HomeMy WebLinkAboutBallpark Audit 08-31-14
TEXAS STUDENT HOUSING AUTHORITY–BALLPARK
AUSTINPROJECT
FINANCIAL REPORT
AUGUST 31, 2014
C O N T E N T S
Page
INDEPENDENT AUDITOR’S REPORT....................................................................................1
MANAGEMENT’S DISCUSSION AND ANALYSIS(unaudited)................................................4
FINANCIAL STATEMENTS
Statement of Net Position................................................................................................9
Statement of Revenues, Expenses, and Changes in Net Position.................................10
Statement of Cash Flows...............................................................................................11
Notes to Financial Statements.......................................................................................12
SUPPLEMENTAL SCHEDULES
Schedule I –Schedule of Revenues and Expenses-Budget and Actual.........................21
Schedule II –Certificate of the Fixed Charges Coverage Ratio......................................22
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
Texas Student Housing Authority–Ballpark AustinProject
Report on the Financial Statements
We have audited the accompanying financial statements of Texas Student Housing Authority–
Ballpark Austin Project(the Project), a component unit of Town of Westlake,as of and for the
year ended August 31, 2014, and the related notes to the financial statements, which
collectively comprise theProject’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
TheProject’s management is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles generally accepted in the United
States of America; this includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financialstatements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Project’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Texas Student Housing Authority –Ballpark Austin Project
Page 2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of theProjectas of August 31, 2014, and the changes in its financial
position and its cash flows for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Emphasis of Matter Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Project will
continue as a going concern. As discussed in Note 10to the financial statements, the Project is
in default on its bondsdue to the discontinuance of certain principal and interest payments and
noncompliance with certain bond covenants. This gives the bondholders the right to accelerate
and demand payment on the bonds in full. These conditions raise substantial doubt about the
Project’sability to continue as a going concern. Management’s plans regarding these matters
also are described in Note 10. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. Our opinion is not modified with respect to this
matter.
Change in Accounting Principle
As discussed in Note 9 to the financial statements, in 2014 the City adopted new accounting
guidance, GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. Our
opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages4–8be presentedto supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted in
the United Statesof America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Texas Student Housing Authority –Ballpark Austin Project
Page 3
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise theProject’s basic financial statements. The Schedule of Revenues and
Expenses–Budget and Actualand the Certificate of the Fixed Charges Coverage Ratioare
presented for purposes of additional analysis and arenot a required part of the basic financial
statements.
The Schedule of Revenues and Expenses–Budget and Actualand the Certificate of the Fixed
Charges Coverage Ratioarethe responsibility of management and were derived from and
relatedirectly to the underlying accounting and other records used to prepare the basic financial
statements. Such information has been subjected to the auditing procedures applied in theaudit
of the basic financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to
prepare the basic financial statements or to the basic financial statements themselves, and
other additional procedures in accordance with auditing standards generally accepted in the
United States of America. In our opinion, the Schedule of Revenues and Expenses–Budget
and Actualand the Certificate of the Fixed Charges Coverage Ratioarefairly stated, in all
material respects, in relation to the basic financial statements as a whole.
WEAVER AND TIDWELL, L.L.P.
Dallas, Texas
February 5, 2015
MANAGEMENT’S DISCUSSION AND ANALYSIS
(unaudited)
TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
As staff of the Texas Student Housing Authority–Ballpark Austin Project (the “Project”),we
offer the readers of the Project’s financial statements this narrative overview and analysis of the
financial activities of the Projectfor the fiscal year ended August 31, 2014. We encourage
readers to consider the information presented herein in conjunction with the Project’s financial
statements which follow this section. As the Projectis an instrumentality of the Town of
Westlake and is thus considered a governmental entity, Governmental Accounting Standards
Board Statement 34, Basic Financial Statements-and Management Discussion and Analysis-for
State and LocalGovernments(Statement 34) has beenimplemented. The reader should note
that this financial report addresses only the financial condition of the Project itself.
FINANCIAL HIGHLIGHTS
The liabilities of the Project exceeded its assets at the close of the fiscal year by
$24,315,118. This is a decreaseof $4,761,586fromthe prior year(including a
$2,145,311 adjustment to beginning net position to reflect the cumulative effect of
implementing GASB Statement No. 65).
