Hutchinson, Shockey, Erley & Co. Frost Bank

OFFICIAL STATEMENT Dated June 18, 2010

NEW ISSUE - Book-Entry-Only RATINGS: Fitch - "AAA" Moody's - "Aaa" S&P - "AA+" (See "OTHER PERTINENT INFORMATION - Bond Ratings" herein)

In the opinion of Bond Counsel (defined herein), assuming continuing compliance by the County (defined herein) after the date of initial delivery of the Refunding Bonds (defined herein) with certain covenants contained in the Order (defined herein) and subject to the matters set forth under “TAX MATTERS” herein, interest on the Refunding Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income of the owners thereof pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the Refunding Bonds, and (2) will not be included in computing the alternative minimum taxable income of individuals or, except as described herein, corporations. See “TAX MATTERS” herein.

$36,915,000 BEXAR COUNTY, TEXAS LIMITED TAX REFUNDING BONDS, SERIES 2010

Dated Date: June 15, 2010 Due: June 15, as shown on inside front cover

The $36,915,000 Bexar County, Texas Limited Tax Refunding Bonds, Series 2010 (the "Refunding Bonds") are being issued by the Commissioners Court (the "Court") of Bexar County, Texas (the “County”) pursuant to the authority granted to the County by Chapter 1207, as amended, Texas Government Code ("Chapter 1207"), and an order (the "Order") adopted by the Commissioners Court on June 8, 2010. In the Order, and as permitted by the provisions of Chapter 1207, the County delegated to certain County representatives the authority to execute a pricing certificate evidencing final terms of sale relating to the Refunding Bonds. This pricing certificate was executed by an authorized representative of the County on June 18, 2010.

Interest on the Refunding Bonds will accrue from the dated date as shown above, will be payable on June 15 and December 15 of each year, commencing December 15, 2010, and will be calculated on the basis of a 360-day year of twelve 30-day months. The definitive Refunding Bonds will be issued as fully registered obligations in book-entry form only and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository. Book-entry interests in the Refunding Bonds will be made available for purchase in the principal amount of $5,000 or any integral multiple thereof. Purchasers of the Refunding Bonds (“Beneficial Owners”) will not receive physical delivery of Refunding Bonds representing their interest in the Refunding Bonds purchased. So long as DTC or its nominee is the registered owner of the Refunding Bonds, the principal of and interest on the Refunding Bonds will be payable by Wells Fargo Bank, National Association, Austin, Texas, as Paying Agent/Registrar, to Cede & Co., which will in turn remit such principal and interest to its participants, which will in turn remit such principal and interest to the Beneficial Owners of the Refunding Bonds. See “BOOK -ENTRY-ONLY SYSTEM” herein.

Proceeds from the sale of the Refunding Bonds will be used to (i) provide funds sufficient to refund a portion of the County's currently outstanding obligations, as identified in Schedule I attached hereto (the “Refunded Obligations”) and (ii) pay for the costs of issuing the Refunding Bonds. (See "SOURCES AND USES OF FUNDS" and “PLAN OF FINANCING” herein.)

In addition to the Refunding Bonds, the County is issuing its $25,000,000 (preliminary, subject to change) Limited Tax General Obligation Bonds, Series 2010 (the “New Money Bonds”) and its $130,000,000 (preliminary, subject to change) Combination Tax and Revenue Certificates of Obligation, Series 2010 (the "Obligations") pursuant to separate orders adopted by the Court. The New Money Bonds and the Obligations are currently expected to be delivered on August 19, 2010. This Official Statement only describes the Refunding Bonds and investors must review the County’s disclosure documents relating to the New Money Bonds and the Obligations in their entirety prior to making an investment decision with respect to the New Money Bonds and/or the Obligations.

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For Maturity Schedule, Principal Amounts, Interest Rates, Initial Yields, CUSIP Numbers, and Redemption Provisions for the Refunding Bonds, see inside page of this front cover ______

The Refunding Bonds are offered for delivery, when, as and if issued and received by the initial purchasers thereof named below (the “Underwriters”) and subject to the approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by Fulbright & Jaworski L.L.P., Bond Counsel, San Antonio, Texas. See "LEGAL MATTERS" herein for a discussion of Bond Counsel's legal opinion. Certain legal matters also will be passed upon for the Underwriters by their counsel, Shelton & Valadez, P.C., San Antonio, Texas. It is expected that the Refunding Bonds will be available for delivery through the services of DTC on or about July 22, 2010.

HUTCHINSON, SHOCKEY, ERLEY & CO. FROST BANK SOUTHWESTERN CAPITAL MARKETS, INC.

MATURITY SCHEDULE, PRINCIPAL AMOUNTS, INTEREST RATES, INITIAL YIELDS, CUSIP NUMBERS, AND REDEMPTION PROVISONS

$36,915,000 BEXAR COUNTY, TEXAS LIMITED TAX REFUNDING BONDS, SERIES 2010

CUSIP NO. PREFIX: 088281(1)

Stated Maturity Principal Interest Initial CUSIP No. June 15 Amount($) Rate (%) Yield (%) Suffix (1)

2011 1,920,000 2.000 0.400 CE8 2012 1,960,000 3.000 0.750 CF5 2013 2,020,000 3.000 1.130 CG3 2014 2,080,000 3.000 1.520 CH1 2015 2,140,000 2.500 1.890 CJ7 2016 2,195,000 4.000 2.320 CK4 2017 2,285,000 4.000 2.640 CL2 2018 2,375,000 4.000 2.890 CM0 2019 2,470,000 4.000 3.120(2) CN8 2020 2,570,000 5.000 3.270(2) CP3 2021 2,695,000 5.000 3.400(2) CQ1 2022 2,830,000 5.000 3.530(2) CR9 2023 2,975,000 5.000 3.610(2) CS7 2024 3,120,000 5.000 3.690(2) CT5 2025 3,280,000 5.000 3.750(2) CU2

(Interest to accrue from Dated Date)

______(1) CUSIP numbers are included solely for the convenience of the owners of the Refunding Bonds. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor’s Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the Underwriters, the County, nor the Co-Financial Advisors is responsible for the selection or correctness of the CUSIP numbers set forth herein. (2) Yield calculated based on the assumption that the Bonds denoted and sold at a premium will be redeemed on June 15, 2018, the first optional call date for the Bonds, at a redemption price of par, plus accrued interest to the redemption date.

-ii- BEXAR COUNTY, TEXAS

COMMISSIONERS COURT

Length of Term Name Position Service Expires Occupation

Nelson W. Wolff County Judge 9 years 2014 Businessman/Attorney Sergio "Chico" Rodriguez Commissioner, Precinct 1 6 years 2012 Public Official Paul Elizondo Commissioner, Precinct 2 27 years 2014 Businessman Kevin A. Wolff Commissioner, Precinct 3 1 year 2012 Businessman Tommy Adkisson Commissioner, Precinct 4 11 years 2010 Attorney

COUNTY OFFICIALS

Years Name Position Served

Sylvia S. Romo County Tax Assessor/Collector 13 Margaret G. Montemayor District Clerk 7 Susan D. Reed Criminal District Attorney 11 Gerard C. Rickhoff County Clerk 13 Amadeo Ortiz Sheriff 2

APPOINTED OFFICIALS

Years Name Position Served

David L. Smith Executive Director, Planning & Resource Management/Budget Officer/Chief Investment 6 Susan T. Yeatts, C.P.A. County Auditor 1st Daniel R. Garza Purchasing Agent 1st

COMMISSIONERS COURT EMPLOYEES

Years Name Position Served

Joe Aceves Director, Infrastructure Services 4 Catherine Maras Chief Information Officer 1st Aurora Sanchez Director, Community Investment 3

CONSULTANTS AND ADVISORS

SAMCO Capital Markets, Inc. Co-Financial Advisors San Antonio, Texas

M. E. Allison & Co., Inc. Co-Financial Advisors San Antonio, Texas

Fulbright & Jaworski L.L.P. Bond Counsel San Antonio, Texas

Garza/Gonzalez & Associates Certified Public Accountants San Antonio, Texas

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For additional information regarding the County, please contact:

Mr. David L. Smith Ms. Susan T. Yeatts, C.P.A. Executive Director, Planning & Resource County Auditor Management/Budget Officer/Chief Investment Officer Bexar County Bexar County 212 Stumberg 410 S. Main, Suite 208 Suite 100 San Antonio, Texas 78204 San Antonio, Texas 78204 (210) 335-2405 - Telephone (210) 335-2434 - Telephone (210) 335-2683 - Facsimile (210) 335-2996 - Facsimile

Mr. Duane L. Westerman Mr. Mark A. Seal Co-Financial Advisors Co-Financial Advisors SAMCO Capital Markets, Inc. M. E. Allison & Co., Inc. 8700 Crownhill Boulevard, Suite 601 950 E. Basse Road, 2nd Floor San Antonio, Texas 78209 San Antonio, Texas 78209 (210) 832-9760 - Telephone (210) 930-4000 - Telephone (210) 832-9794 - Facsimile (210) 930-4001 - Facsimile [email protected] [email protected]

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USE OF INFORMATION IN OFFICIAL STATMENT

No dealer, broker, salesman, or other person has been authorized by the County to give any information or to make any representation with respect to the Refunding Bonds, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by either of the foregoing.

This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Refunding Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. The information set forth herein has been obtained from sources which are believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriters. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the information or opinions set forth herein after the date of this Official Statement

The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will under any circumstances create any implication that there has been no change in the information or opinions set forth herein after the date of this Official Statement. See “CONTINUING DISCLOSURE OF INFORMATION” for a description of the County’s undertaking to provide certain information on a continuing basis.

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

THE REFUNDING BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE REFUNDING BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE REFUNDING BONDS HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION FOR THE PURCHASE THEREOF.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THIS ISSUE AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

None of the County, the Co-Financial Advisors, nor the Underwriters make any representation or warranty with respect to the information contained in this Official Statement regarding The Depository Trust Company or its “BOOK-ENTRY- ONLY SYSTEM.”

The agreements of the County and others related to the Refunding Bonds are contained solely in the contracts described herein. Neither this Official Statement, nor any other statement made in connection with the offer or sale of the Refunding Bonds, is to be construed as constituting an agreement with the purchasers of the Refunding Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL SCHEDULES AND APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE REFUNDING BONDS.

-v- TABLE OF CONTENTS

COVER PAGE ...... I Taxable Property, Exemptions and STATED MATURITY SCHEDULE...... II Agriculture Exclusions ...... 8 COMMISSIONERS COURT...... iii Tax Rate and Funded Debt Limitations ...... 9 COUNTY OFFICIALS ...... iii PROPERTY TAXES APPOINTED OFFICIALS ...... iii Property Tax Code and County-Wide COMMISSIONERS COURT EMPLOYEES ...... iii Appraisal District...... 10 CONSULTANTS AND ADVISORS...... iii Tax Abatement Reinvestment Zone/ USE OF INFORMATION IN OFFICIAL STATEMENT ...... v Tax Phase-In Agreements ...... 11 TABLE OF CONTENTS ...... vi Exemptions from Taxes ...... 11 INTRODUCTION...... 1 County and Taxpayer Remedies ...... 12 PLAN OF FINANCING Levy and Collection of Taxes ...... 12 Purpose ...... 1 Tax Liens ...... 12 Refunded Obligations ...... 1 The Effect of the Financial Institutions Act of 1989 SOURCES AND USES OF FUNDS ...... 2 On Tax Collections of the County ...... 13 THE REFUNDING BONDS INVESTMENT POLICIES ...... 13 Authority for Issuance ...... 2 LEGAL MATTERS ...... 15 General Description ...... 2 NO-LITIGATION ...... 16 Security for Payment ...... 2 TAX MATTERS Payment Record ...... 3 Tax Exemption ...... 16 Legality ...... 3 Ancillary Tax Consequences ...... 16 Delivery ...... 3 Tax Accounting Treatment of Discount Bonds ...... 16 Future Issues ...... 3 Tax Accounting Treatment of Premium Bonds ...... 17 Redemption Provision of the Refunding Bonds...... 3 CONTINUING DISCLOSURE OF INFORMATION...... 17 Notice of Redemption ...... 3 OTHER PERTINENT INFORMATION Defeasance ...... 4 Authenticity of Financial Data and Other Information ...... 19 Amendments ...... 4 Registration and Qualification of Bonds for Sale ...... 19 Defaults and Remedies ...... 4 Legal Investments and Eligibility to REGISTRATION, TRANSFER, AND EXCHANGE Secure Public Funds in Texas ...... 19 Paying Agent/Registrar ...... 5 Bond Ratings ...... 19 Successor Paying Agent/Registrar...... 5 Underwriting ...... 20 Record Date ...... 5 Co-Financial Advisors ...... 20 Special Record Date for Interest Payment...... 5 Forward Looking Statements ...... 21 Registration, Transferability and Exchange ...... 5 Financial Statements ...... 21 Replacement Refunding Bonds ...... 6 GASB 34 Implication for the County ...... 21 BOOK-ENTRY-ONLY SYSTEM ...... 6 Certification of the Official Statement ...... 21 AD VALOREM TAX PROCEDURES Authorization of the Official Statement ...... 21 Ad Valorem Taxation ...... 8

SCHEDULE OF REFUNDED OBLIGATIONS ...... SCHEDULE I SELECTED FINANCIAL INFORMATION OF BEXAR COUNTY...... APPENDIX A GENERAL INFORMATION REGARDING BEXAR COUNTY ...... APPENDIX B BEXAR COUNTY ANNUAL FINANCIAL REPORT ...... APPENDIX C FORM OF OPINION OF BOND COUNSEL ...... APPENDIX D

The cover page, subsequent pages hereof, schedule, and appendices attached hereto, are part of this Official Statement.

-vi- OFFICIAL STATEMENT

Relating to

$36,915,000 BEXAR COUNTY, TEXAS LIMITED TAX REFUNDING BONDS, SERIES 2010

INTRODUCTION

This Official Statement, which includes the cover page, schedule, and the appendices hereto, provides certain information in connection with the issuance by Bexar County, Texas (the "County" or the “Issuer”) of its Limited Tax Refunding Bonds, Series 2010 (the “Refunding Bonds”) in the aggregate principal amount of $36,915,000. Certain capitalized terms used in this Official Statement have the same meanings assigned to such terms in the order authorizing the issuance of the Refunding Bonds (the "Order"), except as otherwise indicated herein.

This Official Statement contains descriptions of the Refunding Bonds and certain other information about the County and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the County at the Bexar County Courthouse, 100 Dolorosa, Room 101, San Antonio, Texas 78205 and, during the offering period, from the County's Co- Financial Advisors, SAMCO Capital Markets, Inc., 8700 Crownhill Blvd., Suite 601, San Antonio, Texas 78209, and M. E. Allison & Co, Inc., 950 E. Basse Road, 2nd Floor, San Antonio, Texas 78209, by electronic mail or upon payment of reasonable copying, mailing, and handling charges.

This Official Statement speaks only as to its date, and the information contained herein is subject to change. A copy of the Final Official Statement pertaining to the Refunding Bonds will be deposited with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (EMMA) system. See “CONTINUING DISCLOSURE OF INFORMATION” herein for a description of the County’s undertaking to provide certain information on a continuing basis.

PLAN OF FINANCING

Purpose

The Refunding Bonds are being issued to: (i) refund a portion of the County’s currently outstanding debt, identified on Schedule I attached hereto (the “Refunded Obligations”) and (ii) pay the costs associated with the issuance of the Refunding Bonds. See Schedule I for a detailed listing of the Refunded Obligations and their respective call dates at par. The refunding is being undertaken to realize debt service savings for the County.

Refunded Obligations

The Refunded Obligations, and interest due thereon, are to be paid on the scheduled maturity dates from funds to be deposited with Wells Fargo Bank, National Association, Austin, Texas (the “Escrow Agent”) pursuant to an Escrow Deposit Letter dated as of June 8, 2010 (the “Escrow Agreement”) between the County and the Escrow Agent.

The Order provides that the County will deposit certain proceeds from the sale of the Refunding Bonds, along with other lawfully available funds of the County, with the Escrow Agent in the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds may be invested by the Escrow Agent in certain U.S. Treasury Securities (the “Federal Securities”), if any, and will be held by the Escrow Agent in an escrow fund (the “Escrow Fund”) irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. SAMCO Capital Markets, Inc., as Co-Financial Advisor to the County, will certify as to the sufficiency of the amounts initially deposited to the Escrow Fund without regard to investment to pay the principal of and interest on the Refunded Obligations when due at the scheduled maturity dates. Such Federal Securities, if any, and cash held in the Escrow Fund will not be available to pay the debt service requirements on the Refunding Bonds. The County envisions a gross cash defeasance of the Refunded Obligations.

Prior to, or simultaneously with, the issuance of the Refunding Bonds, the County will give irrevocable instructions, if any, to provide notice to the owners of the Refunded Obligations that the Refunded Obligations will be redeemed prior to stated maturity on which date money will be made available to redeem the Refunded Obligations from money held under the Escrow Agreement.

By the deposit of Refunding Bond proceeds and cash with the Escrow Agent pursuant to the Escrow Agreement, and the investment thereof in the Federal Securities, if any, the County will have effected the defeasance of the Refunded Obligations pursuant to the terms of the order authorizing their issuance. It is the opinion of Bond Counsel that, as a result of such defeasance, the Refunded Obligations will no longer be payable from ad valorem taxes, but will be payable solely from the amounts on deposit in the Escrow Fund and held for such purpose by the Escrow Agent, and that the Refunded Obligations will be defeased and are not to be included in or considered to be indebtedness of the County for the purpose of a limitation of indebtedness or for any other purpose. -1- The County has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations if for any reason the cash balance on deposit in the Escrow Fund should be insufficient to make such payment.

SOURCES AND USES OF FUNDS

Sources of Funds: Par Amount of Refunding Bonds $36,915,000.00 Net Reoffering Premium 2,852,539.85 Accrued Interest on the Refunding Bonds 156,242.78 Total $39,923,782.63

Uses of Funds: Deposit to Escrow Fund $39,384,000.00 Costs of Issuance 175,000.00 Underwriters' Discount 204,769.20 Deposit to Debt Service Fund 156,242.78 Contingency 3,770.65 Total $39,923,782.63

THE REFUNDING BONDS

Authority for Issuance

The Refunding Bonds are being issued by the Commissioners Court (the "Court") of Bexar County, Texas (the “County”) pursuant to the general laws of the State of Texas, particularly Chapter 1207, Texas Government Code, as amended ("Chapter 1207"), and an order (the "Order") adopted by the Court on June 8, 2010. In the Order, and as permitted by the provisions of Chapter 1207, the County delegated to certain County representatives the authority to execute a pricing certificate evidencing final terms of sale relating to the Refunding Bonds. This pricing certificate was executed by an authorized representative of the County on June 18, 2010.

General Description

The Refunding Bonds will be dated June 15, 2010 and will accrue interest from the dated date, and such interest shall be payable on June 15 and December 15 in each year, commencing December 15, 2010, until the earlier of stated maturity or prior redemption. The Refunding Bonds will mature on the dates, in the principal amounts and will bear interest at the rates set forth on the inside cover page of this Official Statement.

Interest on the Refunding Bonds is payable to the registered owners appearing on the bond registration books of the Paying Agent/Registrar on the Record Date (identified below) and such interest shall be paid by the Paying Agent/Registrar (i) by check sent United States mail, first class postage prepaid, to the address of the registered owner recorded in the bond register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. The principal of the Refunding Bonds is payable at maturity or redemption, upon their presentation and surrender to the Paying Agent/Registrar. The Refunding Bonds will be issued only in fully registered form in any integral multiple of $5,000 principal for any one maturity.

