Bond Sale Statements Lacked Flood Pool Warning

Bond Sale Statements Lacked Flood Pool Warning;

Municipal district didn’t tell investors of risk from reservoir

Since Cinco MUD 8 first sold bonds in 1996 to reimburse developers for infrastructure costs, none of the bond prospectuses prepared by the MUD’s lawyers have referred to the warning, which Fort Bend County officials have included since 1994 in these records: “The subdivision is adjacent to Barker Reservoir and is subject to extended controlled inundation under the management of the U.S. Army Corps of Engineers.” 

Coats Rose, a Houston law firm, prepared all of Cinco MUD 8’s bond prospectuses.  Barbara Bisgaier, a former managing director at Public Financial Management, a Philadelphia based company that provides financial advice to governments around the nation, said Cinco MUD 8 should have disclosed the flood threat in the bond prospectuses, especially since the documents include several “Risk factors” that investors should weigh before buying the bonds.

In the 1992 bond sale, Willow Fork’s lawyers from another Houston law firm, Allen Boone Humphries Robinson, disclosed that the drainage district’s eastern and southern boundaries were formed by the Barker Reservoir and Barker Dam.

One of the most controversial aspects of MUDs is the use of so-called “Rent-a-voters” – these are individuals paid to live temporarily on land to be developed so that they can vote to authorize creation of a MUD as well as the sale of bonds.

As Canyon Gate was developed in phases, another developer, Land Tejas Development LLC, also was reimbursed for their infrastructure costs with bond dollars borrowed by Cinco MUD 8.

Cinco MUD 8’s bond prospectuses disclosed several “Risk factors” about the sale of the bonds.  One example of a “risk factors” includes the citing of the Y2K problem as a potential threat; however no mention was made of the Fort Bend County warning.