Operating revenue of $4,083,329was$174,726more than budget, and operating
expenses were$431,612morethan budget(not including depreciation and other
expensesof $4,475,485).
At the end of the current fiscal year, the total cash balances were $781,063in
unrestricted cash and $228,364in restricted cash.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Project’s basic
financial statements. The Project’s report consists of three parts-Management’sDiscussion and
Analysis, the basic financial statements, and notes to the financial statements. The basic
financial statements include a statement of net position, statement of revenues, expenses, and
changes in net position, and a statement of cash flows. Supplemental schedules follow the
notesto the financial statements.
The Project is being treated as a going concern. The Project is in default on its bonds and is not
financially able to make scheduled principal and interest payments on its outstanding debt. They
are considered an event of default by the Trustee, which gives the bondholders the right to
accelerate and demand payment of the bonds in full. Management and the property manager
are in the process of developing plans to increase occupancy and rental rates at the property to
improve its financial performance.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
The statement of net positionpresents information on all ofthe Project’s assets and liabilities
with the difference between the two reported as net position.
TABLE 1 –NET POSITION
Business-type Activities
20142013
Current and other assets$ 1,070,130$ 3,661,147
Capital assets19,706,65520,567,331
Total assets20,776,78524,228,478
Current liabilities45,091,9039,923,576
Non-current liabilities-33,858,434
Total liabilities45,091,90343,782,010
Net Position
Net investment in capital assets(14,916,864)(13,996,103)
Unrestricted(9,398,254)(5,557,429)
Total net position$(24,315,118)$(19,553,532)
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
The statement of revenues, expenses and changes in net position accounts for all of the
Project’s revenues and expenses regardless of when cash is paid or received.
TABLE 2 –CHANGEIN NET POSITION
Business-type Activities
20142013
Total operating revenue$ 4,083,329$ 3,834,672
Total operating expenses(3,281,995)(3,084,203)
Total operating income801,334750,469
Interest income78127
Interest expense(3,417,687)(2,403,421)
Total nonoperating expenses(3,417,609)(2,403,294)
CHANGE IN NET POSITION
(2,616,275)(1,652,825)
NET POSITION, BEGINNING
(19,553,532)(17,900,707)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE
(2,145,311)-
NET POSITION, ENDING
$(24,315,118)$(19,553,532)
Thestatement of cash flows recaps how cash changedfrom year toyear.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
FINANCIAL ANALYSIS OF THE PROJECT’S FUNDS
Notes to financial statements
The notes provide additional information that is essential to a full understanding of the data
provided in the financial statements.
Restricted cash
Restricted cash represents monies held in escrow by the trustee and are restricted for the
payment of expenses as outlined in the Trust Indenture. As of August 31, 2014, these balances
were as follows:
Operating Fund$ 7,082
Bond Fund - Series 2001A180,488
Bond Fund - Series 2001B 13,003
Bond Fund - Series 2001C 16
Debt Service Reserve 2001A Account2
Debt Service Reserve 2001B Account863
Repair and Replacement Fund2,020
Trustee Fee Fund706
Tax and Insurance Fund21,243
Series A Principal Fund3
Series B Principal Fund2,938
Total$ 228,364
Nonrestricted cash
Nonrestricted cash is available for general use of the Project.
Bonds payable
As of August 31, 2014, the following amounts on the Series A, B and C Bonds were owed:
Series A$28,840,000
Series B2,365,000
Series C3,000,000
Deferred purchase price1,460,000
Less:discount on bond issuance(1,041,481)
Total$34,623,519
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
Fixed charge cover ratio
The bond indenture provides for a fixed charge coverage ratio of 1.25 when payments on the A
and B Bond Series are considered and 1.15 when payments on the C Bond Series are added.
At this time, the Project has only realized a ratio of .76and.66, respectively, and is thus
technically in default of the indenture.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
Leases at the Project are primarily 12-month leases, however, due to competitive and market
conditions, a relatively minor number of 10-month leases exist. These leases do bring a monthly
premium over the 12-month leases. Occupancy for the fiscal year ending August 31, 2014,
indicates a substantial increase to 97.4%; however, rental rates, again due to competitive
pressures, will not see an increase.