Initially the Refunding Bonds will be registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. No physical delivery of the Refunding Bonds will be made to the owners thereof. Notwithstanding the foregoing, as long as the Refunding Bonds are held in the Book-Entry-Only System, principal of, premium, if any, and interest on the Refunding Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Refunding Bonds. See "BOOK-ENTRY-ONLY SYSTEM" herein.

Security for Payment

The Refunding Bonds constitute direct obligations of the County payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the County, as provided in the Order. See “AD VALOREM TAX PROCEDURES – Tax Rate and Funded Debt Limitations” herein.

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Payment Record

The County has never defaulted on the payment of its bonded indebtedness.

Legality

The Refunding Bonds are subject to the approval of legality by the Attorney General of the State of Texas and the approval of certain legal matters by Fulbright & Jaworski L.L.P., Bond Counsel, San Antonio, Texas. The legal opinion of Bond Counsel will accompany the Refunding Bonds deposited with DTC or will be printed on the Refunding Bonds. A form of the legal opinion of Bond Counsel appears in APPENDIX D attached hereto.

Delivery

When issued; anticipated to occur on or about July 22, 2010.

Future Issues

Other than the $25,000,000 (preliminary, subject to change) Limited Tax General Obligation Bonds, Series 2010 and the $130,000,000 (preliminary, subject to change) Combination Tax and Revenue Certificates of Obligation, Series 2010 previously mentioned herein, the County does not anticipate any additional general obligation debt in 2010.

Redemption Provision of the Refunding Bonds

The County reserves the right to redeem the Refunding Bonds maturing on and after June 15, 2019 in whole or in part, in the principal amount of $5,000 or any integral multiple thereof, on June 15, 2018 or any date thereafter, at the redemption price of par plus accrued interest. The years of maturity of the Refunding Bonds called for redemption shall be selected by the County. If less than all of the Refunding Bonds are redeemed within a stated maturity at any time, the Refunding Bonds to be redeemed shall be selected by the Paying Agent/Registrar at random and by lot or other customary method in multiples of $5,000 within any stated maturity.

Notice of Redemption

Not less than 30 days prior to a redemption date for the Refunding Bonds, the County shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each registered owner of a Refunding Bond to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books relating to the Refunding Bonds kept by the Paying Agent/Registrar (the “Security Register”) at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE OF REDEMPTION SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER ONE OR MORE BONDHOLDERS FAILED TO RECEIVE SUCH NOTICE.

All notices of redemption shall (i) specify the date of redemption for the Refunding Bonds, (ii) identify the Refunding Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state the Refunding Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Refunding Bonds, or the principal amount thereof to be redeemed, shall be made at the designated corporate trust office of the Paying Agent/Registrar only upon presentation and surrender thereof by the registered owner. If a Refunding Bond is subject by its terms to redemption and has been called for redemption and notice of redemption thereof has been duly given or waived as provided in the Order such

Refunding Bond (or the principal amount thereof to be redeemed) so called for redemption shall become due and payable, and on the redemption date designated in such notice, interest on said Refunding Bond (or the principal amount thereof to be redeemed) called for redemption shall cease to accrue and such Refunding Bond shall not be deemed to be Outstanding.

The Paying Agent/Registrar and the County, so long as a Book-Entry-Only System is used for the Refunding Bonds, will mail any notice of redemption, notice of proposed amendment to the Order or other notices with respect to the Refunding Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, shall not affect the validity of the redemption of the Refunding Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Refunding Bonds held by the County will reduce the outstanding principal amount of such Refunding Bonds held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Refunding Bonds held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Refunding Bonds from the beneficial owners. Any such selection of Refunding Bonds to be redeemed will not be governed by the Order and will not be conducted by the County or the Paying Agent/Registrar. Neither the County nor the Paying Agent/Registrar will have any responsibility to DTC participants,

-3- indirect participants or the persons for whom DTC participants act as nominees, with respect to the payments on the Refunding Bonds or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of portions of the Refunding Bonds for redemption. See “BOOK-ENTRY-ONLY SYSTEM” herein.

Defeasance

The Order provides for the defeasance of the Refunding Bonds when the payment of the principal of and premium, if any, on the Refunding Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with the paying agent or other authorized entity, in trust (1) money sufficient to make such payment and/or (2) Government Securities, generally certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Refunding Bonds. The Order provides that “Government Securities” means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of any agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent. The County has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Government Securities for the Government Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the Issuer moneys in excess of the amount required for such defeasance.

Upon such deposit as described above, such Refunding Bonds shall no longer be regarded to be outstanding or unpaid for purposes of applying any debt limitation on indebtedness or for purposes of taxation. After firm banking and financial arrangements for the discharge and final payment or redemption of the Refunding Bonds have been made as described above, all rights of the County to initiate proceedings to call the Refunding Bonds for redemption or take any other action amending the terms of the Refunding Bonds are extinguished; provided, however, that the right to call the Refunding Bonds for redemption is not extinguished if the County: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Refunding Bonds for redemption; (ii) gives notice of the reservation of that right to the owners of the Refunding Bonds immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes.

Amendments

The County may amend the Order without the consent of or notice to any registered owners in any manner not detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, or formal defect or omission therein. In addition, the County may, with the written consent of the holders of a majority in aggregate principal amount of the Refunding Bonds then outstanding, amend, add to, or rescind any of the provisions of the Order; except that, without the consent of all of the registered owners of the Refunding Bonds then outstanding, no such amendment, addition, or rescission may (1) change the date specified as the date on which the principal of, or any installment of interest on any Refunding Bond is due and payable, reduce the principal amount thereof, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, or interest on the Refunding Bonds, (2) give any preference to any Refunding Bond over any other Refunding Bond, or (3) reduce the percentage of the aggregate principal amount of Refunding Bonds required to be held for consent to any amendment, addition, or waiver.

Default and Remedies

If the County defaults in the payment of principal, interest, or redemption price on the Refunding Bonds when due, or if it fails to make payments into any fund or funds created in the Order, or defaults in the observation or performance of any other covenants, conditions, or obligations set forth in the Order, the registered owners may seek a writ of mandamus to compel County officials to carry out their legally imposed duties with respect to the Refunding Bonds, if there is no other available remedy at law to compel performance of the Refunding Bonds or the Order and the County’s obligations are not uncertain or disputed. The issuance of a writ of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Refunding Bonds in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Order does not provide for the appointment of a trustee to represent the interest of the bondholders upon any failure of the County to perform in accordance with the terms of the Order, or upon any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the registered owners. Texas counties are generally immune from suits for money damages for breach of contracts under the doctrine of sovereign immunity. On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, 115 S.W.3rd 618 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in “clear and unambiguous” language, because it is unclear whether the Texas legislature has effectively waived the County’s sovereign immunity from a suit for money damages, bondholders may not be able to bring such a suit against the County for breach of the Bond or Order covenants. Even if a judgment against the County could be obtained, it could not be enforced by direct levy and execution against the County’s property. Further, the registered owners cannot themselves

-4- foreclose on property within the County or sell property within the County to enforce the tax lien on taxable property to pay the principal of and interest on the Refunding Bonds. Furthermore, the County is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (“Chapter 9”). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the County avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Order and the Refunding Bonds are qualified with respect to the customary rights of debtors relative to their creditors and general principles of equity which permit the exercise of judicial discretion.

REGISTRATION, TRANSFER, AND EXCHANGE

Paying Agent/Registrar

The initial Paying Agent/Registrar is Wells Fargo Bank, National Association, Austin, Texas. The Refunding Bonds will be issued in fully registered form in multiples of $5,000 for any one stated maturity, and principal and semiannual interest will be paid by the Paying Agent/Registrar. If the Refunding Bonds are not held in the Book-Entry-Only System, interest on the Refunding Bonds will be paid by check or draft mailed on each interest payment date by the Paying Agent/Registrar to the registered owner at the last known address as it appears on the Paying Agent/Registrar's books on the Record Date (see “REGISTRATION, TRANSFER AND EXCHANGE - Record Date” herein) or by such other method, acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of the registered owner, and principal of the Refunding Bonds will be paid to the registered owner at stated maturity or earlier redemption upon presentation to the Paying Agent/Registrar. If the date for the payment of the principal of or interest on the Refunding Bonds shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the Paying Agent/ Registrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due.

Successor Paying Agent/Registrar

The County covenants that until the Refunding Bonds are paid it will at all times maintain and provide a Paying Agent/Registrar. In the Order, the County retains the right to replace the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the County, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the County shall be a bank, trust company, financial institution or other entity duly qualified and legally authorized to serve and perform the duties of Paying Agent/Registrar for the Refunding Bonds. Upon any change in the Paying Agent/Registrar for the Refunding Bonds, the County will promptly cause a notice thereof to be sent to each registered owner of the Refunding Bonds by United States mail, first class, postage prepaid, which notice shall give the address of the new Paying Agent/Registrar.

Record Date

The record date ("Record Date") for determining the person entitled to the payment of interest on a Refunding Bond is the last business day of the month next preceding each interest payment date.

Special Record Date for Interest Payment

In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each registered owner of a Refunding Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice.

Registration, Transferability and Exchange

In the event the Book-Entry-Only System shall be discontinued, printed bonds will be issued to the registered owners of the Refunding Bonds and thereafter the Refunding Bonds may be transferred, registered, and assigned on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration and transfer. A Refunding Bond may be assigned by the execution of an assignment form on the Refunding Bond or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Refunding Bond or Refunding Bonds will be delivered by the Paying Agent/Registrar in

-5- lieu of the Refunding Bonds being transferred or exchanged at the designated office of the Paying Agent/Registrar, or sent by United States registered mail to the new registered owner at the registered owner's request, risk and expense. New Refunding Bonds issued in an exchange or transfer of Refunding Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three (3) business days after the receipt of the Refunding Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Refunding Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000 for any one stated maturity or any integral multiple thereof and for a like aggregate principal amount and at the same maturity or maturities as the Refunding Bond or Refunding Bonds surrendered for exchange or transfer. Neither the County or the Paying Agent/Registrar will be required to transfer or exchange any Refunding Bonds (i) during a period beginning at the close of business on any Record Date and ending with the next interest payment date or (ii) with respect to any Refunding Bonds or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. See “BOOK-ENTRY-ONLY SYSTEM" herein.

Replacement Refunding Bonds

If any Refunding Bond is mutilated, destroyed, stolen or lost, a new Refunding Bond of like kind and in the same amount as the Refunding Bond so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Refunding Bond, such new Refunding Bond will be delivered only upon surrender and cancellation of such mutilated Bond. In the case of any Refunding Bond issued in lieu of and in substitution for a Refunding Bond which has been destroyed, stolen, or lost, such new Refunding Bond will be delivered only (a) upon filing with the County and the Paying Agent/Registrar evidence satisfactory to establish to the County and the Paying Agent/Registrar that such Refunding Bond has been destroyed, stolen or lost and proof of the ownership thereof, and (b) upon furnishing the County and the Paying Agent/Registrar with Refunding Bond or indemnity satisfactory to them. The person requesting the authentication and delivery of a new Refunding Bond must comply with such other reasonable regulations as the Paying Agent/Registrar may prescribe and pay such expenses as the Paying Agent/Registrar may incur in connection therewith.

BOOK-ENTRY-ONLY SYSTEM

The following describes how ownership of the Refunding Bonds is to be transferred and how the principal of and interest on the Refunding Bonds are to be paid to and credited by DTC while the Refunding Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The County, the Co-Financial Advisors and the Underwriters believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof.

The County cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Refunding Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Refunding Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC.

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

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of these regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor’s highest rating: "AAA." The DTC Rules applicable to its Participants are on file with the United States Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

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Purchases of Refunding Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Refunding Bonds on DTC’s records. The ownership interest of each actual purchaser of each Refunding Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Refunding Bonds are to be 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 Refunding Bonds, except in the event that use of the Book-Entry-Only system for the Refunding Bonds is discontinued.

To facilitate subsequent transfers, all Refunding Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Refunding Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Refunding Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Refunding Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Refunding Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Refunding Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Refunding Bond documents. For example, Beneficial Owners of Refunding Bonds may wish to ascertain that the nominee holding the Refunding Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the 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 Refunding Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Refunding Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Refunding Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds and principal and interest payments on the Refunding Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the County or the Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC [nor its nominee], the Paying Agent/Registrar, or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the County or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Refunding Bonds at any time by giving reasonable notice to the County or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, security certificates are required to be printed and delivered.

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

The information in this section concerning DTC and DTC’s Book-Entry System has been obtained from sources that the County believes to be reliable, but the County, the Co-Financial Advisors, and the Underwriters take no responsibility for the accuracy thereof.

-7- Use of Certain Terms in Other Sections of This Official Statement

In reading this Official Statement it should be understood that while the Refunding Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Refunding Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Order will be given only to DTC.

Effect of Termination of Book-Entry-Only System

In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the County, printed certificates will be issued to the respective holders and the Refunding Bonds will be subject to transfer, exchange and registration provisions as set forth in the Order and summarized under the caption “REGISTRATION, TRANSFER AND EXCHANGE” above.

AD VALOREM TAX PROCEDURES

Ad Valorem Taxation

The Refunding Bonds are payable from an annual ad valorem tax levied, within the limitations prescribed by law, on all taxable property within the County. Reference is hereby made to the Vernon’s Texas Codes Annotated, Tax Code (the “Property Tax Code”) for identification of property subject to taxation, property exempt or which may be exempted from taxation, the appraisal of property for taxation purposes, and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Among other provisions, the Property Tax Code contains the following provisions with respect to the assessment of property and the levy and collection of ad valorem taxes:

(1) a single appraisal district in each county to appraise property for taxation purposes for all taxing units located wholly or partly within the county;

(2) excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, all property is to be appraised on the basis of 100% of its market value and the assessment of property on the basis of a percentage of its appraised value is prohibited;

(3) requires an "effective tax rate" and "rollback tax rate" to be annually calculated and publicized and necessitates the holding of two public hearings when the tax rate proposed to be adopted exceeds the lower of the rollback tax rate or the effective tax rate; if the adopted tax rate exceeds the rollback tax rate, a referendum election may be required to be held on limiting the tax rate for the County for the current year to the rollback tax rate; and

(4) the value of property is generally assessed for purposes of taxation on January 1 of each year and taxes levied each year generally become due and payable on October 1 and become delinquent on February 1 of the following year in which the taxes are imposed.

Taxable Property, Exemptions and Agricultural Exclusions

All real property located in the taxing unit and certain personal property is taxable property unless exempt by law. With certain exceptions, intangible personal property is not taxable property. Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, all property is to be appraised on the basis of 100% of its market value. In determining the market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. Effective January 1, 2010, State law requires the appraised value of a residence homestead to be based solely on the property's value as a residence homestead, regardless of whether residential use is considered to be the highest and best use of the property. The County may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the County by petition filed with the Appraisal Review Board. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the less of (1) the market value of the property or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property.

Principal categories of exempt property include: (1) property owned and used for public purposes by the State or its political subdivisions; (2) property exempt by federal law; (3) family supplies, household goods and personal effects not held or used in the production of income; (4) certain property owned by charitable organizations, youth development associations, and religious organizations; (5) certain properties used for school purposes; (6) solar and wind-powered energy devices; (7) farm products, livestock, and poultry in the hands of the producer, and family supplies for home and farm use; (8) implements of husbandry used in the production of farm and ranch products; (9) personally owned -8- automobiles (unless affirmatively provided to be taxed by taxing entity); (10) property owned by disabled veterans or by the surviving spouse and surviving minor children of disabled veterans is exempt from taxation in amounts ranging from $5,000 to $12,000 depending on the disability rating of the veteran; and (11) other miscellaneous exceptions.

House Bill 3613, enacted by the 81st Texas Legislature during its Regular Session, added Section 11.131 to the Texas Tax Code. This law, effective January 1, 2010, states that a disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100% disability compensation due to a service-connected disability and a rating of 100% disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran's residence homestead.

At an election held on September 13, 2003, the voters of the State approved a constitutional amendment authorizing counties, cities, towns or junior college districts to establish an ad valorem “tax freeze” on residence homesteads of the disabled and persons sixty-five years of age or older. This “tax freeze” can be implemented by official action of a governing body, or pursuant to an election called by the governing body upon receipt of a petition signed by 15% of registered voters of the municipality. The County implemented this “tax freeze” on May 11, 2005.

Non-business personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as non-business property are exempt from ad valorem taxation.

Article VIII, Section 1-j of the Texas Constitution exempts from taxation goods, wares, merchandise, other tangible personal property and ores (other than oil, natural gas and other petroleum products) acquired or imported for assembling, storing, manufacturing, processing or fabricating purposes while such property is being detained in the State, and such property is to be forwarded outside the State within 175 days after the date of its acquisition or importation. Notwithstanding such exemption, counties, school districts, junior college districts and cities may tax such tangible personal property provided official action to tax is taken before April 1, 1990. The official action to tax such property can subsequently be rescinded and, if rescinded, such property will thereafter be exempt from taxation.

In addition, effective for tax years 2008 and thereafter, Article VIII, Section 1-n of the Texas Constitution provides for an exemption from taxation for "goods-in-transit", which are defined as personal property acquired or imported into the State and transported to another location inside or outside the State within 175 days of the date the property was acquired or imported into the State. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in- transit during the following tax year. A taxpayer may obtain only a freeport exemption or a goods-in-transit exemption for items of personal property. The County took official action on November 20, 2007 to continue its taxation of goods in transit.

Additionally, a percentage of the value of the residence homestead of a person may be exempt from taxation at the option of the governing body of the taxing entity, such exemption not to exceed 20% each year. Furthermore, not less than $3,000 of the market value of the residence homestead of a person 65 years of age or older and certain disabled persons may be exempt from taxation, if such exemption is allowed by the governing body of the taxing entity or imposed by referendum election.

Tax Rate and Funded Debt Limitations

The County must annually calculate and publicize its “effective tax rate” and “rollback tax rate.” By the later of September 30 or the 60th day after the County receives the certified appraisal roll the Commissioners Court must adopt a tax rate per $100 taxable value for the current year. Under current law, such annual tax rate is required to be adopted before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the County, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. Furthermore, the Commissioners Court may not adopt a tax rate that exceeds the lower of the rollback rate or of the effective tax rate until it has held two public hearings on the proposed increase following notice to the taxpayers and otherwise complied with the Property Tax Code. The tax rate consists of two components: (1) a rate for funding of operations, and (2) a rate for debt service. If the adopted tax rate exceeds the rollback tax rate, the qualified voters of the County, by petition, may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate.

“Effective tax rate” means the rate that will produce last year’s total tax levy (adjusted) from this year’s total taxable values (adjusted). “Adjusted” means lost values are not included in the calculation of last year’s taxes and new values are not included in this year’s taxable values.

“Rollback tax rate" means the rate that will produce last year’s maintenance and operation tax levy (adjusted) from this year’s values (adjusted) multiplied by 1.08 plus a rate that will produce this year’s debt service from this year’s values (adjusted) divided by the anticipated tax collection rate.

-9- Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates.

The Property Tax Code provides certain cities and counties in the State the option of assessing a maximum one-half percent (1/2%) sales tax on retail sales of taxable items for the purpose of reducing its ad valorem taxes if approved by a majority of the voters in a local option election. If the additional tax is approved and levied, the ad valorem property tax levy must be reduced by the amount of the estimated sales tax revenues to be generated in the current year. Further, the Property Tax Code provides certain cities the option of assessing a maximum one-half percent (1/2%) sales tax on retail sales of taxable items for economic development purposes if approved by a majority of the voters in a local option election.

