**Exhibit3.130(b)**

**FIRST AMENDMENT**

**TO**

**OPERATING AGREEMENT OF**

**KIMBALLHILL HOMES AUSTIN INVESTMENTS, L.L.C.**

This FirstAmendment to Operating Agreement of Kimball Hill Homes Austin Investments,L.L.C. (“First Amendment”) is made as of July 1, 2006, by Kimball Hill HomesIllinois, LLC (“KHH IL”), which is the sole member of Kimball Hill Homes AustinInvestments, L.L.C. (the “Company”).

KHH IL wishes toamend the Operating Agreement dated May 23, 2002 in order to set out themanagement structure of the Company.

KHH IL herebyamends Section V of the Agreement by deleting Section V in its entirety andreplacing it with the following Section V:

**Section V**

**Management:Rights, Powers, and Duties**

5.1.                              *Manager*.

5.1.1.       *Manager*.  The Company has one Member, which is KHH IL,and shall be managed by the Member as Manager of the Company.  The Member shall generally manage all theoperations of the Company through a Management Committee, to be appointed asprovided for in Section 5.2 below.  TheManagement Committee shall appoint officers to carry out the duties andresponsibilities as provided in Section 5.3 below.  All persons acting at any time as ManagementCommittee Members and/or as officers of the Company are acting for the Company andnot individually as members of the Company.

5.1.2.       *General Powers*.  The Member shall have full, exclusive, andcomplete discretion, power, and authority, subject in all cases to the otherprovisions of the Agreement and the requirements of applicable law, to manage,control, administer, and operate the business and affairs of the Company forthe purposes herein stated, and to make all decisions affecting such businessand affairs, and the power to delegate any and all such functions, includingwithout limitation, for Company purposes, the power to:

5.1.2.1.    acquire by purchase, lease, or otherwise,any real or personal property, tangible or intangible;

5.1.2.2.    construct, operate, maintain, finance, andimprove, and to own, sell, convey, assign, mortgage, or lease any real estateand any personal property;

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5.1.2.3.    sell, dispose, trade, or exchange Companyassets in the ordinary course of the Company’s business;

5.1.2.4.    enter into agreements and contracts and togive receipts, releases and discharges;

5.1.2.5.    purchase liability and other insurance toprotect the Company’s properties and business;

5.1.2.6.    borrow money for and on behalf of theCompany, and, in connection therewith, execute and deliver instrumentsauthorizing the confession of judgment against the Company;

5.1.2.7.    execute or modify leases with respect to anypart or all of the assets of the Company;

5.1.2.8.    prepay, in whole or in part, refinance,amend, modify, or extend any mortgages, trust deeds or security agreementswhich may affect any asset of the Company and in connection therewith toexecute for and on behalf of the Company any extensions, renewals, ormodifications of such mortgages, trust deeds or security agreements;

5.1.2.9.    execute any and all other instruments anddocuments which may be necessary or in the opinion of the Member desirable tocarry out the intent and purpose of the Agreement, including, but not limitedto, documents whose operation and effect extend beyond the term of the Company;

5.1.2.10.  make any and all expenditures which theMember, in its sole discretion, or in the discretion of the parties to whom theMember has delegated the authority to act for the Company as provided forabove, deems necessary or appropriate in connection with the management of theaffairs of the Company and the carrying out of its obligations andresponsibilities under this Agreement, including, without limitation, alllegal, accounting and other related expenses incurred in connection with theorganization and financing and operation of the Company;

5.1.2.11.  enter into any kind of activity necessary to,in connection with, or incidental to, the accomplishment of the purposes of theCompany;

5.1.2.12.  invest and reinvest Company reserves inshort-term instruments or money market funds; and

5.1.2.13.  delegate any or all of its authority andpowers as manager of the Company to the Management Committee.

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5.2.          *Management Committee*.

5.2.1.       *Powers of ManagementCommittee*. The Member hereby establishes a management committee (the“Management Committee”) and delegates to the Management Committee the Member’sfull power and authority as manager of the Company to represent the Company, toact in the name of the Company and to manage the business of the Company,including without limitation the powers and authorities set forth in Section5.1.2 of the Agreement.  Further, theMember hereby authorizes the Management Committee to delegate its powers andauthorities to the officers and other managers of the Company.  The officers of the Company described inSection 5.3 shall have the powers and authorities set forth therein.  The officers of the Company shall conduct thebusiness operations and activities of the Company in a manner consistent withthe policies adopted from time to time by the Management Committee.