CONTACTING THE PROJECT’S FINANCIAL MANAGEMENT
This financial report is designed to provide the reader with a general overview of the Project’s
finances and to demonstrate the Project’s accountability for the money it receives. If you have
any questions about this report, or need additional information, please contact Pete Ehrenberg
at (817) 490-5723.
8
FINANCIAL STATEMENTS
TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
STATEMENT OF NET POSITION
AUGUST 31, 2014
ASSETS
Current Assets
Cash $ 781,063
Restricted cash228,364
Accounts receivable60,703
Total current assets1,070,130
Capital Assets
Land4,788,265
Other capital assets, net of accumulated depreciation14,918,390
Total capital assets19,706,655
TOTAL ASSETS 20,776,785
LIABILITIES
Current Liabilities
Accounts payable247,558
Accrued liabilities950,997
Unearned revenue and prepaid rent205,453
Accrued interest 9,064,376
Bonds payable 33,163,519
Deferred purchase price1,460,000
Total current liabilities45,091,903
NET POSITION
Net investment in capital assets(14,916,864)
Unrestricted(9,398,254)
TOTAL NET POSITION $(24,315,118)
The Notes to Financial Statements are
an integral part of this statement.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEAR ENDED AUGUST 31, 2014
OPERATING REVENUE
Rental income$ 3,983,818
Other income99,511
Total operating revenue4,083,329
OPERATING EXPENSES
Personnel expenses366,402
Contract services58,088
Utilities625,623
Travel2,973
Repairs and maintenance83,288
Turnover expenses848,045
Advertising and promotion73,277
Administration expenses166,501
Management fees197,122
Depreciation expense860,676
Total operating expenses3,281,995
OPERATING INCOME801,334
NON-OPERATING REVENUE (EXPENSES)
Interest income78
Interest expense(3,417,687)
TOTAL NON-OPERATING REVENUE (EXPENSES)(3,417,609)
CHANGE IN NET POSITION(2,616,275)
NET POSITION, BEGINNING(19,553,532)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE(2,145,311)
NET POSITION, ENDING$(24,315,118)
The Notes to Financial Statements are
an integral part of this statement.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from tenants$3,952,630
Miscellaneous other income99,511
Cash paid to employees(366,402)
Cash paid to suppliers(2,031,977)
Net cash provided by operating activities1,653,762
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Interest paid (2,144,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments78
Net change in cash and cash equivalents(490,160)
Cash and cash equivalents at beginning of year1,499,587
Cash and cash equivalents at end of year$1,009,427
Cash$781,063
Restricted cash228,364
Total cash and cash equivalents$1,009,427
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income$ 801,334
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation860,676
Changes in operating assets and liabilities:
Accounts receivable(44,454)
Accounts payable22,940
Unearned revenue and prepaid rent13,266
Net cash provided by operating activities$1,653,762
The Notes to Financial Statements are
an integral part of this statement.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 1. GENERAL STATEMENT
Texas Student Housing Authority (the Authority), a higher education authority, was
established on January 23, 1995, as a duly constituted authority of the Town of Westlake,
Texas(the Town), pursuant to Section 53.11 of Chapter 53 of the Texas Education Code, as
amended. The Authority’s purpose among other things is to acquire, finance, and operate
student housing facilities. The Authority operates several student housing facilities in Texas
and one of the housing projects is the Ballpark Austin Project (the Project). The Project was
purchased from Jefferson Commons –Austin, L.P., a Delaware limited partnership on
December 27, 2001. TheProject obtained its financing through the issuance of Texas
Student Housing Authority –Student Housing Revenue Bonds (Austin, Texas Project),
Series 2001A, Series 2001B and Subordinate Series 2001C. The bonds were issued
through a trust indenture by andbetween the Authority and the Bank of New York, the,
trustee. The Series 2001A, 2001B and Subordinate Series 2001C Bonds were issued in the
face amounts of $34,175,000, $2,470,000 and $3,000,000, respectively. The accompanying
financial statements presentthe operations of the Project, whose revenue streams are
pledged for the bonds described herein.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Project’ssignificant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
Reporting Entity
For financial reporting purposes, management has considered all potential component
units. The decision to include a potential component unit in the reporting entity was
made by applying the criteria set forth in GASB Statement No. 14 as amended by GASB
statementsNo. 39and 61. The criteria used areas follows:
Financial Accountability-The primary government is deemed to be financially
accountable if it appoints a voting majority of the organization's governing body and (1)
it is able to impose its will on that organization or (2) there is a potential for the
organization to provide specific financial benefits to, or impose specific financial
burdens on, the primary government. Additionally, the primary government may be
financially accountable if an organization is fiscally dependenton the primary
government regardless of whether the organization has a separately elected governing
board appointed by a higher level of government or a jointly appointed board.