Limited Tax Funded Debt Payable From Proceeds of $0.80 Constitutional Tax Rate: Article VIII, Section 9 of the Texas Constitution imposes a limit of $.80 per $100 assessed valuation for all purposes of the County's General Fund, Permanent Improvement Fund, Road and Bridge Fund and Jury Fund, including debt service of bonds, warrants, tax notes and certificates of obligation issued against such funds. By administrative policy, the Attorney General of Texas will permit allocation of $0.40 of the constitutional $0.80 tax rate for the payment of the debt service requirements on the County's indebtedness payable from such tax. Taxes subject to this limitation are the primary source for the currently outstanding limited tax bonds, tax notes, and certificates of obligation. (See "OBLIGATIONS OUTSTANDING" and "AUTHORIZED BUT UNISSUED TAX BONDS" in APPENDIX A.) The Refunding Bonds, the New Money Bonds, and the Obligations constitute indebtedness payable from this limited tax.

Limited tax obligations of counties issued pursuant to authority granted under Section 1301.003, Texas Government Code, as amended, does limit the amount of such debt issued for those certain purposes as follows:

Courthouse 2% of Assessed Valuation Jail 1 1/2% of Assessed Valuation Courthouse and Jail 3 1/2% of Assessed Valuation Road and Bridge 1 1/2% of Assessed Valuation

Unlimited Tax Road Bonds: Article III, Section 52, Texas Constitution, authorizes the County to levy a separate unlimited tax to pay debt service on County road bonds. Unlimited tax road bonds may not be issued in an amount greater than 25% of the County's assessed valuation of real estate. (See "OBLIGATIONS OUTSTANDING" and "AUTHORIZED BUT UNISSUED TAX BONDS" in APPENDIX A.)

Road Maintenance: As imposed by statute (Section 256.052, as amended, Texas Transportation Code) $0.15 per $100 assessed valuation, no part of which may be used for debt service.

Farm-to-Market and/or Flood Control: As imposed by statute (Section 256.054, as amended, Texas Transportation Code, Article VIII, Section 1-8, Vernon’s Texas Civil Statutes), $0.30 per $100 assessed valuation after exemption of homesteads up to $3,000; no allocation prescribed by statute between debt service and maintenance. All or part may be used for either purpose. Although the receipts of these taxes are not available to pay debt service on the Refunding Bonds, these levies provide additional funds for road and flood control purposes that might otherwise be paid from taxes subject to the $0.80 tax limitation. The County held an election on April 17, 1951 which approved the levy of a (i) $0.15 tax per $100 valuation for Farm-to-Market and Lateral Roads and (ii) $0.15 tax per $100 valuation for flood control purposes (the “Flood Control Tax”). The County has previously issued certificates of obligation that are payable, in part, from a lien on and pledge of the Flood Control Tax. (See “OBLIGATIONS OUTSTANDING” in APPENDIX A.)

PROPERTY TAXES

Property Tax Code and County-Wide Appraisal District

The appraisal district created for the County (the "Bexar Appraisal District" or the "Appraisal District") is responsible for the appraisal of all taxable property and the equalization of appraised values of property of all taxing units in the Appraisal District, including the County. The Appraisal District is governed by a Board of Directors elected by the governing bodies of certain taxing units in the Appraisal District. The Board of Directors has appointed a Chief Appraiser to act as Chief Administrator of the Appraisal District. Appraisal districts have a minimum of 5 members of the Board of Directors and may have up to 13 members of the Board of Directors. The Bexar Appraisal District presently has 5 members of the Board of Directors.

The Property Tax Code: (1) requires that all taxing units assess taxable property at 100% of its appraised value, subject to the limitations hereafter described; (2) allows the valuation of certain eligible farm, ranch, and timberlands on a "productive capacity" basis; (3) requires that the appraised values, subject to the limitations hereafter described of real property within an appraisal district be reviewed at least every three years; (4) provides for notices of any increases in appraised values to property owners before meetings of an appraisal review board; (5) grants rights of administrative and judicial appeal for taxpayers challenging property valuations established by an appraisal district or a county; (6) requires taxing jurisdictions to hold two public hearings and publish newspaper advertisements before adopting a tax rate that exceeds the rollback tax or the effective tax rate, whichever is lower in accordance with the Property Tax Code; and

-10- (7) permits taxpayers by referendum in the event the tax rate exceeds the rollback tax rate to reduce the tax rate to the rollback tax rate. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property.

The Texas Constitution permits local governments the option of granting all individuals a homestead exemption of up to 20% of market value, with a minimum exemption of $5,000. The Commissioners Court has never granted such exemption and it cannot be predicted whether the Commissioners Court will exercise any of its options thereunder in future years.

Tax Abatement Reinvestment Zone/Tax Phase-In Agreements

Texas statutes permit the creation of tax abatement reinvestment zones to attract new commercial investment, to expand existing facilities, and to contribute to retaining or expanding primary employment within areas of economic development interests. The designation of a zone should contribute to the County's economic development and guidelines and criteria for governing tax phase-in agreements must be adopted at the discretion of Commissioners Court. Once a reinvestment zone has been designated, the County may offer a tax phase-in agreement to owners or lessees of taxable property within the reinvestment zone on a case-by-case basis. Areas designated as an enterprise zone under the Texas Enterprise Zone Act also constitute designation as a reinvestment zone. Tax phase-in agreements are contracts between the County and an owner or lessee of property wherein the owner or lessee makes an amount of new capital investment and jobs and the County abates all or a portion of ad valorem taxes under its authority on the new eligible real and personal property improvements within a reinvestment zone for a specific period of time. Tax phase-in agreements may abate up to 100% on real and/or personal property improvement values for up to 10 years.

Since 1985, the County has executed a number of tax phase-in agreements to grow and diversify its economy, to attract new industry and commercial enterprises, and to encourage the retention and development of existing businesses. As evidenced by the following companies, such agreements result in major stimulus to the County’s marketplace: ACLP University Park SA, L.P./Clarke American Check, Inc.; AHS Family Real Estate, Ltd./Bates Container, Inc.; Ark Recycling Texas/LLC Toyota Tsusho America, Inc.; Avanzar Interior Technologies, Ltd.; BDS Properties Inc./Ultramar Diamond Shamrock Corp./Valero Energy; Boeing Aerospace Operations, Inc.; The Capital Group Companies, Inc.; Caterpillar, Inc., CEDRA Clinical Research, LLC; Chase Bankcard Services, Inc./JP Morgan Chase Bank; Coilplus Texas, Incorporated; Curtis-Maruyasu America, Inc.; DPT Laboratories, Ltd./Brooks Development Authority; Futaba Industrial Texas Corp.; GMI Recycling Texas, LLC/Toyota Tsusho America, Inc.; HEB Grocery Co. LP; HEI San Antonio Hotel LP (Adams Mark); HERO Assemblers, LP/Toyota Tsusho America, Inc.; HERO Logistics, LP/Toyota Tsusho America, Inc.; Higuchi International Corp.; Kautex, Inc./Toyota Tsusho America, Inc.; KLN Steel Products Company, LLC; Lancer Corp.; LCWW Partners (Westin La Cantera Resort); Lowe’s Home Centers, Inc.; Mann Road, Inc., dba International Bank of Commerce; McCarley Investment Co., Inc.; Metalsa Light Truck, Inc.; Metokote Corp./Toyota Tsusho America, Inc.; Microsoft Corp.; Millennium Steel of Texas, LP/Toyota Tsusho America, Inc.; Reyes Automotive Group, LLC; Reyes- Amtex Automotive, LLC; Richter’s Bakery of San Antonio, Inc.; Security Capital Industrial Trust (Gaylord Container Corporation); Silver Rio Ltd. Partnership (Westin Riverwalk Hotel); Takata Seat Belts, Inc.; Takumi Stamping Texas, Inc.; Tenneco Automotive Services Texas, Inc./Toyota Tsusho America, Inc.; Tindall Corp.; Toyoda Gosei Texas, LLC; Toyota Motor Manufacturing Texas; Toyotetsu Texas, Inc.; Vistana, Ltd.; Vutex, Inc.; Wachovia/World Savings and Loan Association; York International Corp.; and Zachry Construction Corp..

Under the revised and adopted Tax Phase-in Guidelines, for 10-year term abatements the County is focused on the revitalization of areas located within Loop 410, South of U.S. Highway 90, or located within boundaries of I-35 Highway to the North, I-10 Highway to the South, the County’s jurisdictional line to the East, and Loop 410 to the West (includes areas near Windsor Park Mall and Walzem Road in City Council Districts 2 and 10), and projects located within commercial areas of the Medical Center, the boundaries of the San Antonio International Airport, or the Texas Research Park Foundation. Areas eligible for 6-year term abatements are outside of Loop 410 and also North of U.S. Highway 90 (to the extent not defined as a 10-year term area). Areas not eligible for tax abatement are projects located in whole or in part over the Edwards Aquifer Recharge Zone or new or existing projects that may have a potentially negative impact on military missions. In addition, the County may offer tax abatement proposals to the following targeted industries predicated on a project's proposed levels of capital investment and job creation: agribusiness; aviation/aerospace; biotechnology; creative services; environmental technology (also known as clean technology or green technology); finance; information technology and security; logistics and distribution; manufacturing; telecommunications; corporate and regional headquarters; or Downtown urban significant projects, including but not limited to mixed-use, and multi-family rental only housing projects. The County does not offer to abate flood control taxes or taxes levied on behalf of the University Health System.

Exemptions from Taxes

The Texas Constitution and the Property Tax Code grant various exemptions from taxation, if properly claimed, including exemptions for public property, residence homestead, tangible personal property not producing income, farm products and implements of farming or ranching, cemeteries, property owned and used exclusively by certain charitable organizations, and, at the option of the taxing jurisdiction, freeport goods. The County has elected to tax freeport goods. -11-

In addition, Texas law authorizes counties, cities, or junior college districts to take official action to establish a permanent limitation on the total amount of ad valorem taxes that may be imposed by such governmental entity on the residence homestead of a disabled individual or an individual 65 years of age or older under Texas Constitution, article VIII, Section 1-b(h). Under the legislation, the surviving spouse of an individual who qualified for the limitation on ad valorem taxes, would be entitled to the limitation if the surviving spouse is 55 years of age or older when the individual dies and the residence homestead of the qualifying individual is, and remains, the residence homestead of the surviving spouse. If an individual who qualified for the limitation makes improvements to the residence homestead, the governmental entity granting the limitation may increase the amount of taxes on the homestead in the first year the value of the homestead is increased on the appraisal roll because of the enhanced value of the improvements. The legislation required the adoption of a constitutional amendment by the voters of the State of Texas authorizing the governing body of a county, city or junior college district to place such a limitation on ad valorem tax increases on the residence homestead of a disabled individual or individual 65 years of age or older which voters adopted on September 13, 2003. By Order approved by the Commissioners Court on May 11, 2005, the Commissioners Court adopted the ad valorem tax limitation on the residence homestead of individuals who are under a disability for purposes of payment of disability insurance benefits under Federal Old-Age, Survivors, and Disability Insurance, or its successor, and individuals 65 years of age or older as permitted under the Texas Constitution, article VIII, 1-b(h) and Property Tax Code, Section 11.261. Adoption of the tax limitation by Commissioners Court set 2005 as the base year for those individuals who qualify for the stated ad valorem tax limitation and the qualified individuals realized tax freeze benefits beginning January 1, 2006 for tax year 2006. Once established, the governing body of the taxing unit may not repeal or rescind the tax limitation. The County studied the effects of implementing such an ad valorem tax freeze for resident homeowners that qualify as disabled individuals and/or individuals 65 years of age or older and was unable to determine the exact extent to which such a tax freeze would negatively impact the County’s future tax revenues. A number of other studies have been undertaken to measure the extent of the impact of a tax freeze and these studies have concluded that such a tax freeze would cause a decrease in the rate of growth of future ad valorem tax revenues to the County.

County and Taxpayer Remedies

Under certain circumstances, taxpayers and taxing units, including the County, may appeal orders of the Appraisal Review Board by filing a notice of appeal with that Board and a petition for review in district court. In such event, the property value in question may be determined by the courts or by a jury, if requested by any party. Additionally, taxing units may bring suit against the Appraisal District to compel compliance with the Property Tax Code.

The Property Tax Code establishes procedures for providing notice and the opportunity for a hearing for taxpayers in the event of certain proposed tax increases and provides for taxpayer referenda which could result in the repeal of certain tax increases. The Property Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll.

Levy and Collection of Taxes

The County is responsible for the collection of its taxes, but it may assign such functions to another governmental entity. By the later of September 30th or 60 days after the certified appraisal roll is delivered to the taxing unit, the rate of taxation is set by the Commissioners Court based upon the valuation of property within the County as of January 1. Ad valorem taxes are due on receipt of a tax bill and payable from October 1 of the year in which levied until January 31 of the following year without interest or penalty. Split payments are allowed with the first half due by November 30 and the second half of the taxes due by June 30. Unless the split payment option is exercised by the taxpayer, taxes become delinquent after January 31 of the following year. On February 1, the unpaid taxes have a penalty and interest charge of 7%. Taxes delinquent from March 1 through June 30 have an additional penalty and interest charge of 2% per month, for a total penalty and interest charge of 18%. Taxes delinquent on July 1 have a total penalty and interest charge of 18%. Unpaid taxes after July 31 accrue an additional interest charge of 1% per month until paid. State law allows employment of outside legal counsel to collect delinquent taxes. When this is done, the County may, upon giving proper notice, impose an additional penalty up to 20% to the taxes, penalty, and interest delinquent as of July 1. The County has elected this option and presently uses outside legal counsel to collect delinquent taxes.

Tax Liens

Taxes levied by the County are a personal obligation of the owner of the property. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of each taxing unit, including the County, having power to tax the property. The tax lien on real property has priority over the claim of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalty, and interest. At any time after taxes on property become delinquent, the County may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the County may join other taxing units that have claims for delinquent taxes against all or part of the same property. The ability of the County to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption rights, or bankruptcy proceedings which restrain the collection of a -12- taxpayer's debt. Also, provisions of the Property Tax Code require the abatement of any foreclosure or collection suit for delinquent taxes against any individual who is 65 years of age or older, owns and occupies as a residential homestead the property on which the taxes are delinquent, and requests the abatement in writing at the appropriate time.

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

The "Financial Institutions Reform, Recovery and Enforcement Act of 1989" ("FIRREA"), enacted on August 9, 1989, contains certain provisions which affect the time for protesting property valuations, the fixing of tax liens, and the collection of penalties and interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation ("FDIC") and the Resolution Trust Corporation ("RTC") when the FDIC/RTC is acting as the conservator or receiver of an insolvent financial institution.

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

There has been little judicial determination of the validity of the provisions of FIRREA or how they are to be construed and reconciled with respect to conflicting state laws. However, certain federal court decisions have held that the FDIC/RTC is not liable for statutory penalties and interest authorized by State property tax law, and that although a lien for taxes may exist against real property, such lien may not be foreclosed without the consent of the FDIC/RTC, and no liens for penalties, fines, interest, attorneys fees, costs of abstract and research fees exist against the real property for the failure of the FDIC/RTC or a prior property owner to pay ad valorem taxes when due. It is also not known whether the FDIC/RTC will attempt to claim the FIRREA exemptions as to the time for contesting valuations and tax assessments made prior to and after the enactment of FIRREA. Accordingly, to the extent that the FIRREA provisions are valid and applicable to any property in the County, and to the extent that the FDIC/RTC attempts to enforce the same, these provisions may affect the timeliness of collection of taxes on property, if any, owned by the FDIC/RTC in the County, and may prevent the collection of penalties and interest on such taxes.

INVESTMENT POLICIES

Investments

The County invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the Commissioners Court of the County. Both state law and the County's investment policies are subject to change.

Legal Investments

Under Texas law, the County is authorized to invest in (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than "A" or its equivalent, (6) (a) certificates of deposit and share certificates issued by a depository institution that has its main office or branch office in the State of Texas, that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund or their respective successors, or are secured as to principal by obligations described in clauses (1) through (5) or in any other manner and amount provided by law for County deposits, and in addition (b) the County is authorized, subject to certain conditions, to invest in certificates of deposit with a depository institution that has its main office or branch office in the State of Texas and that participates in the Bond of Deposit Account Registry Service network ("CDARS") and as further provided by Texas law, (7) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1) and require the security being purchased by the County to be pledged to the County, held in the County’s name and deposited at the time the investment is made with the County or with a third party selected and approved by the County, and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (8) bankers’ acceptances with the remaining term of 270 days or less from the date of issuance, if the short-term obligations of the accepting bank or its parent are rated at least "A-1" or "P-1" or the equivalent by at least one nationally recognized credit rating agency, (9) commercial paper with the remaining term of 270 days or less from the date of issuance that is rated at least "A-1" or "P-1" or the equivalent by at least (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (10) no-load money market mutual funds registered with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (11) no-load mutual fund registered with the United States Securities and Exchange Commission that: have

-13- an average weighted maturity of less than two years; invest exclusively in obligations described in the preceding clauses, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than "AAA" or its equivalent, and (12) public funds investment pools that have an advisory board which includes participants in the pool and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than "AAA" or its equivalent or no lower than investment grade with a weighted average maturity no greater than 90 days. Texas law also permits the County to invest bond proceeds in a guaranteed investment contract subject to the limitations set forth in Chapter 2256, as amended, Texas Government Code.

Entities such as the County may enter into securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (5) and clause (12) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (5) and clause (12) above, clause (9) above and clauses (10) and (11) above, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to such investing entity or a third party designated such investing entity; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less.

The County may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than "AAA" or "AAA-m" or an equivalent by at least one nationally recognized rating service. The County is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.

Under Texas law, the County may contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the County retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the County must do so by order, ordinance or resolution. The County has not contracted with, and has no present intention of contracting with, any such investment management firm or the State Securities Board to provide such services.

Investment Policies

Under Texas law, the County is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for County funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All County funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield.

Under Texas law, County investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the County shall submit an investment report detailing: (1) the investment position of the County, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest County funds without express written authority from the Commissioners Court.

Additional Provisions

Under Texas law the County is additionally required to: (1) annually review its adopted policies and strategies, (2) adopt an order or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the said order or resolution, (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Commissioners Court; (4) require the qualified representative of firms offering to engage in any investment transaction with the County to: (a) receive and review the County's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the County and the business organization that are not authorize by the County's investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the County's entire portfolio or requires an interpretation of subjective investment standards, and (c) deliver a written

-14- statement in a form acceptable to the County and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the County's investment policy; (6) provide specific investment training for the Treasurer, Chief Financial Officer, or other investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in mutual funds in the aggregate to no more than 80% of the County's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service and further restrict the investment in no-load mutual funds of any portion of bond proceeds, reserves and funds held for debt service and to no more than 15% of the entity's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to confirm to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements, and (10) at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the County.

Current Investments(1)

The investments of the County as of March 31, 2010 are as follows:

Book Fair Market Type of Investment Balance Value Percent

Money Market (Sweep Account) $ 22,193,715 $ 22,193,715 2.95% U.S. Government Securities 442,148,727 442,090,271 68.86% Local Government Investment Pools 236,839,580 236,839,580 31.53% Fully Collateralized Certificates of Deposit 50,000,000 50,000,000 6.66% Total $751,182,022 $751,123,566 100.00%

______Source: Bexar County Quarterly Investment Report for the quarter ended March 31, 2010. (1) Unaudited.

As of such date, the market value of such investments (as determined by the County by reference to published quotations, dealer bids, and comparable information) was approximately 100% of their book value. No funds of the County are invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other instrument, index, or commodity.