5.2.2.       *Composition of ManagementCommittee*.  Effective as ofthe date of this First Amendment, the Management Committee shall consist ofthree persons (“Management Committee Members”), who shall be appointed fromtime to time by the Member.  The Memberhereby appoints David K. Hill, Eugene K. Rowehl and Hal H. Barber as theManagement Committee Members, effective as of the date of this FirstAmendment.  Each Management CommitteeMember shall hold office until his successor shall have been appointed by theMember. Management Committee Members need not be residents of the state inwhich the Company is organized.  Anyvacancy occurring in the Management Committee shall be filled by theMember.  The Management Committee fromtime to time shall appoint officers of the Company to act for and on behalf ofthe Company.

5.2.3.       *Meetings of the ManagementCommittee*.  The ManagementCommittee shall meet at such times and places as a majority of the ManagementCommittee Members may designate from time to time.  Notice of any meeting shall be given at leastfive days previous thereto by written notice mailed or telefaxed to eachManagement Member at his business address, unless the giving of such notice iswaived by such Management Committee Member. The attendance of a Management Committee Member at any meeting shallconstitute a waiver of notice of such meeting. Neither the business to be transacted at, nor the purpose of, anymeeting of the Management Committee need be specified in the notice or waiverof notice of such meeting.

A majority of theManagement Committee shall constitute a quorum for transaction of business atany meeting of the Management Committee. The act of the majority of the Management Committee Members present at ameeting at which a quorum is present shall be the act of the ManagementCommittee.  Any action which may be takenat a meeting of the Management Committee may be taken without a meeting if awritten consent, setting forth the action so taken, shall be signed by all theManagement Committee Members.  Anywritten consent signed by all the Management Committee Members shall have thesame effect as a unanimous vote, and may be stated as such in any documentreflecting action taken by the Management Committee.

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5.3.          *Officers of the Company*.  The officers of the Company shall be achairman and chief executive officer, one or more vice-chairmen, a president,one or more vice-presidents, a treasurer, a secretary, and such other officersas may be elected or appointed from time to time by the Management Committee.  Any two or more offices may be held by thesame person.  Each officer shall holdoffice until his successor shall have been duly elected or until his death oruntil he shall resign or shall have been removed by the Management Committee.  Election of an officer shall not of itselfcreate contract rights.

5.3.1.       *Chairman and ChiefExecutive Officer*. Subject to the direction and control of the Management Committee, thechairman shall be the chief executive officer and shall have the followinggeneral duties and responsibilities:  bein charge of the business of the Company; see that the resolutions anddirections of the Management Committee are carried into effect except in thoseinstances in which that responsibility is specifically assigned to some otherperson by the Management Committee; and, in general, discharge all dutiesincident to the office of chairman and such other duties as may be prescribedby the Management Committee from time to time. The chairman shall preside at all meetings of the ManagementCommittee.  Except in those instances inwhich the authority to execute is expressly delegated to another officer oragent of the Company or a different mode of execution is expressly prescribedby the Management Committee, the chairman may execute for the Company anycontracts, deeds, mortgages, bonds, or other instruments which the ManagementCommittee has authorized to be executed.

5.3.2.       *Vice Chairman*.  The Vice Chairman (or Chairmen) shall assistthe chairman and chief executive officer in the discharge of his duties as thechairman may direct and shall perform such other duties as from time to timemay be assigned to him by the chairman or by the Management Committee.  Except in those instances in which theauthority to execute is expressly delegated to another officer or agent of theCompany or a different mode of execution is expressly prescribed by theManagement Committee, each Vice Chairman may execute for the Company anycontracts, deeds, mortgages, bonds or other instruments which the ManagementCommittee has authorized to be executed.

5.3.3.       *President*.  The president shall assist the chairman andchief executive officer in the discharge of the chairman’s duties as thechairman may direct and shall perform such other duties as from time to timemay be assigned to him by the chairman or by the Management Committee.  In the absence of the chairman or in theevent of his inability or refusal to act, the president shall perform theduties of the chairman, and when so acting, shall have all the powers of thechairman.  Except in those instances inwhich the authority to execute is expressly delegated to another officer oragent of the Company or a different mode of execution is expressly prescribedby the Management Committee, the president may execute for the Company anycontracts, deeds, mortgages, bonds or other instruments which the ManagementCommittee has authorized to be executed.