Accordingly, the Project reports no component units.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES–CONTINUTED
Measurement Focus and Basis of Accounting
The Project uses the economic resources measurement focus. This means that all
assets,liabilities, equity, revenues, and expenses are accounted for using the accrual
basis ofaccounting. Revenue is recognized when earned and expenses are recognized
when they areincurred.
The Governmental Accounting Standards Board (GASB) is the accepted standards
setting body for establishing governmental accounting and financial reporting principles
(GAAP). Management uses estimates and assumptions in preparing financial
statements in accordance with GAAP. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could vary from the
estimates that are used.
Income Taxes
The Project is an instrumentality of the Town and, therefore, its income is not subject to
federal income taxation pursuant to Section 115 of the Internal Revenue Code.
Cash and Cash Equivalents
The Project considers all highly liquid investments with maturity of three months or less
when purchased to be cash equivalents. At August 31, 2014, the Project had no such
investments included in cash and cash equivalents.
In addition, the Project has restricted cash of $228,364that is held by the trustee for the
bonds payable under provisions of the trust indenture. During the year ended
August 31,2014, the Projectdid not receive any investment income from cash. See
Note 3for riskdisclosures and breakdown of restricted cash accounts.
Accounts Receivable
Accounts receivable are stated at amounts management expects to collect from
outstanding balances. Management writes-off uncollectible amounts through a
reduction to revenue and a credit to accounts receivable based on its assessment of the
outstanding receivables. At year end,management assesses the accounts receivable
balance and establishes a valuation allowance based on historical experience and an
evaluation of the outstanding balances.As of August 31, 2014, management has
determined that all accounts doubtful of collection have been charged to operations and
an allowance is not required.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES–CONTINUED
Advertising Costs
All advertising costs are expensed as they are incurred. Advertising costs for the year
ending August 31, 2014were approximately $73,000.
Capital Assets
Property and equipment have been recorded at the date of acquisition at cost. Routine
maintenance and repair costs to ready the units for the next period are expensed as
incurred.
Expenses directly related to the improvement of property are capitalized at cost. The
Projectcapitalizes the cost of roof replacementsand expenditures for other major
property improvements.
The Indenture (dated December 1, 2001) provides for a repair and replacement fund
requirement. The covenant states that no less frequently than every five years following
the date of issuance of the Bonds, the Project will cause a professional engineer or firm
of such engineers to conduct a physical assessment of the Project and to submit a
written report concerning the physical condition of the Project and the engineer’s
recommendations for capital improvements needed at the Project.
Depreciation is computed using the straight-line method over the estimated useful lives
as follows:
Estimated
Asset ClassUseful Lives
Building30
Improvements, furniture and fixtures3-20
NOTE 3. CASH AND INVESTMENTS
At August 31, 2014, the carrying amount of Texas Student Housing Authority-Ballpark
Austin Project deposits (cash with interest bearing accounts and restricted cash held in
interest bearing accounts) was $1,009,427,of which $228,364represented restricted cash.
The following is the breakdown of the restricted cash.