LEGAL MATTERS

The County will furnish the Underwriters with a complete transcript of proceedings incident to the authorization and issuance of the Refunding Bonds, including the unqualified approving legal opinion of the Attorney General of the State of Texas to the effect that the Initial Refunding Bond is a valid and legally binding obligation of the County, and based upon examination of such transcript of proceedings, the approval of certain legal matters by Bond Counsel, to the effect that the Refunding Bonds, issued in compliance with the provisions of the Order, are valid and legally binding obligations of the County and, subject to the qualifications set forth herein under "TAX MATTERS," the interest on the Refunding Bonds will be excludable from gross income for federal income tax purposes under existing statutes, published rulings, regulations, and court decisions. Though it represents the Co-Financial Advisors and the Underwriters from time to time in connection with matters unrelated to the Refunding Bonds, Bond Counsel only represents the County in connection with the issuance of the Refunding Bonds. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the caption "THE REFUNDING BONDS" (other than the information under the subcaptions "Payment Record," “Delivery,” "Future Issues," and "Defaults and Remedies," as to which no opinion is expressed), "REGISTRATION, TRANSFER AND EXCHANGE," "LEGAL MATTERS" (except for the last sentence of the first paragraph thereof as to which no opinion is expressed) "TAX MATTERS," "CONTINUING DISCLOSURE OF INFORMATION" (other than the information under the subcaption "Compliance with Prior Undertakings," as to which no opinion is expressed), and the subcaption "Legal Investments and Eligibility to Security Public Funds in Texas" under the caption "OTHER PERTINENT INFORMATION" in the Official Statement and such firm is of the opinion that the information relating to the Refunding Bonds and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Refunding Bonds, such information conforms to the provisions of the Order. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Refunding Bonds or which would affect the provision made for their payment or security, or in any manner questioning the validity of the Refunding Bonds will also be furnished. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Refunding Bonds are contingent on the sale and delivery of the Refunding Bonds. The legal opinion of Bond Counsel will accompany the Refunding Bonds deposited with DTC or will be printed on the definitive Refunding Bonds in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriters by Shelton & Valadez, P.C., San Antonio, Texas, counsel to the Underwriters, whose fee is contingent on the sale and delivery of the Refunding Bonds.

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The various legal opinions to be delivered concurrently with the delivery of the Refunding Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

NO-LITIGATION

On the date of delivery of the Refunding Bonds to the Underwriters, the County will execute and deliver to the Underwriters a certificate to the effect that no litigation of any nature has been filed or is pending, as of that date, to restrain or enjoin the issuance or delivery of the Refunding Bonds or which would adversely affect the provisions made for their payment or security, or in any manner questioning the validity of the Refunding Bonds.

TAX MATTERS

Tax Exemption

The delivery of the Refunding Bonds is subject to an opinion of Fulbright & Jaworski L.L.P., Bond Counsel to the County (“Bond Counsel”), to the effect that interest on the Refunding Bonds for federal income tax purposes under existing statutes, regulations, published rulings and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the Refunding Bonds (the “Code”), of the owners thereof pursuant to section 103 of the Code and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. The statute, regulations, rulings and court decisions on which such opinion will be based are subject to change. A form of Bond Counsel’s opinion appears in APPENDIX D attached hereto.

Interest on Refunding Bonds owned by a corporation will be included in such corporation’s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust (REIT), a financial asset securitization investment trust (FASIT), or a real estate mortgage investment conduit (REMIC). A corporation’s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed.

In rendering the foregoing opinions, Bond Counsel will rely upon the certificate of the County's Co-Financial Advisors regarding the sufficiency of the deposit to the Escrow Fund on the date of initial delivery of the Refunding Bonds and upon the representations and certifications of the County pertaining to the use, expenditure and investment of the proceeds of the Refunding Bonds and will assume continuing compliance with the provisions of the Order by the County subsequent to the issuance of the Refunding Bonds. The Order contains covenants by the County with respect to, among other matters, the use of the proceeds of the Refunding Bonds and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Refunding Bonds are to be invested and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Refunding Bonds to be includable in the gross income of the owner thereof for federal income taxes from the date of the issuance of the Refunding Bonds.

Except as described above, Bond Counsel will express no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Refunding Bonds. Bond Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, published rulings and court decisions and the representations and covenants of the County described above. No ruling has been sought from the Internal Revenue Service (the “Service”) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel’s opinion is not binding on the Service. The Service has an on going program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Refunding Bonds is commenced, under current procedures the Service is likely to treat the County as the “taxpayer,” and the Owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Refunding Bonds, the County may have different or conflicting interests from the Owners. Public awareness of any future audit of the Refunding Bonds could adversely affect the value and liquidity of the Refunding Bonds during the pendency of the audit, regardless of its ultimate outcome.

Ancillary Tax Consequences

Prospective purchasers of the Refunding Bonds should be aware that the ownership of tax-exempt obligations such as the Refunding Bonds may result in collateral federal tax consequences to, among others, financial institutions, property and casualty insurance companies, life insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances.

-16-

Tax Accounting Treatment of Discount Bonds

The initial public offering price to be paid for certain Refunding Bonds may be less than the amount payable on such Refunding Bonds at maturity (the “Discount Bonds”). An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bonds. A portion of such original issue discount, allocable to the holding period of a Discount Bond by the initial purchaser, will be treated as interest for federal income tax purposes, excludable from gross income on the same terms and conditions as those for other interest on the Refunding Bonds. Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during his taxable year.

However, such accrued interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation’s alternative minimum tax imposed by section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, property and casualty insurance companies, life insurance companies, S corporations with subchapter C earnings and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.

In the event of the sale or other taxable disposition of a Discount Bond prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross income.

Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal income tax purposes of accrued interest upon disposition of Discount Bonds and with respect to the state and local tax consequences of owning Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on the Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment.

Tax Accounting Treatment of Premium Bonds

The initial public offering price to be paid for certain Refunding Bonds may be greater than the stated redemption price on such Refunding Bonds at maturity (the “Premium Bonds”). An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and its stated redemption price at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable certificate premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable certificate premium with respect to the Premium Bonds. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser’s yield to maturity.

Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable certificate premium on Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds.

CONTINUING DISCLOSURE OF INFORMATION

In the Order, the County has made the following agreement for the benefit of the holders and beneficial owners of the Refunding Bonds. The County is required to observe the agreement while it remains obligated to advance funds to pay the Refunding Bonds. Under the agreement, the County will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to the Municipal Securities Rulemaking Board (“MSRB”). This information will be available to the public free of charge from the MSRB via the Electronic Municipal Market (“EMMA”) system at www.emma.msrb.org, as further described below under “Availability of Information from MSRB”.

Annual Reports

Under Texas law, including, but not limited to, Chapter 115, as amended, Texas Local Government Code, the County must keep its fiscal records in accordance with generally accepted accounting principles, must have its financial accounts and records audited by a certified or permitted public accountant and must maintain each audit report with the County

-17- Auditor. The County’s fiscal records and audit reports are available for public inspection during the regular business hours of the County Auditor. Additionally, upon the filing of these financial statements and the annual audit, these documents are subject to the Texas Open Records Act, as amended, Texas Government Code, Chapter 552. Thereafter, any person may obtain copies of these documents upon submission of a written request to the County Auditor at the Bexar County Auditor, 212 Strumberg, Suite 100, San Antonio, Texas 78204, and upon paying the reasonable copying, handling, and delivery charges for providing this information.

The County will provide certain updated financial information and operating data to the MSRB annually. The information to be updated with respect to the County includes all quantitative financial information and operating data of the general type included in this Official Statement. The information is of the type included in APPENDIX A, exclusive of the table reflecting "Consolidated Overlapping Gross Funded Debt Payable from Ad Valorem Taxes," and in APPENDIX C. The County will update and provide this information within six months after the end of each of its fiscal years ending in and after 2010. The County will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC") in accordance with the requirements of SEC Rule 15c2-12 (the “Rule”).

The County may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by the Rule. The updated information will include audited financial statements, if it commissions an audit and the audit is completed by the required time. If audited financial statements are not provided with annual information, the County will provide unaudited financial statements at such time and later provide audited financial statements when and if the audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX C or such other accounting principles as the County may be required to employ from time to time pursuant to state law or regulation.

The County's current fiscal year end is September 30. Accordingly, it must provide updated information by the last day of March in each year, unless it changes its fiscal year. If the County changes its fiscal year, it will notify the MSRB.

Material Event Notices

In the Order, the County has agreed, for the benefit of the holders and Beneficial Owners of the Refunding Bonds, to provide timely notices of certain events to the MSRB. The District is required to observe such agreement for so long as it remains obligated to advance funds to pay the Refunding Bonds. The County will provide notice of any of the following events with respect to the Refunding Bonds, if such event is material to a decision to purchase or sell Refunding Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Refunding Bonds; (7) modifications to rights of holders of the Refunding Bonds; (8) Refunding Bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Refunding Bonds; and (11) rating changes. Neither the Refunding Bonds nor the Order makes any provision for debt service reserves, credit enhancement, or liquidity enhancement. In addition, the County will provide timely notice of any failure by the County to provide information, data, or financial statements in accordance with its agreement described above under “Annual Reports.” The MSRB has made this information available to the public without charge and investors are able to access continuing disclosure information with the MSRB at www.emma.msrb.org.

Availability of Information from MSRB

Effective July 1, 2009 (the "EMMA Effective Date"), the SEC implemented amendments to the Rule which approved the establishment by the MSRB of EMMA, which is now the sole successor to the national municipal securities information repositories with respect to filings made in connection with undertakings made under the Rule after the EMMA Effective Date. Commencing with the EMMA Effective Date, all information and documentation filing required to be made by the County in accordance with its undertaking made for the Refunding Bonds will be made with the MSRB in electronic format in accordance with MSRB guidelines. Access to such filings will be provided, without charge to the general public, by the MSRB.

With respect to debt of the County issued prior to the EMMA Effective Date, the County remains obligated to make annual required filings, as well as notices of material events, under its continuing disclosure obligations relating to those debt obligations (which includes a continuing obligation to make such filings with the Texas state information repository (the “SID”)). Prior to the EMMA Effective Date, the Municipal Advisory Council of Texas (the “MAC”) had been designated by the State and approved by the SEC staff as a qualified SID. Subsequent to the EMMA Effective Date, the MAC has entered into a Subscription Agreement with the MSRB pursuant to which the MSRB makes available to the MAC, in electronic format, all Texas-issuer continuing disclosure documents and related information posted to EMMA’s website simultaneously with such posting. Until the County receives notice of a change in this contractual agreement between the MAC and EMMA or of a failure of either party to perform as specified thereunder, the County has determined, in reliance on guidance from the MAC, that making its continuing disclosure filings solely with the MSRB will satisfy its obligations to make filings with the SID pursuant to its continuing disclosure agreements entered into prior to the EMMA Effective Date.

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Limitations and Amendments

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

The County may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the County, if (1) the agreement, as amended, would have permitted an underwriter to purchase or sell Refunding Bonds in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate principal amount of the outstanding Refunding Bonds consent or (b) any person unaffiliated with the County (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the beneficial owners of the Refunding Bonds. The County may also repeal or amend these provisions if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but in either case only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Refunding Bonds in the primary offering of the Refunding Bonds giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the County amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and data provided.

Compliance with Prior Undertakings

During the past five years, the County has complied in all material respects with continuing disclosure agreements made by it in accordance with the Rule. On March 31, 2010, the County made its timely annual filing which included the audited financial statements for the period ended September 30, 2009. Due to the recalibration of municipal credit ratings that both Fitch and Moody’s have recently completed, the County received upgraded ratings on its indebtedness from both Moody’s (on April 23, 2010) and Fitch (on April 30, 2010) (see “OTHER PERTINENT INFORMATION – Bond Ratings” herein). On June 4, 2010, the County filed notice of this material event with the MSRB through EMMA.

OTHER PERTINENT INFORMATION

Authenticity of Financial Data and Other Information

The financial data and other information contained herein have been obtained from the County’s records, audited financial statements and other sources that are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects.

Registration and Qualification of Bonds for Sale

The sale of the Refunding Bonds has not been registered under the federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Refunding Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Refunding Bonds been qualified under the securities act of any other jurisdiction. The County assumes no responsibility for qualification of the Refunding Bonds under the securities laws of any jurisdiction in which the Refunding Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Refunding Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions.

Legal Investments and Eligibility to Secure Public Funds in Texas

Section 1201.041 of the Public Securities Procedures Act (Chapter 1201, Texas Government Code) provides that the Refunding Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Refunding Bonds by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Refunding Bonds be assigned a rating of at least "A" or its

-19- equivalent as to investment quality by a national rating agency. See "OTHER PERTINENT INFORMATION - Bond Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Refunding Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Refunding Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value.

Bond Ratings

Fitch Ratings ("Fitch"), Moody's Investors Service, Inc. (“Moody's”) and Standard and Poor's Ratings Services, a Standard & Poor's Financial Services LLC business (“S&P”) have assigned their municipal bond ratings of “AAA,” "Aaa," and "AA+," respectively, to the Bonds.

The County’s underlying, unenhanced ratings on the Refunding Bonds reflect recent upgrades received by the County on its indebtedness due to the recalibration of municipal credit ratings that both Fitch and Moody’s have recently completed. Moody’s released its recalibrated ratings on April 23, 2010 and Fitch released its recalibrated ratings on April 30, 2010. See “CONTINUING DISCLOSURE OF INFORMATION – Compliance with Prior Undertakings” herein.

The ratings reflect only the views of Fitch, Moody's and S&P at the time the ratings are given, and the County makes no representations as to the appropriateness thereof. There is no assurance that any rating will continue for any given period of time, or that a rating will not be revised downward or withdrawn entirely if, in the judgment of Fitch, Moody's or S&P, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Refunding Bonds.

Underwriting

The Underwriters have agreed, subject to certain conditions, to purchase the Refunding Bonds at a price equal to the initial offering prices to the public, as shown on the inside cover page hereof, less an underwriting discount of $204,769.20, plus accrued interest on the Refunding Bonds from their dated date through their date of initial delivery. The Underwriters’ obligations are subject to certain conditions precedent. The Underwriters will be obligated to purchase all of the Refunding Bonds if any Refunding Bonds are purchased. The Refunding Bonds may be offered and sold to certain dealers and others at prices lower than such public offering price, and such public prices may be changed from time to time, by the Underwriters.

Effective as of September 30, 2008, MSRB rules require underwriter participation with the Depository Trust and Clearing Corporation’s (“DTCC”) New Issue Information Dissemination System (“NIIDS”). The rule change consists of an amendment of Rule G-8, Books and Records, Rule G-9, Preservation of Records, and Rule G-34, CUSIP Numbers and New Issue Requirements. The rule change is designed to improve new issue trade reporting by accelerating the timing for CUSIP number assignment, and, with the exception of new issues of short-term instruments with less than nine months in effective maturity, requiring underwriters to: (1) submit certain information about a new issue of municipal securities to NIIDS within set timeframes and (2) set and disseminate a “Time of First Execution” that allows time for market participants to access necessary information in preparation for trade reporting prior to beginning trade executions in the issue.

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

Co-Financial Advisors

SAMCO Capital Markets, Inc. and M. E. Allison & Co., Inc. (the “Co-Financial Advisors”) are employed as the Co-Financial Advisors to the County in connection with the issuance of the Refunding Bonds. The Co-Financial Advisors' fees for services rendered with respect to the sale of the Refunding Bonds are contingent upon the issuance and delivery of the Refunding Bonds. SAMCO Capital Markets, Inc. and M. E. Allison & Co., Inc. in their capacity as Co-Financial Advisors, have relied on the opinion of Bond Counsel and have not verified and do not assume any responsibility for the information, covenants, and representations contained in any of the bond documentation with respect to the federal income tax status of the Refunding Bonds.

The fees of the Co-Financial Advisors for services with respect to the Refunding Bonds are contingent upon the issuance and sale of the Refunding Bonds. In the normal course of business, the Co-Financial Advisors may also from time to time sell investment securities to the County for the investment of bond proceeds or other funds of the County upon the request of the County.

-20- The Co-Financial Advisors have provided the following sentence for inclusion in this Official Statement. The Co-Financial Advisors have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to the County and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Co-Financial Advisors do not guarantee the accuracy or completeness of such information.

Forward Looking Statements

The statements contained in this Official Statement, and in any other information provided by the County, that are not purely historical, are forward-looking statements, including statements regarding the County’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward looking statements included in this Official Statement are based on information available to the County on the date hereof, and the County assumes no obligation to update any such forward-looking statements. It is important to note that the County’s actual results could differ materially from those in such forward-looking statements.

The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the County. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement would prove to be accurate.

Financial Statements

Appendix C to this Official Statement contains the County’s annual financial report for the fiscal year ended September 30, 2009. These financial statements have been audited by Garza/Gonzalez & Associates, San Antonio, Texas, independent certified public accountants, as stated in their reports included with such financial statements in Appendix C.

GASB 34 Implication for the County

In June 1999, the Governmental Accounting Standards Board issued Statement No. 34, “Basic Financial Statements -- Management’s Discussion and Analysis -- for State and Local Governments" ("GASB 34"). The objective of GASB 34 is to enhance the clarity and usefulness of the general-purpose external financial reports of state and local governments to the citizenry, legislative and oversight bodies, and investors and creditors. The County implemented GASB 34 for its fiscal year ending December 31, 2003. While adoption of GASB 34 altered the presentation of the County's financial information, County management believes that adoption of GASB 34 did not have any material adverse impact to the County’s financial position, results of operation, or cash flow.

Certification of the Official Statement

At the time of payment for and delivery of the Refunding Bonds, the Underwriters will be furnished a certificate, executed by proper officers, acting in their official capacity, to the effect that to the best of their knowledge and belief: (a) the description and statements of or pertaining to the County contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, and on the date of the initial delivery of the Refunding Bonds, were and are true and correct in all material respects; (b) insofar as the County and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of circumstances under which they are made, not misleading; (c) insofar as the description and statements, including financial data, of or pertaining to entities, other than the County, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the County believes to be reliable and that the County has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the County since September 30, 2009, the date of the last audited financial statements of the County.

Authorization of the Official Statement

No person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the County.

This Official Statement has been approved by the Commissioners Court of the County for distribution in accordance with provisions of the United States Securities and Exchange Commission’s rule codified at 17 C.F.R. Section 240.15c-12, as amended.

-21- The Order will also approve the form and content of this Official Statement and any addenda, supplement or amendment thereto and authorize its further use in the reoffering of the Refunding Bonds by the Underwriters.

BEXAR COUNTY, TEXAS

/s/ Nelson W. Wolff County Judge ATTEST:

/s/ Gerald C. Rickhoff County Clerk and Ex-Officio Clerk of the Commissioners Court

-22- SCHEDULE I

SCHEDULE OF REFUNDED OBLIGATIONS

Bexar County, Texas General Obligation Commercial Paper Notes, Series A (the "Refunded Obligations"), in the outstanding principal amount of $39,384,000 to be paid at maturity. See "APPENDIX A - Other Debt" herein. The Refunded Obligations will mature on or about August 2, 2010.

- Schedule I -

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APPENDIX A

SELECTED FINANCIAL INFORMATION OF BEXAR COUNTY

(this page intentionally left blank) GENERAL OBLIGATION DEBT

2009 Appraised Valuation of County @ 100% ...... $108,437,413,370 Less Local Exemptions ...... 9,867,565,863 2009 Taxable Assessed Valuation ...... $ 98,569,847,507 ______Source: Comptroller of Public Accounts 2009 County Report of Property Value.