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5.3.4.       *Vice Presidents*.  Each of the vice-presidents shall assist thepresident in the discharge of the president’s duties as the president maydirect and shall perform such other duties as from time to time may be assignedto him by the chairman and chief executive officer, the president or theManagement Committee.  In the absence ofthe president or in the event of his inability or refusal to act, thevice-presidents in the order of seniority of tenure as vice-president shallperform the duties of the president, and when so acting, shall have all thepowers of the president.  Except in thoseinstances in which the authority to execute is expressly delegated to anotherofficer or agent of the Company or a different mode of execution is expresslyprescribed by the Management Committee, each of the vice-presidents may executefor the Company any contracts, deeds, mortgages, bonds or other instrumentswhich the Management Committee has authorized to be executed.

5.3.5.       *Treasurer*.  The treasurer shall be the chief financialofficer and principal accounting officer of the Company.  He shall have charge of and be responsiblefor the maintenance of adequate books of account for the Company, have chargeand custody of all funds and securities of the Partnership and be responsiblefor the receipt and disbursement thereof, and perform all duties incident tothe office of treasurer and such other duties as from time to time may beassigned to him by the chairman and chief executive officer, the president orthe Management Committee.

5.3.6.       *Secretary*.  The secretary shall record the minutes ofManagement Committee meetings or actions taken by unanimous consent of theManagement Committee, be custodian of the Company’s records, sign with thechairman and chief executive officer or the president or a vice-president orany other officer authorized by the Management Committee any contracts, deeds,mortgages, bonds or other instruments which the Management Committee hasauthorized to be executed, except when a different mode of execution isexpressly prescribed by the Management Committee, and perform all dutiesincident to the office of secretary and such other duties as from time to timemay be assigned to him by the chairman, the president or the ManagementCommittee.

5.3.7.       *Assistant Treasurers andAssistant Secretaries*. The assistant treasurers and assistant secretaries shall perform suchduties as shall be assigned to them by the treasurer or the secretary,respectively, or by the chairman and chief executive officer, the president orthe Management Committee.

5.4.          *Authority of Officers andManagers*.  In addition to thepowers and authorities granted to officers as provided in Section 5.3 above,the Member or the Management Committee from time to time may grant additionalpowers and authorities to the officers and managers of the Company.  The Management Committee may authorize anyofficer, manager or employee of the Company to enter into any contract,including without limitation contracts to borrow money, and to execute anddeliver any instrument, including without limitation contracts to borrow money,and to execute and deliver any instrument, including without limitationpromissory notes and other evidences of indebtedness, in the name of and onbehalf of the Partnership, and such

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authority may be generalor confined to specific instances.  Theofficers and managers of the Company shall have authority to delegate any orall of their respective powers and authorities to subordinate managers andemployees of the Company.

5.5.          *Action by Member*.  Since there is only one Member, any action ofthe Member can be taken unilaterally by written consent or by any other meansdeemed appropriate by the Member.

5.6.          *Personal Services*.

5.6.1.       The Member is not required to performservices for the Company solely by virtue of being a Member.

5.6.2.       Upon subordination of the amount andpurpose thereof, the Member shall be entitled to compensation and toreimbursement for expenses reasonably incurred in connection with theactivities of the Company.

5.7.          *Duties of Member*.

5.7.1.       The Member shall devote such time to thebusiness and affairs of the Company as it deems necessary to carry out theMember’s duties set forth in the Agreement.

5.7.2.       Nothing in the Agreement shall be deemedto restrict in any way the rights of the Member to conduct any other businessor activity whatsoever, and the Member shall not be accountable to the Companywith respect to that business or activity even if the business or activitycompetes with the Company’s business. The organization of the Company shall be without prejudice to its rightsto maintain, expand or diversify such other interests and activities and toreceive and enjoy profits or compensation therefrom.

5.8.          *Liability andIndemnification*.

5.8.1.       The Member, the Management CommitteeMembers and the officers appointed by the Management Committee shall not beliable, responsible, or accountable, in damages or otherwise, to the Companyfor any act performed by them within the scope of the authority conferred onthem by the Agreement or for any actions for which they may be indemnified asprovided for below in this Section 5.8.