Restricted Cash
Restricted cash representsamounts placed on deposit in accountsandheld by the
Trustee, which are restricted for the payment of expenses as required by the Trust
Indenture.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 3. CASH AND INVESTMENTS –CONTINUTED
Restricted Cash–Continued
At August 31, 2014,restricted cash consists of the following funds andaccounts:
Operating Fund$ 7,082
Bond Fund - Series 2001A180,488
Bond Fund - Series 2001B 13,003
Bond Fund - Series 2001C 16
Debt Service Reserve 2001A Account2
Debt Service Reserve 2001B Account863
Repair and Replacement Fund2,020
Trustee Fee Fund706
Tax and Insurance Fund21,243
Series A Principal Fund3
Series B Principal Fund2,938
Total$228,364
The following is a brief description of the funds and accounts making up the restricted cash
balance at year end, as defined by the Trust Indenture:
Operating Fund-Amounts in the operating fund may be transferred to the property
manager to fund operations if the transfer from the revenue fund is not sufficient to pay
operating expenses. Amounts may also be transferred to the Bond Fund to pay
principal and interest on the Bonds; to the extent there are insufficient monies in the
Bond Fund on any interest payment date.
Bond Fund-The Trustee makes monthly deposits in the bond fund pursuant to the Trust
Indenture. Amounts in the Bond Fund shall be used solely to fund the payment of
principal and interest on the Bonds, for the redemption of the Bonds at or prior to
maturity, and to purchase Bonds on the open market. In the event of default, amounts
in this fund may pay the fees and expenses of the Trustee prior to making any payments
to the bondholders. This fund has three accounts, the Series 2001A, 2001B and the
Series 2001C accounts.
Debt Service Reserve 2001A Account-The amounts on deposit in this account are to
be used for the purpose of paying principal and interest on the Series 2001A Bonds as
they become due in the event there should be insufficient funds in the Bond Fund.
Debt Service Reserve 2001B Account-The amounts on deposit in this account are to
be used for the purpose of paying principal and interest on the Series 2001B Bonds as
they become due in the event there should be insufficient funds in the Bond Fund.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 3. CASH AND INVESTMENTS –CONTINUTED
Repair and Replacement Fund-Amounts in the Repair and Replacement Fund may be
(a) used to pay the maintenance and repair costs related to the Ballpark AustinProperty,
which the Projectis obligated to pay pursuant to the Trust Indenture and (b) transferred
to the bond fund to pay principal of or interest on the Bonds to the extent there are
insufficient monies in the bond fund.
Trustee Fee Fund-Amounts are deposited in the trustee fee fund on a monthly basis
and are intended to pay the fees to the Trustee at year end.
Tax and Insurance Fund –The amounts on deposit in this account represent 1/12th of
the ad valorem property taxes, if any, and 1/12th of the annual premiums for insurance
due, determined in accordance with the annual budget.
Series A Principal Fund-Amounts in the Series A principal fund represent sinking fund
payments set aside for repayment of the principal balance on the Series A Bonds.
Series B Principal Fund-Amounts in the Series B principal fund represent sinking fund
payments set aside for repayment of the principal balance on the Series B Bonds.
The Public Funds Investment Act (Government Code Chapter 2256) contains specific
provisions in the areas of investment practices, management reportsand establishment of
appropriate policies relating to a governmental entity’s cash and investments.
Disclosure Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the
fair value of aninstrument. Generally, the longer the maturity of an investment the
greater the sensitivity of its fair value to changes in market interest rates. Texas Student
Housing Authority-Ballpark Austin Project is not significantly exposed to interest rate risk
as all investments earn a variable rate.
Disclosure Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation
to the holder of the investment. This is measured by the assignment of a rating by a
nationally recognized statistical rating organization. The Public Funds Investment Act
has a minimum rating that is required for investments. Texas Student Housing
Authority-Ballpark Austin Project holds all of its cash and investments with the bond
trustee and commercial banks.
Concentration of Credit Risk
The investment policy of Texas Student Housing Authority-Ballpark Austin Project is
subject to the indenture agreement of the Bonds. As of August 31, 2014, Texas Student
Housing Authority-Ballpark Austin Project held all of its restricted cash balances with the
trustee, which represents 29% of the total cash and investments held at August 31,
2014.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 3. CASH AND INVESTMENTS –CONTINUED
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be
able to recover collateral securities that are in the possession of an outside party. The
custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty to a transaction, a governmental will not be able to recover the value of its
investment or collateral securities that are in the possession of another party. The
Public Funds Investment Act does not contain legal or policy requirements that would
limit the exposure to custodial credit risk for deposits or investments, other than the
following provision for deposits:
The Public Funds Investment Act requires that a financial institution secure deposits
made by state or local governmental units by pledging securities in an undivided
collateral pool held by a depository regulated under state law (unless so waived by the
governmental unit). The market value of the pledged securities in the collateral pool
must equal at least the bank balances less FDIC insurance at all times.