County’s Funded Debt Payable from Ad Valorem Taxes (as of 6-15-2010) Total Funded Debt Outstanding ...... $883,040,000 * Ratio Total Funded Debt to 2009 Taxable Assessed Valuation ...... 0.90%

______* Includes the Refunding Bonds, the Proposed New Money Bonds, and the Proposed Obligations; excludes the Refunded Obligations. . 2000 U.S. Census Population - 1,392,931; 2009 Estimated Population - 1,622,899 Per Capita 2009 Taxable Assessed Valuation - $60,736.90 Per Capita Total General Purpose Funded Debt - $544.11 Area - 1,248 Square Miles - 798,720 Acres Total General Purpose Funded Debt Per Acre - $1,105.70

OBLIGATIONS OUTSTANDING (As of June 15, 2010)

Limited Tax Debt: (a) (b) Combination Tax and Revenue Certificates of Obligation, Series 2002 $ 7,280,000.00 Limited Tax General Obligation Refunding Bonds, Series 2004 7,610,000.00 Combination Tax and Revenue Certificates of Obligation, Series 2004 10,170,000.00 Limited Tax Bonds, Series 2004 7,520,000.00 Combination Tax and Revenue Certificates of Obligation, Series 2004-A 17,770,000.00 Limited Tax General Obligation Refunding Bonds, Series 2005 21,355,000.00 Limited Tax General Obligation Refunding Bonds, Series 2006 2,195,000.00 Pass-Through Revenue and Limited Tax Bonds, Series 2007 20,950,000.00 Combination Tax and Revenue Certificates of Obligation, Series 2007 19,855,000.00 Combination Tax and Revenue Certificates of Obligation, Series 2008 51,150,000.00 Pass-Through Revenue and Limited Tax Bonds, Series 2008 29,170,000.00 Limited Tax Refunding Bonds, Series 2009 10,690,000.00 Public Property Finance Contractual Obligations, Series 2009 3,960,000.00 Combination Tax and Revenue Certificates of Obligation, Series 2009 A & B 149,065,000.00 Limited Tax Refunding Bonds, Series 2010 (the "Refunding Bonds") 36,915,000.00 Proposed Limited Tax General Obligation Bonds, Series 2010 25,000,000.00 * Proposed Combination Tax and Revenue Certificates of Obligation, Series 2010 130,000,000.00 * Total Limited Tax Debt $550,655,000.00 * Unlimited Tax Debt: (b) Unlimited Tax Road Bonds, Series 2004 5,445,000.00 Unlimited Tax Road Bonds, Series 2007 17,855,000.00 Unlimited Tax Road Bonds, Series 2008 14,265,000.00 Total Unlimited Tax Debt 37,565,000.00 Flood Control Tax Debt: Combination Flood Control Tax and Revenue Certificates of Obligation, Series 2002 2,570,000.00 Combination Flood Control Tax and Revenue Certificates of Obligation, Series 2004 3,220,000.00 Combination Flood Control Tax and Revenue Certificates of Obligation, Series 2007 67,885,000.00 Combination Flood Control Tax and Revenue Certificates of Obligation, Series 2008 66,835,000.00 Combination Flood Control Tax and Revenue Certificates of Obligation, Series 2009 A& B 154,310,000.00 Total Flood Control Debt 294,820,000.00 Total Outstanding Debt $883,040,000.00 *

______* Preliminary, subject to change. (a) See “AD VALOREM TAX PROCEDURES - Limited Tax Funded Debt Payable from Proceeds of $0.80 Constitutional Tax Rate” in the Official Statement. (b) As of May 15, 2009. Excludes debt payable from a flood control tax which is included as "Flood Control Tax Debt." (See “AD VALOREM TAX PROCEDURES - Tax Rate and Funded Debt Limitations" in the Official Statement.) A-1 OTHER DEBT

The County has authorized its General Obligation Commercial Paper Notes, Series A in the maximum principal amount of $100,000,000. The purpose of the Commercial Paper Program is to provide funds for the interim financing of a portion of the costs of capital improvements in the County. Scheduled maturities of the short-term borrowings under the Commercial Paper Program must mature within 270 days and cannot extend beyond September 20, 2012, which is the current stated expiration date of the Revolving Credit Agreement executed between the County and Dexia Credit Local, acting through its New York Branch. J. P. Morgan Securities, Inc. serves as the dealer for the Commercial Paper Program and Deutsche Bank Trust Company Americas, New York, New York, serves as the Issuing and Paying Agent. As of May 31, 2010, the County has issued $39,384,000 in principal amount of these commercial paper notes that constitute the Refunded Obligations.

At an election held on May 10, 2008 (the "2008 Election"), the County’s qualified voters authorized the County to continue its levy and collection of the Venue Tax, which the County began collecting on January 1, 2000 as authorized at an election of its qualified voters held on November 2, 1999, and to pledge the revenues therefrom for the repayment of, and as security for, one or more series of bonds to finance various venue projects authorized by Chapter 334, as amended, Texas Local Government Code. The Commissioners Court ordered the continuation of its collection of the Venue Taxes on May 27, 2008. On September 30, 2008, the County refunded the Original Venue Bonds, and issued two series of new money venue project bonds to provide construction proceeds for the completion of venue projects approved at the 2008 Election, all of which obligations are secured by and payable from (in whole or in part) the Venue Taxes. On December 17, 2009, the County issued two additional series of bonds. The purpose of these bonds is for financing the costs of Motor Vehicle Rental Tax Venue Projects, to pay the costs of their issuance, and to fund the Tax-Exempt Combined Venue Tax Bonds Reserve. These six series of bonds that have been issued represent the only outstanding County indebtedness secured by and payable from the Venue Taxes; however, the County anticipates issuing multiple series of such bonds over the next five years to provide additional proceeds for the completion of the projects authorized at the 2008 election, which includes the proposed issuance of two series of new money venue project revenue bonds to be issued prior to September 30, 2010. As of June 15, 2010, the County had $153,940,000 in combined venue project debt outstanding.

______Source: The County's audited financial statements and information provided by the County Auditor.

AD VALOREM TAX RATIOS

The following table sets forth the ratio of the County's indebtedness outstanding payable from ad valorem taxes to assessed value and indebtedness outstanding per capita.

Fiscal Net Net Year Net Indebtedness Indebtedness Ended Assessed Indebtedness Outstanding Estimated Outstanding 9/30 Value (a) Outstanding To Assessed Value Population Per Capita

1999 $39,836,862,150 $139,577,751 0.35% 1,432,700 $97.42 2000 41,870,592,752 141,455,298 0.34% 1,462,500 96.72 2001 45,407,904,531 128,096,591 0.28% 1,488,600 86.05 2002 49,789,196,016 133,262,031 0.27% 1,512,800 88.09 2003 52,734,890,581 121,442,194 0.23% 1,536,600 79.03 2004 57,047,025,482 120,114,211 0.21% 1,560,500 76.97 2005 60,273,124,001 145,642,187 0.24% 1,584,600 91.94

2006 65,437,180,648 132,304,822 0.20% 1,609,500 82.20

2007 74,916,971,550 234,361,842 0.31% 1,609,500 169.75

2008 86,921,985,819 349,497,513 0.40% 1,618,918 215.88

2009 97,312,377,954 665,979,115 0.68% 1,622,899 410.36 (b) 2010 98,569,847,507 784,857,224 0.80% 1,641,170 478.23

______(a) Assessed values are net of exemptions. The basis of assessment is 100% of appraised value. (b) Includes the Refunding Bonds, the proposed New Money Bonds and the proposed Obligations, less County cash and investments as of May 27, 2010.

A-2 ADDITIONAL DEBT

On November 4, 2003, the voters of the County approved a bond referendum authorizing $99,246,000 in new debt for a variety of projects. As of June 1, 2010, the County has $49,265,000 in authorized but unissued bonds outstanding from the 2003 bond referendum. It is projected that the County will issue this debt in various increments over the course of the next seven years. (See “SELECTED FINANCIAL INFORMATION OF THE COUNTY - Authorized but Unissued Tax Bonds” herein.)

The County may issue certificates of obligation, personal property finance contractual obligations, tax notes and commercial paper notes payable from ad valorem taxes without voter approval. See "OTHER DEBT ISSUES" herein.

AUTHORIZED BUT UNISSUED TAX BONDS

The County has the following authorized but unissued bonds payable from the $0.80 Tax Limitation:

Original Amount Amount Date Amount Previously Being Unissued Purpose e Authorized Authorized Issued Issued Balance

Detention Facilities 11-2-93 $79,000,000 $66,999,113 $0 $12,000,887 Detention Facilities 11-4-03 47,990,000 8,112,500 0 39,877,500 Parks & Comm. Facilities 11-4-03 5,925,000 975,000 0 4,950,000 Public Safety 11-4-03 4,750,000 312,500 0 4,437,500

The County has not previously held a bond election to authorize debt payable from the Flood Control Tax (hereinafter defined).

The County has no authorized but unissued bonds payable from its unlimited tax for County road projects.

OTHER DEBT ISSUES

In addition to the Refunding Bonds, the County is issuing its $25,000,000* Limited Tax General Obligation Bonds, Series 2010 (the “New Money Bonds”) and its $130,000,000* Combination Tax and Revenue Certificates of Obligation, Series 2010 (the "Obligations") pursuant to separate orders adopted by the Court. The New Money Bonds and the Obligations are currently expected to be delivered on August 19, 2010. This Official Statement only describes the Refunding Bonds and investors must review the County’s disclosure documents relating to the New Money Bonds and the Obligations in their entirety prior to making an investment decision with respect to the New Money Bonds and/or the Obligations.

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______* Preliminary, subject to change.

A-3 DEBT SERVICE REQUIREMENTS - LIMITED TAX INDEBTEDNESS*

The following table sets forth the annual debt service requirements on the County's limited tax indebtedness (See "SELECTED FINANCIAL INFORMATION OF THE COUNTY - Authorized But Unissued Tax Bonds" herein.)

Less: Total Fiscal Year Direct Limited Tax Ending 9/30 Principal Interest Subsidy(1) Debt Service

2010 $20,860,000 $ 16,975,847.66 $ (919,854.82) $ 36,915,992.84 2011 24,670,000 27,123,712.36 (1,174,282.76) 50,619,429.60 2012 25,705,000 26,157,929.36 (1,174,282.76) 50,688,646.60 2013 25,660,000 25,058,762.36 (1,174,282.76) 49,544,479.60 2014 22,210,000 23,963,712.86 (1,174,282.76) 44,999,430.10 2015 19,580,000 22,974,430.86 (1,174,282.76) 41,380,148.10 2016 18,930,000 22,094,550.86 (1,174,282.76) 39,850,268.10 2017 18,075,000 21,213,257.36 (1,174,282.76) 38,113,974.60 2018 18,935,000 20,361,034.86 (1,174,282.76) 38,121,752.10 2019 21,825,000 19,475,327.10 (1,174,282.76) 40,126,044.34 2020 20,595,000 18,466,606.10 (1,174,282.76) 37,887,323.34 2021 20,585,000 17,440,162.60 (1,174,282.76) 36,850,879.84 2022 15,605,000 16,411,131.10 (1,174,282.76) 30,841,848.34 2023 17,415,000 15,615,056.10 (1,174,282.76) 31,855,773.34 2024 16,110,000 14,756,112.36 (1,174,282.76) 29,691,829.60 2025 16,905,000 13,963,999.86 (1,174,282.76) 29,694,717.10 2026 14,295,000 13,132,724.86 (1,174,282.76) 26,253,442.10 2027 14,990,000 12,432,549.86 (1,174,282.76) 26,248,267.10 2028 14,955,000 11,705,143.60 (1,174,282.76) 25,485,860.84 2029 13,450,000 10,967,531.10 (1,174,282.76) 23,243,248.34 2030 14,105,000 10,314,206.10 (1,174,282.76) 23,244,923.34 2031 14,810,000 9,608,956.10 (1,174,282.76) 23,244,673.34 2032 15,545,000 8,874,106.10 (1,174,282.76) 23,244,823.34 2033 16,315,000 8,102,818.60 (1,174,282.76) 23,243,535.84 2034 17,125,000 7,293,343.60 (1,174,282.76) 23,244,060.84 2035 17,980,000 6,437,093.60 (1,174,282.76) 23,242,810.84 2036 19,450,000 5,538,093.60 (1,174,282.76) 23,813,810.84 2037 20,555,000 4,377,559.60 (906,345.86) 24,026,213.74 2038 21,720,000 3,150,298.20 (622,054.36) 24,248,243.84 2039 22,950,000 1,852,495.40 (320,248.38) 24,482,247.02 2040 9,605,000 480,250.00 10,085,250.00

$571,515,000 $436,318,804.08 $(33,299,855.18) $974,533,948.90

______* Includes the Refunding Bonds, the proposed New Money Bonds and the proposed Obligations. (1) The Bexar County, Texas Combination Tax and Revenue Certificates of Obligation, Taxable Series 2009B (Direct Subsidy - Build America Bonds) (the "Taxable Non-Flood Obligations") were designed as "Build America Bonds" under and pursuant to the authority provided for in the federal American Recovery and Reinvestment Act of 2009 (effective February 17, 2009) and are permitted to receive directly from the United States Treasury a refundable tax credit equal to 35% of the taxable interest the County pays on the Taxable Non-Flood Obligations to the holders thereof (the "Subsidy Payment"). Failure on the part of the County to comply with the conditions imposed by the Internal Revenue Code, and future guidance to be provided by the United States Treasury and the Internal Revenue Service, may cause the County to fail to receive the Subsidy Payment for the Taxable Non-Flood Obligations. Moreover, Subsidy Payments are subject to automatic offsets against certain amounts that may, for unrelated reasons, be owed by the County to an agency of the United States of America.

TAX ADEQUACY - LIMITED TAX DEBT

Estimated Proceeds from $0.045267 Limited Tax Using 2009 Taxable Assessed Valuation of $98,569,847,507 at 95% Collected ...... $42,388,632

Estimated Other Sources (includes funds transferred from the Advanced Transportation District) ...... 8,800,000

Total Estimated Available Funds for 2010/2011 Debt Service ...... $51,188,632

2010/2011 Estimated Limited Tax Debt Service Requirement ...... $50,619,430 *

______* Includes the Refunding Bonds, the proposed New Money Bonds, and the proposed Obligations.

A-4

DEBT SERVICE REQUIREMENTS - UNLIMITED TAX INDEBTEDNESS*

The following table sets forth the annual debt service requirements on the County's unlimited tax indebtedness.

Total Unlimited Fiscal Year Tax Debt End 9/30 Principal Interest Debt Service

2010 $ 1,510,000.00 $ 1,786,703.76 $ 3,296,703.76 2011 1,575,000.00 1,724,153.76 3,299,153.76 2012 1,650,000.00 1,658,263.76 3,308,263.76 2013 1,715,000.00 1,588,488.76 3,303,488.76 2014 1,785,000.00 1,518,433.76 3,303,433.76 2015 1,855,000.00 1,442,143.76 3,297,143.76 2016 1,945,000.00 1,360,291.26 3,305,291.26 2017 2,025,000.00 1,273,628.76 3,298,628.76 2018 2,125,000.00 1,176,478.76 3,301,478.76 2019 2,220,000.00 1,080,056.26 3,300,056.26 2020 2,325,000.00 978,473.76 3,303,473.76 2021 2,430,000.00 871,092.51 3,301,092.51 2022 2,535,000.00 761,611.26 3,296,611.26 2023 2,660,000.00 644,611.26 3,304,611.26 2024 2,230,000.00 518,231.26 2,748,231.26 2025 2,340,000.00 411,431.26 2,751,431.26 2026 2,450,000.00 298,125.00 2,748,125.00 2027 2,570,000.00 179,487.50 2,749,487.50 2028 1,130,000.00 53,675.00 1,183,675.00

$39,075,000.00 $19,325,381.41 $58,400,381.41

______* In practice, the County has not levied a tax for its unlimited tax bonds. The County currently is covering the debt service for these unlimited tax bonds from other lawfully available funds.

TAX ADEQUACY - UNLIMITED TAX BONDS

Estimated Proceeds from $0.00352 Unlimited Tax Using 2009 Taxable Assessed Valuation of $98,569,847,507 at 95% Collected ...... $3,299,154

Estimated Other Sources ...... 20,000

Total Estimated Available Funds for Unlimited Tax Debt Service ...... $3,319,154

2010/2011 Estimated Unlimited Tax Debt Service Requirement ...... $3,299,154 *

______* In practice, the County has not levied a tax for its unlimited tax bonds. The County currently is covering the debt service for these unlimited tax bonds from other lawfully available funds.

A-5

DEBT SERVICE REQUIREMENTS - FLOOD CONTROL TAX INDEBTEDNESS

The following table sets forth the annual debt service requirements on the County's flood control indebtedness.

Less: Total Fiscal Year Direct Flood Control Ending 9/30 Principal Interest Subsidy(1) Debt Service

2010 $ 2,915,000.00 $ 13,631,276.44 $ (919,854.82) $ 15,626,421.62 2011 3,035,000.00 15,352,718.60 (1,174,282.76) 17,213,435.84 2012 3,150,000.00 15,228,883.60 (1,174,282.76) 17,204,600.84 2013 3,295,000.00 15,086,833.60 (1,174,282.76) 17,207,550.84 2014 3,435,000.00 14,951,723.60 (1,174,282.76) 17,212,440.84 2015 3,605,000.00 14,782,768.60 (1,174,282.76) 17,213,485.84 2016 4,055,000.00 14,606,368.60 (1,174,282.76) 17,487,085.84 2017 3,745,000.00 14,408,718.60 (1,174,282.76) 16,979,435.84 2018 3,920,000.00 14,235,043.60 (1,174,282.76) 16,980,760.84 2019 6,090,000.00 14,069,083.60 (1,174,282.76) 18,984,800.84 2020 6,355,000.00 13,799,958.60 (1,174,282.76) 18,980,675.84 2021 6,660,000.00 13,488,077.36 (1,174,282.76) 18,973,794.60 2022 6,995,000.00 13,158,821.10 (1,174,282.76) 18,979,538.34 2023 8,360,000.00 12,800,483.60 (1,174,282.76) 19,986,200.84 2024 8,455,000.00 12,373,118.60 (1,174,282.76) 19,653,835.84 2025 8,885,000.00 11,939,193.60 (1,174,282.76) 19,649,910.84 2026 9,345,000.00 11,483,181.10 (1,174,282.76) 19,653,898.34 2027 9,825,000.00 11,003,543.60 (1,174,282.76) 19,654,260.84 2028 11,320,000.00 10,505,531.10 (1,174,282.76) 20,651,248.34 2029 13,895,000.00 9,932,418.60 (1,174,282.76) 22,653,135.84 2030 14,590,000.00 9,237,093.60 (1,174,282.76) 22,652,810.84 2031 15,320,000.00 8,506,943.60 (1,174,282.76) 22,652,660.84 2032 16,070,000.00 7,759,856.10 (1,174,282.76) 22,655,573.34 2033 16,855,000.00 6,976,218.60 (1,174,282.76) 22,656,935.84 2034 17,675,000.00 6,154,143.60 (1,174,282.76) 22,654,860.84 2035 18,550,000.00 5,279,118.60 (1,174,282.76) 22,654,835.84 2036 19,610,000.00 4,360,756.10 (1,174,282.76) 22,796,473.34 2037 20,710,000.00 3,201,784.60 (906,345.86) 23,005,438.74 2038 17,210,000.00 1,976,798.20 (622,054.36) 18,564,743.84 2039 13,805,000.00 914,995.40 (320,248.38) 14,399,747.02

$297,735,000.00 $321,205,454.50 $(33,299,855.18) $585,640,599.32

______(1) The Bexar County, Texas Combination Tax and Revenue Certificates of Obligation, Taxable Series 2009B (Direct Subsidy - Build America Bonds) (the "Taxable Non-Flood Obligations") were designed as "Build America Bonds" under and pursuant to the authority provided for in the federal American Recovery and Reinvestment Act of 2009 (effective February 17, 2009) and are permitted to receive directly from the United States Treasury a refundable tax credit equal to 35% of the taxable interest the County pays on the Taxable Non-Flood Obligations to the holders thereof (the "Subsidy Payment"). Failure on the part of the County to comply with the conditions imposed by the Internal Revenue Code, and future guidance to be provided by the United States Treasury and the Internal Revenue Service, may cause the County to fail to receive the Subsidy Payment for the Taxable Non-Flood Obligations. Moreover, Subsidy Payments are subject to automatic offsets against certain amounts that may, for unrelated reasons, be owed by the County to an agency of the United States of America.