5.8.2.       The Company shall indemnify any personwho was or is a party or is threatened to be made a party to any threatened,pending or completed action, suit or proceeding, whether civil, criminal,administrative or investigative (other than an action by or in the right of theCompany) by reason of the fact that he is or was a Member, Management CommitteeMember, officer, employee or agent of the Company (collectively, an “Action”),against expenses (including attorneys’ fees), judgments, fines and amounts paidin settlement actually and reasonably incurred by him in connection

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with such Action if heacted in good faith and in a manner he reasonably believed to be in or notopposed to the best interests of the Company, and, with respect to any criminalaction or proceeding, had no reasonable cause to believe his conduct wasunlawful.  The termination of any Actionby judgment or settlement, conviction or upon a plea of *nolocontendere*or its equivalent shall not, of itself, create apresumption that the person did not act in good faith and in a manner which hereasonably believed to be in or not opposed to the best interests of theCompany, and with respect to any criminal action or proceeding, had reasonablecause to believe that his conduct was unlawful.

5.8.3.       Any indemnification under Section 5.8.2shall be made by the Company only as authorized in the specific case upon adetermination that indemnification is proper in the circumstances because theperson requesting indemnification has met the applicable standard of conductset forth therein.  Such determinationshall be made (a) by the Management Committee by a majority vote of a quorumconsisting of Management Committee Members who are not parties to such Action,or (b) if directed by the Management Committee, by independent legal counsel ina written opinion.  Notwithstanding theforegoing, to the extent that a Member, Management Committee Member, officer,employee or agent of the Company has been successful on the merits or otherwisein defense of any Action, or in defense of any claim, issue or matter therein,he shall be indemnified against expenses (including attorneys’ fees) actuallyand reasonably incurred by him in connection therewith.

5.8.4.       Expenses (including attorneys’ fees)actually and reasonably incurred by a Member, Management Committee Member,officer, employee or agent of the Company in connection with the defense ordisposition of any Action may be paid from time to time by the Company inadvance of the final disposition thereof upon receipt of (a) an affidavit bysuch person of his good faith belief that he has met the standard of conductnecessary for indemnification under Section 5.8.2, and (b) an undertaking bysuch person to repay to the Company the amounts so paid if it is ultimately determinedthat he is not entitled to indemnification as authorized in Section 5.8.2,which undertaking may be accepted by the Company without reference to thefinancial ability of such person to make repayment.  Any payment of expenses under this Section5.8.4 shall be made in the sole discretion of the Company and on such terms andconditions as the Company, in its sole discretion, deems appropriate.

5.8.5.       If both the Company and any person to beindemnified are parties to an Action, legal counsel representing the Companytherein may, at the request of such person, also represent such person (unlesssuch dual representation would involve such legal counsel in a conflict ofinterest in violation of applicable law or principles of professional ethics),and the Company shall pay all fees and expenses of such legal counsel incurredduring the period of dual representation other than those, if any, that wouldnot have been incurred if legal counsel were representing only the Company.  Any allocation of fees and expenses betweenthe Company and such person made by legal counsel shall be final and bindingupon the Company and such person.

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5.8.6.       The indemnification and advancement ofexpenses provided by this article shall not be deemed exclusive of any rightsto which a Member, Management Committee Member, officer, employee or agent ofthe Company may be entitled under any contract, agreement or otherwise, both asto action in his official capacity and as to action in another capacity whileholding such position or office, and shall continue as to a person who hasceased to be a Member, Management Committee Member, officer, employee or agentand shall inure to the benefit of the heirs, executors and administrators ofsuch person.

5.8.7.       The Company shall have power to purchaseand maintain insurance on behalf of any person who is or was a Member,Management Committee Member, officer, employee or agent of the Company, or isor was serving at the request of the Partnership as a director, officer,employee or agent of another corporation, partnership, joint venture, trust orother enterprise against any liability asserted against him and incurred by himin any such capacity, or arising out of his status as such, whether or not theCompany would have the power to indemnify him against such liability under theprovisions of this article.

As so amended, theAgreement shall continue in full force and effect in accordance with its terms.

IN WITNESSWHEREOF, KHSC has executed this First Amendment to Operating Agreement as ofthe date first written above.
|   | KIMBALL HILL HOMES ILLINOIS,  LLC                  |
|--------|----------------------------------------------------|
|   |   an  Illinois limited liability company |
|   |                                               |   |
|   |                                               |   |
|   | By:                                                | /s/      Hal H. Barber |   |
|   |                                               | Hal H. Barber |
|   |                                               | Vice President |

 

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