TAX ADEQUACY - FLOOD CONTROL TAX OBLIGATIONS

Estimated Proceeds from $0.01709 Flood Control Tax Using 2009 Taxable Assessed Valuation of $98,569,847,507 at 95% Collected ...... $16,000,000

Estimated Other Sources ...... 1,225,000

Total Estimated Available Funds for Flood Control Tax Debt Service ...... $17,225,000

2010/2011 Estimated Flood Control Tax Debt Service Requirement ...... $17,213,436

A-6 AD VALOREM TAX RATES

The following table shows the County's ad valorem tax rates per $100 of assessed value for each of the tax years 2005 through 2009:

Purpose 2009 2008 2007 2006 2005

General Fund $0.250920 $0.250920 $0.265594 $0.286301 $0.287407 Limited Tax Debt Service 0.045267 0.038479 0.029510 0.027846 0.031064 Equipment Obligations 0.00 0.00 0.00 0.00 0.00 Total Limited Tax Rate $0.296187 $0.289399 $0.295104 $0.314147 $0.318471 Unlimited Tax Rate (1) 0.00 0.00 0.00 0.00 0.00 Sub-Total $0.296187 $0.289399 $0.295104 $0.314147 $0.318471 Farm to Market Special Tax 0.00 0.00 0.00 0.00 0.00 Flood Control Special Tax (2) 0.030676 0.037467 0.031762 0.012719 0.012719 Total Tax Rate $0.326866 $0.326866 $0.326866 $0.326866 $0.331190

______(1) The County has historically utilized other lawfully available funds, including the Farm-to-Market and Lateral Road Tax discussed above to pay the debt service requirements on the County's unlimited tax road bonds. (2) The County has previously entered into a contract, as amended, with the San Antonio River Authority (“SARA”) pursuant to Section 411.003, as amended, Texas Local Government Code, for the accomplishment of plans and programs for flood control and soil conservation, pursuant to which the County agreed to annually assess and levy a portion of the Flood Control Tax at the rates and amounts set forth in the contract sufficient to meet the obligations of the County under the contract with SARA. In addition, a portion of the Flood Control Tax is utilized to pay the debt service requirements on the Flood Control Certificates.

PROPERTY TAX LEVIES AND COLLECTIONS (Unaudited)

County Tax Rate - General and Debt

Collected Within the Subsequent (3) Fiscal Year of the Levy Collections Total Collections to Date Receivable Taxes Levied Taxes from Outstanding Fiscal for Percent Prior Year Percent of Taxes from

Year(1) Fiscal Year (2) Amount of Levy Levy Amount Current Prior Years(4) L

2000 $142,444,278 $139,401,003 97.9% $1,875,176 $141,276,179 99.2% $10,174,483 2001 153,348,375 150,869,686 97.7% 3,022,102 153,891,788 99.7% 10,873,624 2002 159,860,934 156,028,658 97.6% 3,376,904 159,405,562 99.7% 11,264,054 2003 167,857,501 163,685,935 97.5% 3,659,885 167,345,821 99.7% 11,498,246 2004 182,983,382 179,297,078 98.0% 3,090,416 182,387,494 99.7% 12,058,064 2005 191,334,814 187,860,871 98.2% 2,823,028 190,683,899 99.7% 11,616,455 2006 207,309,014 203,851,097 98.3% 2,708,288 206,559,385 99.6% 11,880,379 2007 232,729,932 229,355,021 98.5% 2,360,160 231,715,181 99.6% 11,142,226 2008 253,356,250 249,567,648 98.5% 2,064,062 251,631,710 99.3% 11,415,483 2009 275,433,604 270,493,314 98.2% 1,605,378 (6) 270,493,314 98.2% 12,359,490

A-7 County Tax Rate - Flood and Debt

Collected Within the Subsequent Fiscal Year of the Levy Collections(3) Total Collections to Date Receivable Taxes Levied Taxes from Outstanding Fiscal for Percent Prior Year Percent of Taxes from (2) Year(1) Fiscal Year Amount of Levy Levy Amount Current Prior Years(4)

2000 $ 8,011,667 $ 7,840,542 97.9% $ 98,293 $ 7,938,835 99.1% $ 524,250 2001 8,689,519 8,494,424 97.8% 168,083 8,662,507 99.7% 583,511 2002 8,451,822 8,247,838 97.6% 177,990 8,425,829 99.7% 603,968 2003 8,967,649 8,741,687 97.5% 195,582 8,937,268 99.7% 622,131 2004 7,633,579 7,480,196 98.0% 124,556 7,604,753 99.6% 607,588 2005 8,040,185 7,888,282 98.1% 119,860 8,008,142 996% 586,621 2006 8,691,424 8,538,987 98.2% 114,917 8,653,904 99.6% 588,853 2007 9,837,333 9,685,804 98.5% 101,173 9,786,978 99.5% 560,731 (5) 2008 26,805,988 26,407,917 98.5% 223,031 26,630,948 99.3% 827,131 2009 34,968,389 34,354,457 98.2% 207,486 (6) 34,354,457 98.2% 1,100.234

______Source: Bexar County Tax Assessor-Collector TC-168 Reports. (1) Figures for Fiscal Year 2000-2001 totals are estimated. TC-168 Reports were not available. (2) Taxes Levied can increase or decrease based on the number of tax cases settled during the fiscal years. Figures for fiscal years 2000- 2001 tax cases were not included. (3) Subsequent collections consist of prior tax year collections during the fiscal year. Figures for fiscal years 2000-2001 are estimated. (4) Outstanding taxes from prior years consist of all delinquent taxes from tax year 2008 - 1988 for the County, and tax year 2008 - 1988 for the flood. (5) Total tax rate the County assesses is split between flood and general and debt. While the total tax rate for FY 2008 remained unchanged, the portion allocated to flood was significantly increased. (6) Amount of taxes from prior year levy as of April 30, 2010.

TAXPAYERS BY CLASSIFICATION

Property Valuations by Category

2009 2008 2007 Assessed Percent Assessed Percent Assessed Percent Classification Valuation Of Total Valuation Of Total Valuation Of Total

Real Estate: Single Family Residential $ 61,668,472,119 56.87% $ 61,470,072,666 57.24% $56,854,414,951 58.74% Multi-Family Residential 6,528,581,942 6.02% 6,415,000,884 5.97% 5,623,822,904 5.81% Vacant - Platted Lots/Tracts 2,192,622,474 2.02% 2,252,352,783 2.09% 1,937,526,723 2.00% Acreage (Land Only) 3,801,861,354 3.51% 3,997,999,406 3.72% 3,235,596,866 3.34% Farm & Ranch 329,625,731 0.30% 342,964,999 0.32% 348,898,132 0.36% Commercial & Industrial 22,341,075,205 20.60% 21,198,041,669 19.73% 17,979,504,712 18.58% Oil, Gas & Other Mineral Res. 7,060,714 0.01% 7,324,448 0.01% 5,802,968 0.01% Personal: Utilities 684,497,899 0.63% 704,619,973 0.66% 763,879,638 0.79% Commercial 7,713,126,321 7.11% 7,579,896,162 7.06% 6,707,350,704 6.93% Industrial 1,995,759,970 1.84% 2,158,497,750 2.01% 2,118,386,320 2.19% Mobile Homes 278,635,629 0.26% 281,277,235 0.26% 298,168,089 0.31% Residential Inventory 538,479,532 0.50% 586,413,692 0.55% 537,826,000 0.56% Special Inventory 357,614,480 0.33% 405,040,630 0.38% 371,943,130 0.38% Total Valuation $108,437,413,370 $107,399,502,297 $96,783,121,137 Less Exemptions & 9,867,565,863 100.00% 10,087,124,343 100.00% 9,571,280,243 100.00%

Net Taxable Assessed $ 98,569,847,507 $ 97,312,377,954 $87,211,840,894

______Source: Comptroller of Public Accounts - Property Tax Assistance Division - County Reports of Property Value.

A-8 EXEMPTIONS AND REDUCTIONS TO APPRAISED VALUES

Fiscal Year ending September 30 2009 2008 2007 2006 2005 65 and Over Exemptions on Homestead (a) $4,426,863,084 $ 4,404,017,548 $4,234,076,55 $4,104,719,699 $3,864,326,984 Veterans Exemption 635,168,562 278,264,885 266,111,027 255,929,296 293,427,384 Freeport Loss 585,674,228 564,810,967 536,783,733 399,287,480 343,086,810 Productivity Loss 2,545,401,123 2,517,811,598 1,996,236,944 1,481,159,905 1,108,039,348 Abatement Loss 1,133,917,332 1,125,785,384 966,338,860 339,635,304 331,649,050 Solar 15,742,308 38,306,758 11,754,892 15,930,706 - Other 87,397,460 119,137,003 108,845,266 75,506,813 1,796,347,097 Value Lost to 10% Cap 437,401,766 1,038,990,200 1,451,132,962 941,717,633 345,932,958

$ 9,867,565,863 $10,087,124,343 $9,571,280,243 $7,613,886,836 $8,082,809,631

______(a) The County currently offers an exemption of $50,000 to property owners that qualify as disabled persons and/or persons 65 years of age or older. The County has studied the effects to the property tax base and tax revenues of raising that exemption to levels between $60,000 and $100,000. The exact extent to which such an increase in the current exemption would negatively impact the County’s future tax revenues is unknown. A number of studies, however, have been undertaken to measure the extent of the impact of an increase in the current exemption, and these studies have concluded that such an increase in the current exemption would cause a decrease in the rate of growth of future tax revenues to the County. Source: Comptroller of Public Accounts - County Reports of Property Value.

TEN LARGEST TAXPAYERS AND THEIR VALUATIONS

The following table lists the ten taxpayers with the largest assessed values in the County as of September 30, 2009:

Percent of Total Taxpayer Type of Business Market Value Taxable Value

H.E. Butt Grocery Company Retail $ 926,841,969 0.96% Methodist Healthcare System SA Medical 459,806,611 0.48% AT&T Services 408,854,755 0.42% Wal-Mart Stores, Inc. Retail 392,639,185 0.41% Baptist Hospital Sys (VHS San Antonio Partners LP) Medical 375,476,876 0.39% USAA Finance/Insurance 343,756,700 0.36% La Cantera Retail LTD Partnership Real Estate 263,640,000 0.27% Frost National Bank Services 209,948,288 0.22% Frankel Family Trust Real Estate 199,812,310 0.21% SA Real Estate LLLP Real Estate 171,986,360 0.18%

Total $3,752,763,054 3.89%

______Source: Bexar Appraisal District.

A-9 CONSOLIDATED OVERLAPPING GROSS FUNDED DEBT PAYABLE FROM AD VALOREM TAXES

Expenditures of the various taxing bodies within the territory of the County are paid out of ad valorem taxes levied by these taxing bodies on properties within the County. These political taxing bodies are independent of the County and may incur borrowings to finance their expenditures. The following statement of direct and estimated overlapping ad valorem tax debt was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the County, the County has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed below may have issued additional debt since the date stated in the table, and such entities may have programs requiring the issuance of substantial amounts of additional debt, the amount of which cannot be determined. The following table reflects the County’s estimated share of overlapping gross debt of these various taxing bodies:

Tax Debt Outstanding Estimated Overlapping Taxing Body As of 5/01/2010 Percent Tax Debt

Alamo CCD $ 411,718,778 100.00% $ 411,718,778 City of Alamo Heights 6,865,000 100.00% 6,865,000 Alamo Heights ISD 66,748,702 100.00% 66,748,702 City of Balcones Heights 1,229,000 100.00% 1,229,000 Bexar County Hospital District 551,910,000 100.00% 551,910,000 Bexar Co. WC&ID #10 -0- 100.00% -0- Bexar Co. WC&ID #18 -0- 100.00% -0- Boerne ISD 114,175,499 26.71% 30,496,276 Cibolo Creek Municipal Authority -0- 100.00% -0- Cibolo Canyons Special Imp. District 22,520,000 100.00% 22,520,000 Comal ISD 536,942,806 14.93% 80,165,561 City of Converse 3,770,000 100.00% 3,770,000 East Central ISD 90,994,996 (a) 100.00% 90,994,996 Edgewood ISD 101,350,000 (a) 100.00% 101,350,000 City of Elmendorf -0- 100.00% -0- City of Fair Oaks Ranch 2,485,000 67.97% 1,689,055 Floresville ISD 80,154,984 0.12% 96,186 City of Grey Forest 405,000 100.00% 405,000 Harlandale ISD 214,597,183 (a) 100.00% 214,597,183 City of Helotes 9,950,000 100.00% 9,950,000 City of Hill Country Village 1,275,000 100.00% 1,275,000 Town of Hollywood Park -0- 100.00% -0- Judson ISD 398,516,646 (a) 100.00% 398,516,646 City of Kirby 3,325,000 100.00% 3,325,000 Lackland ISD -0- (a) 100.00% -0- City of Leon Valley 3,370,000 100.00% 3,370,000 City of Live Oak 18,270,000 100.00% 18,270,000 City of Lytle 1,035,000 1.37% 14,179 Medina Valley ISD 62,786,518 (a) 27.12% 17,027,704 North East ISD 1,255,012,166 (a) 100.00% 1,255,012,166 Northside ISD 1,534,795,000 (a) 99.55% 1,534,795,000 City of Olmos Park 4,625,000 100.00% 4,625,000 Randolph Field ISD -0- (a) 100.00% -0- City of St. Hedwig 980,000 100.00% 980,000 San Antonio ISD 464,587,560 (a) 100.00% 464,587,560 San Antonio MUD #1 1,165,000 100.00% 1,165,000 San Antonio RA 42,015,000 100.00% 42,015,000 City of San Antonio 1,089,420,000 100.00% 1,089,420,000 City of Schertz 59,165,000 3.32% 1,964,278 Schertz- Cibolo- University City ISD 282,285,514 10.47% 29,555,293 City of Selma 12,215,000 71.68% 8,755,712 City of Shavano Park 6,082,665 100.00% 6,082,665 Somerset ISD 25,579,991 (a) 75.21% 19,239,711 City of Somerset 125,000 100.00% 125,000

(Table continued on next page)

A -10 Consolidated Overlapping Gross Funded Debt Payable From Ad Valorem Taxes (continued from page A-10)

Tax Debt Outstanding Estimated Overlapping Taxing Body As of 5/01/2010 Percent Tax Debt

South San Antonio ISD $141,472,061 100.00% $ 141,472,061 Southside ISD 63,390,000 (a) 100.00% 63,390,000 Southwest ISD 132,169,999 100.00% 132,169,999 City of Terrell Hills 3,235,000 100.00% 3,235,000 City of University City 11,635,000 100.00% 11,635,000 City of Windcrest 2,155,000 100.00% 2,155,000 6,841,776,134 Total Overlapping

Bexar County 883,040,000 (b) 100.00% 883,040,000

Total Direct & Overlapping $7,724,816,134

______(a) Certain bonds issued by Texas Independent School Districts are eligible for payment from the State of Texas “Instructional Facilities Allotments” and from “Existing Debt Allotments.” These bonds, while obligations of the district, are payable in whole or in part from district allocations of state funds. Such funding may vary between districts and from year to year depending upon the state’s contributions. (b) Includes the Refunding Bonds, the proposed New Money Bonds, and the proposed Obligations. NOTE: All outstanding capital appreciation bonds are shown at the original issue amount.

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A -11 CURRENT DEBT SERVICE REQUIREMENTS

The following table sets forth the annual debt service requirements on all of the County's outstanding general obligation indebtedness, including the Flood Control Certificates, the Refunding Bonds, the proposed New Money Bonds, and the proposed Obligations. Preliminary, subject to change.

Less: Total Fiscal Year Direct General Obligation Ending 9/30 Principal Interest Subsidy Debt Service

2010 $ 23,775,000 $ 30,607,124.10 $ (1,839,709.64) $ 52,542,414.46 2011 27,795,000 42,776,430.96 (2,348,565.52) 68,222,865.44 2012 28,950,000 41,682,312.96 (2,348,565.52) 68,283,747.44 2013 29,055,000 40,436,345.96 (2,348,565.52) 67,142,780.44 2014 25,750,000 39,201,186.46 (2,348,565.52) 62,602,620.94 2015 23,295,000 38,037,699.46 (2,348,565.52) 58,984,133.94 2016 23,100,000 36,975,919.46 (2,348,565.52) 57,727,353.94 2017 21,940,000 35,891,225.96 (2,348,565.52) 55,482,660.44 2018 22,980,000 34,859,328.46 (2,348,565.52) 55,490,762.94 2019 28,050,000 33,801,410.70 (2,348,565.52) 59,502,845.18 2020 27,090,000 32,516,814.70 (2,348,565.52) 57,258,249.18 2021 27,390,000 31,171,489.96 (2,348,565.52) 56,212,924.44 2022 22,755,000 29,805,952.20 (2,348,565.52) 50,212,386.68 2023 25,935,000 28,643,789.70 (2,348,565.52) 52,230,224.18 2024 24,735,000 27,349,480.96 (2,348,565.52) 49,735,915.44 2025 25,970,000 26,114,943.46 (2,348,565.52) 49,736,377.94 2026 23,830,000 24,818,655.96 (2,348,565.52) 46,300,090.44 2027 25,015,000 23,629,343.46 (2,348,565.52) 46,295,777.94 2028 26,485,000 22,393,924.70 (2,348,565.52) 46,530,359.18 2029 27,560,000 21,072,699.70 (2,348,565.52) 46,284,134.18 2030 28,925,000 19,713,299.70 (2,348,565.52) 46,289,734.18 2031 30,370,000 18,266,399.70 (2,348,565.52) 46,287,834.18 2032 31,865,000 16,772,462.20 (2,348,565.52) 46,288,896.68 2033 33,435,000 15,205,037.20 (2,348,565.52) 46,291,471.68 2034 35,080,000 13,560,237.20 (2,348,565.52) 46,291,671.68 2035 36,820,000 11,814,962.20 (2,348,565.52) 46,286,396.68 2036 39,365,000 9,983,099.70 (2,348,565.52) 46,999,534.18 2037 41,585,000 7,648,344.20 (1,812,691.72) 47,420,652.48 2038 39,265,000 5,180,096.40 (1,244,108.72) 43,200,987.68 2939 37,110,000 2,803,740.80 (640,496.76) 39,273,244.04 2040 9,975,000 498,750.00 10,473,750.00

$875,250,000.00 $763,232,508.58 $(66,599,710.36) $1,571,882,798.22

A -12 THE COUNTY Creation and Location

The County was created in 1836 and organized in 1837 as one of the original counties of the Republic of Texas and is now the third most populous of the 254 counties in the State of Texas. The County is located in south central Texas and is a component of the San Antonio Metropolitan Statistical Area, the nation's thirtieth largest Metropolitan Statistical Area and the third largest in Texas in 2000. The 2000 population of the County was 1,392,931. (See Appendix B for more information concerning the County.)

The principal city within the County is San Antonio, the county seat. The economy is based on manufacturing, agriculture, mineral production, medical facilities, military activities, and tourism.

Administration of the County

Those officials having responsibility for the financial administration of the County are the County Judge and four County Commissioners (the "Commissioners Court"), the County Tax Assessor Collector and the County Clerk (all of whom are elected officials), the County Auditor (who is appointed by the District Judges), and the Budget Officer (who is an employee of Commissioners Court). See page iii of the Official Statement for the names of the current office holders.

The Commissioners Court is the governing body of the County. It has certain powers expressly granted by the Texas Constitution and by the Legislature and powers necessarily implied from such grants. Among other things, it approves the budget, determines the tax rates, approves contracts in the name of the County, determines whether indebtedness should be authorized and issued, and appoints certain County officials.

The County Judge is the presiding official of the Commissioners Court and is elected for a four-year term by the voters of the County. Each Commissioner represents one of the four precincts into which the County is divided. Each of the four Commissioners is elected by the voters of his precinct for a four-year term.

The Tax Assessor Collector is responsible for collecting ad valorem taxes, collecting certain State and County fees and other taxes.

The County Clerk's duties include Treasurer responsibilities as related to depositing money received by the County in the depository selected by the Commissioners Court and cosigning all of the County's checks. In addition, the County Clerk is the Clerk of the Commissioners Court and civil, criminal, and probate courts. The County Clerk is also the recorder of the County and issues and records, marriage licenses, assumed business names, and records military discharges, cattle brands, uniform commercial code filings and deeds.

The County Auditor is the chief financial officer of the County and is responsible for substantially all County finance and accounting control functions. The responsibilities include those of auditing, accounting system design, financial planning, financial relations, payroll and is charged statutorily with strict enforcement of the law governing county finances. The County Auditor is appointed for a two-year term by, and is accountable to, the 24 State District Judges of whose courts are located in the County.

The County Budget Officer is appointed by the Commissioners Court and is responsible for preparing the County’s annual budget. These responsibilities also include those of Chief Investment Officer, debt issuance planning and health insurance administration. In addition, the County Budget Officer develops the long range financial forecast and completes special studies and cost/benefit analyses of various issues that have a fiscal impact on the County.

Employees

The following table shows the number and employment category of the County's employees on September 30, years 2003 through 2009.

2009 2008 2007 2006 2005 2004 2003

General Government 807 803 767 753 739 692 685 Judicial 921 902 904 863 844 843 828 Public Safety 2,579 2,515 2,387 2,467 2,384 2,331 2,325 Education & Recreation 73 69 62 67 67 66 69 Public Works 272 277 270 269 265 254 249 Health & Public Welfare 59 68 50 40 54 50 45 Total 4,711 4,634 4,440 4,459 4,353 4,236 4,201

A -13 County Services

The County operates a jail and detention system and various parking facilities, constructs and maintains roads, and provides various levels of civil and criminal courts, a district attorney's office, a county sheriff's department, juvenile probation and detention, parks, and certain other public health and social welfare services.

The Bexar County Hospital District which uses the assumed name University Health System (the "System"), is a political subdivision of the State of Texas which owns and operates several health care facilities and is the major teaching facility for the University of Texas Health Science Center. The Commissioners Court appoints the governing body of the System and approves the System's annual budget. The financial information contained herein does not include information concerning the System.

The financial statements of the County include the Bexar County Housing Finance Corporation, the Bexar County Health Facilities Development Corporation, and the Bexar County Industrial Development Corporation as blended component units.

In March, 2005, Commissioners Court recognized the Deputy Sheriff’s Association of Bexar County/International Union of Police Associations, Local #30 (DSABC/IUPA) as the exclusive bargaining agent for collective bargaining under Section 174.101 of the Texas Local Government Code. The DSABC/IUPA represents all Sheriff’s Office uniformed employees in the Detention and Law Enforcement careers and a majority of the senior management. These 1,450 positions represent an annual payroll of $52.3 million.

The purpose of bargaining is to come to an agreement pertaining to wages, hours and conditions of employment and enter into a contract between the members of the DSABC/IUPA and Bexar County. Negotiations started in October 2005 and continued with agreement reached on all articles July 21, 2006. The contract was ratified by DSABC membership and approved by both the Sheriff’s Office and Commissioners Court on August 17, 2006.

The Wages and Benefits article includes adoption of a new step pay plan resulting in a first year average base pay increase of 5.5% for law enforcement deputies and 6.9% for adult detention deputies. A 3.5 percent increase will be implemented in each of the second and third years of the contract. The total cumulative investment over the three-year contract period is $26.4 million.

RETIREMENT PROGRAM

Plan Description

The County provides retirement, disability and death benefits for all of its full-time employees through a non-traditional defined benefit pension plan in the statewide Texas County and District Retirement System (TCDRS). The Board of Trustees of TCDRS is responsible for the administration of the statewide agent multiple-employer public employee retirement system which consists of 586 non-traditional defined benefit pension plans. TCDRS, in the aggregate issues a Comprehensive Annual Financial Report (CAFR) on a calendar year basis. The CAFR is available upon written request from the TCDRS Board of Trustees at P. O. Box 2034, Austin, Texas 78768-2034.

The plan provisions are adopted and may be amended by the governing body of the County within the options available in the Texas state statutes governing TCDRS (TCDRS Act). Members can retire at age 60 and above with 8 or more years of service, with 20 years of service regardless of age, or when the sum of their age and years of service equals 75 or more. Members are vested after 8 years of service but must leave their accumulated deposits in the plan to receive any employer-financed benefit. Members who withdraw their personal deposits in a lump-sum and who are not eligible to retire are not entitled to any amounts contributed by their employer.

Benefit amounts are determined by the sum of the employees' deposits to the plan, with interest, and employer-financed monetary credits. The level of these monetary credits is adopted by the governing body of the employer within the actuarial constraints imposed by the TCDRS Act, so that the resulting benefits can be expected to be adequately financed by the employer's commitment to contribute. At retirement, death, or disability, the benefit is calculated by converting the sum of the employee's accumulated deposits and the employer-financed monetary credits to a monthly annuity using annuity purchase rates prescribed by the TCDRS Act.

Funding Policy

The County has elected the Annually Determined Contribution Rate (ADCR) plan provisions of the TCDRS Act. The plan is funded by monthly contributions from both employee members and the employer based on the covered payroll of employee members. Under the TCDRS Act, the contribution rate of the employer is actuarially determined annually. The County contributed using the actuarially determined rate of 9.90% of covered payroll for the months of the accounting year in 2008, and 9.9% of covered payroll for the months of the accounting year in 2009.

The deposit rate payable by all employee members for the calendar year 2009 is the rate of 7% as adopted by the governing body of the County. The employee deposit rate and the employer contribution rate may be changed by the governing body of the employer within the options available in the TCDRS Act.

A -14 Annual Pension Cost

For the County's accounting year ended September 30, 2009 the annual pension cost for the TCDRS plan for its employees was $21,164,730 and the actual contributions were $21,164,730.

The annual required contributions were actuarially determined as a percent of the covered payroll of the participating employees, and were in compliance with the GASB Statement No. 27 parameters based on the actuarial valuations as of December 31, 2006 and December 31, 2007, the basis for determining the contribution rates for calendar years 2008 and 2009. The December 31, 2008 actuarial valuation is the most recent valuation.

Actuarial Valuation Information

Actuarial valuation date December 31,2006 December 31, 2007 December 31, 2008 Actuarial cost method Entry ageEntry ageEntry age Amortization method Level percentage of Level percentage of Level percentage of payroll, closed payroll, closed payroll, closed Amortization period in years 12.3 12.0 20.0 Asset valuation method SAF: 10-yr SAF: 10-yr SAF: 10-yr Smoothed value ESF: Smoothed value ESF: Smoothed value ESF: Fund Value Fund Value Fund Value Actuarial assumptions: Investment return* 8.0% 8.0% 8.0% Projected salary increases* 5.3% 5.3% 5.3% Inflation 3.5% 3.5% 3.5% Cost-of-living adjustments 0.0% 0.0% 0.0%

______* Includes inflation at the stated rate.

Trend Information

Accounting Actual Pension Percentage of Net Pension Year Ending Cost (APC) APC Contributed Obligation

September 30, 2007 $18,247,585 100% $0 September 30, 2008 $19,981,983 100% $0 September 30, 2009 $21,164,730 100% $0

Schedule of Funding Progress for the Retirement Plan for the Employees of Bexar County

UAAL as a Actuarial Unfunded Percentage of Actuarial Actuarial Accrued AAL Funded Annual Covered Valuation Value Liability (UAAL) Ratio Covered Payroll Date** Assets (a) (AAL) (b) (b-a) (a/b) Payroll*(c) ((b-a)/c)

12/31/06 493,106,883 544,318,343 51,211460 90.59% 174,803,879 29.30% 12/31/07 533,909,770 586,511,660 52,601,890 91.03% 189,723,874 27.73% 12/31/08 532,359,466 632,707,583 100,348,117 84.14% 205,997,638 48.71%

______* The annual covered payroll is based on the employee contribution received by TCDRS for the year ending with the valuation date. ** Funding information for 12/31/2006 may differ from prior year compliance due to plan changes effective 1/1/2008.

GASB 45 – Reporting Liabilities for Other Post-Employment Benefits (OPEB)

The Governmental Accounting Standards Board has issued Statement No. 45 (“GASB 45”), “Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions”. GASB 45 establishes financial reporting standards for other post employment benefit plans. Currently the County has established a post employment healthcare plan for full-time regular employees that retire after January 1, 2000. This statement will require the County to accumulate assets for the payment of post-employment healthcare benefits. In order to comply with GASB 45, beginning with FY 2007-08, the County started reporting the accrued liability for Other Post Employment Benefits (OPEB). Although this reporting is not required by law, it is part of Generally Accepted Accounting Principles (GAAP). Furthermore, bond rating agencies such as Moody’s, Fitch, and S&P, have stated that GASB 45 compliance will be considered when assigning credit ratings for local governments. In FY 2006-07, the County retained L&E Actuaries and Consultants to do an actuarial study on the County’s potential OPEB liabilities.

A -15 This study showed that as of May 1, 2007, the County’s unfunded actuarial accrued liability (UAAL) was $118,738,300 and the County’s annual contribution requirement (ARU) was $10,620,736 (assuming a 4.5% investment rate of return) of which $5,150,000, approximately 50 percent, was programmed by the County in the FY 2007-08 budget to begin addressing this potential liability. A second actuarial study was performed for fiscal year ending September 30, 2009 to confirm these initial findings. This study showed that as of October 1, 2008, the County's unfunded actuarial accrued liability (UAAL) was $129,384,741, and the County's annual contribution (ARU) was $9,764,752 (assuming a 4% investment rate return). The County has continued to explore cost mitigation strategies and to develop a full funding plan to meet its OPEB liabilities. At this time the County has not and is not contemplating entering into any contracts that obligate the County to make future health care benefit payments and no such obligation exists under Texas law as the County, at its sole discretion, may reduce, modify, and/or terminate any post-employment healthcare benefit plans with any County employees. It is not the County’s intention to establish an irrevocable trust for its OPEB liabilities, but rather report this liability as prescribed by GASB 45 and develop a structured funding mechanism with annual contributions maintained in a dedicated fund, thereby reducing the County’s OPEB liability over a period of time.

BEXAR COUNTY, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN GENERAL FUND BALANCE

For the Fiscal Year Ended September 30 2009 2008 2007 2006 2005 REVENUES: Ad Valorem Taxes $237,371,527 $ 228,787,319 $ 213,293,692 $188,613,835 $170,881,729 Other Taxes, Licenses, Fees & Permits 12,282,471 11,388,377 9,810,281 8,084,404 6,289,868 Intergovernmental Revenue 7,327,046 6,327,669 5,280,520 5,702,551 10,511,528 Fines and Court Costs 23,349,658 24,709,816 25,653,891 21,925,747 19,314,287 Fees on Motor Vehicles 5,317,888 5,281,979 5,132,575 5,169,201 4,913,787 Other Fees 11,092,240 11,089,848 13,018,672 13,307,060 8,248,916 Detention Board Bills ------667,955 786,952 Commissions from Govt. Units 3,632,217 3,369,191 3,646,909 3,334,166 3,495,393 Revenue from Use of Assets 13,644,286 17,340,769 19,518,906 15,196,066 12,714,860 Net Decrease in Investment Fair Value ------Sales Refunds and Miscellaneous 5,237,073 4,395,775 4,199,003 5,573,009 5,810,431 TOTAL REVENUES $319,254,406 312,690,743 299,554,449 267,573,994 242,967,751

EXPENDITURES: General Government 62,641,999 69,881,291 58,533,050 50,904,335 48,617,954 Judicial 76,083,494 71,133,334 63,734,773 59,610,351 54,689,066 Public Safety 162,044,672 153,089,321 140,942,811 124,713,571 120,039,552 Education and Recreation 7,888,400 6,794,790 6,711,436 5,642,199 5,127,360 Public Works 892,467 1,139,642 900,358 913,338 630,506 Health and Public Welfare 6,659,129 6,638,246 5,638,071 4,229,257 3,160,499 Capital Expenditures 387,839 422,213 235,447 34,242 256,059 Debt Service 100,171 3,579,663 1,893,227 164,229 -- TOTAL EXPENDITURES 316,698,171 312,678,500 278,589,173 246,211,522 232,520,996

Excess (Deficiency) of Revenues Over Expenditures 2,556,235 12,243 20,965,276 21,362,472 10,446,755

OTHER FINANCING SOURCES (USES): Operating Transfers In 17,599 107,790 416,490 564,145 868,847 Operating Transfers (Out) (5,428,829 ) (2,365,799 ) (16,215,402 ) ( 3,109,883 ) ( 3,890,821 ) Total Other Financing Sources (Uses) (5,411,230 ) (2,258,009 ) (15,799,002 ) ( 2,545,738 ) ( 3,021,974 )

Net Change in Fund Balance (2,854,995 ) (2,245,766 ) 5,166,274 18,816,734 7,424,781

Beginning Fund Balance (Oct. 1) 51,490,183 53,735,949 (1) 48,726,754 29,910,020 22,485,239 Ending Fund Balance (Sept. 30) $ 48,645,188 (2) $ 51,490,183 $ 53,893,028 $ 48,726,754 $ 29,910,020

______Source: County’s Annual Financial Reports (1) See Note V in Comprehensive Annual Financial Report for fiscal year ended September 30, 2008 for explanation of restatement of prior year's fund balance. (2) The decrease in the prior year's ending General Fund Balance of the County was primarily attributable to the planned drawdown of the General Fund, but still leaving a General Fund surplus in excess of the County's internal fiscal policy of ten percent.

A -16

APPENDIX B

GENERAL INFORMATION REGARDING BEXAR COUNTY

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This Appendix contains a brief discussion of certain economic and demographic characteristics of the area in which the County is located. Information in this Appendix has been obtained from the sources noted. They are believed to be reliable, although no investigation has been made to verify the accuracy of such information. Information concerning the City of San Antonio, Texas (the “City) and its operations is included in this Appendix solely for general information; the City is not obligated in any way to support payment of the Refunding Bonds.

Creation and Location of Bexar County

The County was organized in 1836 as one of the original counties of the Republic of Texas and is now the fourth most populous of the 254 counties in the State of Texas. The County is located in south central Texas and is a component of the San Antonio Metropolitan Statistical Area. The County is one of the nation's largest Metropolitan Statistical Areas and the third in Texas. According to the United State Economic Development Intelligence System (EDIS), the 2008 population of the County was 1,641,170. The County has an area of approximately 1,248 square miles, and contains 21 other incorporated cities within its boundaries.

The principal city within the County is San Antonio, the county seat. The City covers approximately 430 square miles. The City was founded in the early eighteenth century and was incorporated by the Republic of Texas in 1837. The City’s 2009 population estimate of 1,645,301 makes it the second largest city in Texas and the seventh largest in the United States.

The following table provides, at the dates shown, the population of the City, the County, and the Area MSA, which includes Bexar, Comal, Wilson and Guadalupe Counties.

Calendar City of Bexar Area Year (a) San Antonio County MSA 1920 161,399 202,096 238,639 1930 231,542 292,533 333,442 1940 253,854 338,176 376,093 1950 408,442 500,460 542,209 7960 587,718 687,151 736,066 1970 654,153 830,460 888,179 1980 786,023 988,870 1,071,954 1990 935,933 1,185,394 1,337,705 2000 1,144,646 1,392,931 1,592,383

______Source: U.S. Census of Population, 1920-2000 as of April 1 of the year shown.

Economic Factors

The County has a diversified economic base which is composed of agribusiness, manufacturing, construction, tourism, medicine and the military. The County’s proximity to Mexico provides favorable conditions for international business relations in the areas of agriculture, tourism, manufacturing, wholesale and retail markets. Approximately fifty percent (50%) of U.S. exports to Mexico and fifty percent (50%) of Mexican exports to the U.S. pass through the City. Trade between the United States and Mexico was valued at $45.84 billion annually in 1995 and was expected to exceed $98.00 billion in 2007. The increase in trade is largely attributed to the passage of the North American Free Trade Agreement (NAFTA) in 1993. The City is also the headquarters for the North American Development Bank (NADBank), a bi-national institution created by NAFTA. The intended purpose of NADBank is to help finance environmental infrastructure within 60 to 100 miles (approximately) of the US/Mexican border. With a lending capacity of $3 billion, NADBank finances projects including water, wastewater and solid waste programs. Industries in the County range from the manufacturing of apparel, food products, aircraft, electronics and pharmaceuticals to iron and steel products and oil well equipment. San Antonio is a major insurance center in the southwest, serving as the headquarters for several insurance companies, including United Services Automobile Association, the nation's 6th largest private automobile insurer and the 10th largest homeowner’s insurer.

The medical and bio-medical industry is now the number one economic generator in the County, having an economic impact of nearly $16.3 billion on the local economy in 2007, maintained a $4.8 billion payroll and employed 116,417 persons. One of every seven City employees works in the health care and bio-medical industry. The key components of the health care industry are three major military medical centers, the South Texas Medical Center (which includes five University of Texas health professional schools, nine major hospitals and 80 health-related facilities), the Southwest Foundation for Biomedical Research, and the Southwest Research Institute.

The military presence in the County continues to be a principal component of the area economy. The active military installations in the County include Fort Sam Houston and the Air Force Bases of Lackland and Randolph, as well as the

B-1

"privatized" installation of Brooks City-Base. These facilities provide over 72,500 defense-related jobs and an estimated $5 billion annual direct economic impact. Although the military mission of Kelly Air Force Base concluded in 2001 as a result of the last round of base closure and realignment process in 1995, the Air Force still retains over 2 million square feet of lease space at the facility now known as Port San Antonio. The County also is home to Camp Bullis which offers nearly 28,000 acres of unparalleled training infrastructure to ensure the readiness of military and government agencies. The demand for training at Camp Bullis is strong, particularly in light of the ongoing global war on terror and its capacity to support joint military operations and homeland security missions.

San Antonio stands to gain both military and civilian positions with the addition of a satellite campus of the National Security Agency and additional missions added to existing bases.

In 2005, a fifth round of base closures and realignments over the last 18-years was initiated by the U.S. Department of Defense. Final recommendations of the 2005 Defense Base Closure and Realignment Commission are recognized to have profound effects on many communities and the people who bring them to life as well as on the uniformed men and women embodying our Armed Forces. Recommendations were made to strategically transform the military infrastructure to meet current and future missions of the United States of America. For the County, key recommendations are the closure of a Defense Finance and Accounting Service field site and Brooks City-Base, as well as the realignment of Lackland Air Force Base. Despite the closure of military missions at Brooks City-Base, several of its missions are recommended to be relocated to Fort Sam Houston and the Air Force Bases of Lackland and Randolph so as to maximize existing technical synergies and co-locate similar research and development activities. The recommendations also significantly expand Fort Sam Houston to become the nation's premier military medical training base and the future home of Army installation management, and management of family support activities and community programs. The County is supportive of tax phase-in incentives and other economic development programs to extensively market and encourage the commercial redevelopment of properties previously used by the military at Brooks-City Base and Kelly USA. As a result of the Base Realignment and Closure Commission, San Antonio will see a net increase of military employment of about 9,700 and an estimated increase in investment of about $2.5 billion by 2011. While many of the military missions are being relocated from Brooks City-Base, private development is increasing with the continued expansion of Port San Antonio, the expansions of DPT Laboratories, and the recent announcement by Southeast Baptist Hospital System of plans to build a hospital at Brooks City-Base.

Agribusiness is still a leading industry in the County. The agricultural industry is not limited to farmers and ranchers, but includes storage, processing and distribution of farm commodities and products made from them.

The cornerstone of the manufacturing sector is the Toyota Tundra manufacturing facility. In November 2006, the first Toyota Tundra rolled off the assembly line in the City. Toyota expects to produce 200,000 trucks per year and have a payroll exceeding $37 million for 2,000 jobs. The facility covers 2,000 acres and represents an investment of $850 billion. The 21 on-site suppliers will employ 2,100 people and represent an additional investment of over $300 million (Source: Toyota). As the trucks roll off the line, the jobs also spin off, possibly adding 5,300 to 13,000 new jobs to Bexar County in associated industries (Source: Texas Workforce Commission). Union Pacific's new intermodal railroad facility near the Toyota plant opened in 2008, and the company is investing in infrastructure improvements to railways in and around Bexar County (Source: United Pacific).

In July 2008, Toyota announced that the plant would shut down production for 90 days. During this temporary cessation of the Toyota Tundra production, all 2,000 permanent employees remained at the plant with a focus on training and non- manufacturing duties. The 21 Toyota suppliers at the site, providing another 2,000 jobs, also remained and retained the majority of their workforce with expectations that the plant would resume production in November 2008. Production resumed on November 10, 2008, at which time the plant assumed production responsibilities for all domestic Toyota Tundras.

Toyota's presence in San Antonio increased in August 2009 when Toyota confirmed it was moving the production of the Tacoma pickup to its San Antonio facility. The move could add as many as 1,100 new jobs and return the plants on-site suppliers to full capacity employing hundreds more. The addition of a second vehicle, estimated to be 100,000 Tacoma pickups yearly, returns the plant to two shifts and means that 80% of Toyota's pickups will be made in San Antonio.

The financial services sector is growing faster in the City than any other metropolitan area at an annual rate of 4.7 percent. The financial industry has become an important component of the Bexar County economy. There are eight financial institutions headquartered in San Antonio and four regional headquarters located in the city. The financial industry is the third largest employer with over 50,000 employees, and has the highest employee pay with an average salary of $52,614, over $18,000 higher than the area average salary (Source: City of San Antonio).

In June 2005, Washington Mutual announced its selection of San Antonio as the location of its new regional operations center and the purchase of the former MCI San Antonio campus located at 20855 Stone Oak, a three-building campus with 405,000 square feet of prime office space that can accommodate as many as 2,250 employees, and can be expanded to accommodate as many as 4,200 employees. In one of the largest job creation announcements in the United States so far this year, Washington Mutual committed to bringing as many as 4,200 jobs to Texas over the next seven years with up to 3,000 of those jobs based in San Antonio.

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In September 2008, the federal Office of Thrift Supervision closed Washington Mutual (“WAMU”), and the Federal Deposit Insurance Corporation (“FDIC”) then became the receiver of WAMU. FDIC then sold the assets and most of WAMU’s liabilities to JP Morgan Chase Bank (“Chase”). Both Chase and WAMU have major customer service centers in the City along with retail banking operations, each employing about 2,000 people. Each of these customer service centers serves a different set of customers. While there may be some closure and consolidation of WAMU banking operations, the City has stated that it does not expect WAMU’s customer service center to close nor does the City expect to lose a significant number of WAMU jobs in the community.

On October 3, 2008, Wells Fargo announced its acquisition of Wachovia, which operates a major customer service center in the City. Based on available information, it does not appear this back office operation will be affected by this acquisition and integration of the two major financial institutions. Wachovia currently has a major presence in the City, employing approximately 3,300 people.

Headquartered in the City, Rackspace Managed Hosting is the fastest growing manage hosting specialist in the world. The company was founded in San Antonio in 1998 and currently manages more than 22,000 servers in seven data centers in Europe and the U.S. Rackspace was awarded a $22 million grant from the Texas Enterprise Fund as part of an incentive package to help Rackspace relocate within Bexar County and create up to 4,000 new jobs. The company is spending more than $100 million to convert a 1.2 million square foot mall located on a 68 acre-tract and has already converted over 600,000 square feet of the former mall. Rackspace could increase its local employment from nearly 2,000 to as much as 6,000 over the next 5 years with an annual payroll of approximately $300 million.

In May 2009, Medtronic, Inc. announced San Antonio as its home of its new Diabetes Therapy Management and Education Center, which is expected to hire nearly 1,400 professionals during a five-year period to staff the new 150,000- square-foot facility. Based on analyses made by the San Antonio Economic Development Foundation, when fully staffed, the new operation is expected to generate more than $750 million in economic benefit for San Antonio and Texas each year, which includes an investment of more than $23 million in capital improvements.

Also in May 2009, the Air Force selected San Antonio as its preferred location for its new cyber command. Lackland Air Force Base will be the center for the new unit, known formerly as the 24th Air Force Command. The unit is slated to have up to a $1 billion budget, create up to 400 military and civilian jobs, and have an annual payroll of $40 million to $45 million once fully funded. The selection further bolsters San Antonio as a military community and strengthens its economy.

The San Antonio River Improvement Project, an investment by the City, the County, and the U.S. Army Corps of Engineers with the San Antonio River Authority providing project and technical management, recently completed the northern portion of its flood control, amenities, ecosystem restoration and recreational improvements to the San Antonio River. The Museum Reach, as the northern portion is known, extends from the downtown area north to the San Antonio Museum of Art and the 125-year-old Pearl Brewery building, where shopping, dining, and entertainment venues are planned. The southern portion, known as the Mission Reach, is already underway and will connect the downtown river area to the historic missions in the southern part of San Antonio.

The National Security Agency (NSA) has a formidable presence in South Texas employing over two thousand people in San Antonio. In 2007, the NSA announced the establishment of a new facility at an old Sony microchip plant that is now known as the Texas Cryptology Center. The 470,000-square-foot facility represents an investment of over $100 million by the NSA to renovate the old plant which will house a data center geared toward cybersecurity.

The City is one of the top convention cities in the country. The City is proactive in attracting convention business through its management practices and marketing efforts. The following table shows both overall City performance as well as convention activity booked and hosted by the City's Convention & Visitors Bureau for the years indicated:

Estimated Delegate Calendar Expenditures Year (a) Attendance Room Nights ($ Millions)

2000 389,448 696,215 350.8 2001 419,970 712,189 378.3 2002 483,452 693,921 435.5 2003 429,549 613,747 387.0 2004 491,287 621,640 510.5 2005 503,601 699,932 523.3 2006 467,426 736,659 485.8 2007 455,256 644,431 473.1 2008 563,164 691,525 607.5 2009 399,408 660,736 474.3

______(a) Figures based on expenditures per Convention delegate party.

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Employment Statistics

The following table indicates the total civilian employment in the County for the period 2005 through 2009.

Annual Annual Annual Annual Annual 2009 2008 2007 2006 2005

Civilian Labor Force 765,017 746,758 732,800 727,670 715,837 Total Employment 712,970 711,019 702,203 693,573 679,501 Total Unemployment 52,047 35,746 30,597 30,597 36,336 Unemployment Rate 6.8% 4.8% 4.2% 4.7% 5.1% Texas Unemployment Rate 7.6% 4.9% 4.4% 4.9% 5.4%

______Source: Texas Workforce Commission.

Education

The County encompasses 19 independent school districts, which includes over 400 schools. Enrollment ranges anywhere from nearly 900 in Lackland ISD to over 91,000 in Northside ISD, the fourth largest independent school district in Texas. Students attend school districts in which they reside with no busing in effect. In addition, San Antonio has over 150 private and parochial schools at all education levels.

San Antonio has 20 institutions of higher learning offering degrees in all major fields of study, many at the graduate level. Among universities, the University of Texas at San Antonio (UTSA) has over 28,000 students enrolled and has represented many first-time college students within their family. In May of 2009, The Texas A&M University San Antonio became the newest four-year college in San Antonio. Among junior colleges, Alamo Colleges includes five colleges, San Antonio, Palo Alto, Saint Philips, Northeast Lakeview, and Northwest Vista, totaling over 53,000 students enrolled.

Water Supply

Historically and currently, the City obtains all of its water through wells drilled into a geologic formation known as the Edwards Limestone Formation. The portion of the formation supplying water in the City’s area has been the “Edwards Underground Water Reservoir” (the “Edwards Aquifer”) and since 1978 has been designated by the Environmental Protection Agency as a sole-source aquifer under the Safe Drinking Water Act. The Edwards Aquifer lies beneath an area approximately 3,600 square miles in size, and including its recharge zone, it underlies all or part of 13 counties, varying from 5 to 30 miles in width and stretching over 175 miles in length, beginning in Bracketville, Kinney County, Texas, in the west and stretching to Kyle, Hays County, Texas, in the east. The Edwards Aquifer receives most of its water from rainfall runoff, rivers, and streams flowing across the 4,400 square miles of drainage basins located above it.

Much of the Edwards Aquifer region consists of agricultural land, but areas of population ranging from communities with only a few hundred residents to urban areas with well over one million citizens exist as well. The Edwards Aquifer supplies nearly all the water for the municipal, domestic, industrial, commercial, and agricultural needs in its region. Naturally occurring artesian springs, such as the Comal Springs and the San Marcos Springs, are fed with Edwards Aquifer water and are utilized for commercial, municipal, agricultural, and recreational purposes, while at the same time supporting ecological systems containing rare and unique aquatic life.

The water level of the Edwards Aquifer has never fallen below the uppermost part of the Edwards Aquifer even during extreme and lengthy drought conditions lasting from 1947 to 1956. The maximum fluctuation of water levels at the City’s index well has been about 91 feet, with the recorded low of 612 feet above sea level in August, 1956 and a recorded high of 703 feet above sea level in June, 1992. In the summer of 2007, the Edwards Aquifer hit 699 feet above sea level. The historical (1934 to 1999) average water level at the index well in San Antonio is approximately 664 feet above sea level. San Antonio Water Supply (“SAWS”), the major water purveyor in the County as the water agency of the City, sets all pumps at 575 feet to insure continuous access to Edwards Aquifer water in any anticipated condition.

The Edwards Aquifer is recharged from streams and by precipitation infiltrating directly into the cavernous, honeycombed, limestone outcroppings in its north and northwestern area. Practically continuous recharge is furnished by spring-fed streams, with storm water runoff adding additional recharge, as well. The historical annual recharge to the reservoir is approximately 679,000 acre-feet. The average annual recharge over the last four decades, however, including the aforementioned drought period, is approximately 791,300 acre-feet. The lowest recorded recharge was 43,000 acre-feet in 1956, while the highest was 2,485,000 acre-feet in 1992. Recharge has been increased by the construction of recharge dams over an area of the Edwards Aquifer exposed to the surface known as the “recharge zone.” The recharge dams, or flood-retarding structures, slows flood waters and allows much of the water that would have otherwise bypassed the recharge zone to infiltrate the Edwards Aquifer.

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Enhancing the City’s Water Supply

The City has relied on the Edwards Aquifer as its sole source of water since the 1800’s. Beginning in the 1980’s and continuing today, however, the conservation and regulation of the water in the Edwards Aquifer has been the subject of intense scrutiny that has led to both extensive litigation and federal and state agency initiation of regulatory action. Based upon population and water demand projections, along with various regulatory and environmental issues, the City recognizes that additional water sources supplementing its use of the Edwards Aquifer will be required to meet the City’s long-term water needs.

SAWS’ Resource Development department is charged with the responsibility of identifying additional water resources for the City and its surrounding areas. New water resource projects range from optimizing the City’s current source through conservation measures to identification and procurement of completely new and independent water sources. These efforts are guided by the 2005 Water Resource Plan, a comprehensive, widely supported water resource plan for the City, which established programs for formulating and implementing both immediate and long-term water plans to enhance the City’s water supply. In October, 2000, the City Council created a permanent funding mechanism (the “Water Supply Fee”) to be used for water supply development and water quality protection. The fee is based upon a uniform rate per 100 gallons of water used and is applied to all customers. The Water Supply Fee is projected to generate sufficient revenue to support approximately $642 million in capital expenditures, as well as sufficient operational funds to conduct the planning, operation, and maintenance of such water resource facilities. The multi-year financial plan will be updated every 3 years to ensure sufficient revenues are available to meet the water resource requirements. An updated Water Resource Plan is currently being formulated.

Water Supply Fee

Actual Fee Assessed Year Per 100 Gallons 2002 $ 0.0708 2003 0.0938 2004 0.1128 2005 0.1378 2006 0.1487 2007 0.1487 2008 0.1487 2009 0.1529

______Source: SAWS.

SAWS has determined that the City’s water needs can be met through the implementation of an array of programs and projects, including a critical management plan, conservation, agricultural irrigation efficiencies, reuse, surface water, non- Edwards Aquifer groundwater, enhanced recharge capabilities, and aquifer storage and recovery. SAWS has already initiated and/or implemented many such programs in an effort to increase the supply of water available to the City.

2009 Fifteen Largest Employers

Firm Name Total Category

Fort Sam Houston 30,793 Government Lackland AFB/37th Training Wing(1) 28,100 Government H.E.B. Grocery Company 20,500 Retail Northside Independent School District 15,925 Services USAA 14,589 Finance/Insurance Randolph Air Force Base 10,700 Government City of San Antonio 9,000 Government Northeast Independent School District 8,507 Services San Antonio Independent School District 7,547 Services Methodist Healthcare System 7,154 Medical UT Health Science Center At San Antonio 6,217 Medical Baptist Health System 6,190 Medical University Health System 5,322 Medical Tesoro Corporation 5,620 Gas and Oil/Retail Bexar County 4,711 Government Total 180,875

______Source: San Antonio Business Journal Book of Lists 2010, Greater San Antonio Chamber of Commerce and confirmation from individual corporate human resource offices. (1) Includes military personnel and their dependents and civilian personnel.

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Growth Indices (City of San Antonio)

CPS Energy(a) As Of Electric Gas Water 12/31 Customers Customers Customers(b)

1995 516,679 297,654 266,308 1996 528,302 299,140 269,405 1997 586,884 327,444 273,276 1998 545,605 301,491 279,209 1999 550,000 302,000 282,209 2000 563,100 303,900 288,803 2001 578,300 305,800 300,296 2002 592,195 306,668 293,299 2003 604,108 310,310 302,880 2004 602,313 306,845 310,433 2005 638,344 310,699 317,214 2006 639,001 310,860 331,476 2007 662,131 314,785 344,168 2008 681,295 319,261 348,834 2009 700,378 321,436 352,059

______(a) Source: CPS Energy. (b) Source: San Antonio Water System.

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APPENDIX C

BEXAR COUNTY, TEXAS ANNUAL FINANCIAL REPORT

For the Year Ended September 30, 2009

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APPENDIX D

Form of Opinion of Bond Counsel

(this page intentionally left blank) Fulbright & Jaworski l.l.p. A Registered Limited Liability Partnership 300 Convent Street, Suite 2200 San Antonio, Texas 78205-3792 www.fulbright.com telephone: (210) 224-5575 facsimile: (210) 270-7205

FINAL

IN REGARD to the authorization and issuance of the “Bexar County, Texas Limited Tax Refunding Bonds, Series 2010” (the Bonds), dated June 15, 2010, in the aggregate original principal amount of $36,915,000, we have reviewed the legality and validity of the issuance thereof by the Commissioners Court of Bexar County, Texas (the County). The Bonds are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof, and have Stated Maturities of June 15 in each of the years 2011 through 2025, unless redeemed prior to Stated Maturity in accordance with the terms stated on the face of the Bonds. Interest on the Bonds accrues from the dates, at the rates, in the manner, and is payable on the dates, all as provided in the order (the Order) authorizing the issuance of the Bonds.

WE HAVE SERVED AS BOND COUNSEL for the County solely to pass upon the legality and validity of the issuance of the Bonds under the laws of the State of Texas, the defeasance and discharge of the County’s obligations being refunded by the Bonds, and with respect to the exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes and for no other purpose. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the County. We have not assumed any responsibility with respect to the financial condition or capabilities of the County or the disclosure thereof in connection with the sale of the Bonds. We express no opinion and make no comment with respect to the sufficiency of the security for or the marketability of the Bonds. Our role in connection with the County’s Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein.

WE HAVE EXAMINED the applicable and pertinent laws of the State of Texas and the United States of America. In rendering the opinions herein we rely upon (1) original or certified copies of the proceedings of the Commissioners Court of the County in connection with the issuance of the Bonds, including the Order and the Escrow Deposit Letter (the Escrow Agreement) between the County and Wells Fargo Bank, National Association, Austin, Texas (the Escrow Agent), and the verification by the co-financial advisors to the County of the sufficiency of cash and investments deposited with the Escrow Agent; (2) customary certifications and opinions of officials of the County; (3) certificates executed by officers of the County relating to the expected use and investment of proceeds of the Bonds and certain other funds of the County, and to certain other facts solely within the knowledge and control of the County; and (4) such other documentation, including an examination of the Bond executed and delivered initially by the County, and such matters of law as we deem relevant to the matters discussed below. In such examination, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents submitted to us as certified copies, and the accuracy of the statements and information contained in such certificates. We express no

Legal Opinion of Fulbright & Jaworski L.L.P. in connection with the authorization and issuance of “BEXAR COUNTY, TEXAS LIMITED TAX REFUNDING BONDS, SERIES 2010” opinion concerning any effect on the following opinions which may result from changes in law effected after the date hereof.

BASED ON OUR EXAMINATION, IT IS OUR OPINION that the Bonds have been duly authorized and issued in conformity with the laws of the State of Texas now in force and that the Bonds are valid and legally binding obligations of the County enforceable in accordance with the terms and conditions described therein, except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights or the exercise of judicial discretion in accordance with general principles of equity. The Bonds are payable from the levy of an annual ad valorem tax, within the limitations prescribed by law, upon all taxable property within the County.

BASED ON OUR EXAMINATION, IT IS FURTHER OUR OPINION that the Escrow Agreement has been duly authorized, executed, and delivered by the County and, assuming due authorization, execution, and delivery thereof by the Escrow Agent, is a valid and binding obligation, enforceable in accordance with its terms (except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights or the exercise of judicial discretion in accordance with general principles of equity), and that the outstanding obligations refunded, discharged, paid, and retired with certain proceeds of the Bonds have been defeased and are regarded as being outstanding only for the purpose of receiving payment from the funds held in trust with the Escrow Agent, pursuant to the Escrow Agreement, and the order authorizing their issuance, and in accordance with the provisions of Chapter 1207, as amended, Texas Government Code. In rendering this opinion, we have relied upon the verification by the co-financial advisors of the sufficiency of cash and investments deposited with the Escrow Agent pursuant to the Escrow Agreement for the purposes of paying the outstanding obligations refunded and to be retired with the proceeds of the Bonds and the interest thereon.

IT IS FURTHER OUR OPINION THAT, assuming continuing compliance after the date hereof by the County with the provisions of the Order and in reliance upon the certificate of the co-financial advisors and upon the representations and certifications of the County made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, under existing statutes, regulations, published rulings, and court decisions, (1) interest on the Bonds will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the Code), of the owners thereof for federal income tax purposes, pursuant to section 103 of the Code, and (2) interest on the Bonds will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations.

WE CALL YOUR ATTENTION TO THE FACT THAT, with respect to our opinion in clause (2) above, interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation’s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S

-2- Legal Opinion of Fulbright & Jaworski L.L.P. in connection with the authorization and issuance of “BEXAR COUNTY, TEXAS LIMITED TAX REFUNDING BONDS, SERIES 2010” corporation, a mutual fund, a financial asset securitization investment trust, a real estate mortgage investment conduit, or a real estate investment trust. A corporation’s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed.

WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.

OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.

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Co- Financial Advisory Services Provided By:

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