As of August 31, 2014, $759,429of the Project’s $1,009,429bank balance was
collateralized with a Bank Deposit Guarantee Bond from the Project’s depository. The
remaining balance, $250,000, was covered by FDIC insurance.
NOTE 4. CAPITAL ASSETS
Capital asset activity for the Project for the yearended August 31, 2014was as follows:
BeginningEnding
BalanceAdditionsRetirementsBalalnce
Capital assets, not being depreciated
Land$ 4,788,265$ -$ -$4,788,265
Total capital assets, not being depreciated4,788,265--4,788,265
Capital assets, being depreciated
Building21,345,305--21,345,305
Improvements, furniture and fixtures6,993,063--6,993,063
Total capital assets, being depreciated28,338,368--28,338,368
Less accumulated depreciation for:
Building(8,300,952)(711,510)-(9,012,462)
Improvements, furniture and fixtures(4,258,350)(149,166)-(4,407,516)
Total accumulated depreciation(12,559,302)(860,676)-(13,419,978)
Total capital assets, being depreciated, net15,779,066(860,676)-14,918,390
Capital assets, net$20,567,331$(860,676)$ -$19,706,655
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 5. BONDS PAYABLE
The bonds are tax-exempt governmental obligations under the Internal Revenue Code. The
bonds payable represent amounts due to the bondholders, via the Trustee, and payable
under the terms of the Trust Indenture dated December 1, 2001. The Bonds are payable
solely from the revenues generated by the Projectand are secured bythe revenues pledged
and assigned under the terms of the Trust Indenture. The Town of Westlake does not have
any liability for the payment of the bonds as the bonds are non-recourse to both the Town of
Westlake and Texas Student Housing Authority. Interest rates on the bondsrange from
4.00% to 11.00%and are payable semi-annually on July 1 and January 1 of each year
thereafter.
At August 31, 2014, the Project had not made interest payments on the subordinate 2001C
Bond series since July 2003 and the subordinate 2001C Bond is in default. In addition, the
Project’s fixed charges coverage ratio was not in compliance with the covenants of the
Indenture. These conditions constitute an event of default which gives bondholders the right
to accelerate and demand payment on the bonds in full. Generally accepted accounting
principles require that if events of default occur, the liability should be disclosed as current
on the financial statements.
The following is a summary of long-term debt transactions of the Projectfor the yearended
August 31, 2014:
Amounts
BeginningEndingDue Within
BalalnceIncreasesDecreasesBalalnceOne Year
Revenue Bonds
2001A Bonds$28,840,000$ -$ -$28,840,000$ 745,000
2001B Bonds2,365,000--2,365,00055,000
2001C Bonds3,000,000--3,000,000-
Deferred purchase price1,460,000--1,460,000-
Less: Discount(1,101,566)-60,085(1,041,481) -
Total$34,563,434$ -$60,085$34,623,519$ 800,000
The Project has a deferred purchase commitment for $1,460,000 as part of the original
purchase of the Project. The deferred purchase price accrues interest at a rate of 11% per
annum. The first deferred purchase price installment shall be payable on September 1 of the
first year after the Series C Bonds have been paid in full (scheduled final payment on Series
C Bonds is in 2033), and the remaining installments shall be paid on each anniversary
thereafter until the deferred purchase price and all interest thereon has been paid in full. As
of August 31, 2014, there have been no payments made on the deferred purchase price.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 5. BONDS PAYABLE –CONTINUED
The annual requirements to amortize all bondsoutstanding (excluding the deferred
purchase price) as of August 31, 2014are as follows:
Year EndingGovernmental Activities
August 31,PrincipalInterestTotal
Past Due$ 1,035,000$4,668,109$ 5,703,109
2015800,0001,962,8562,762,856
2016845,0001,916,9502,761,950
2017890,0001,868,5562,758,556
2018940,0001,817,4062,757,406
2019985,0001,763,5002,748,500
2020-20245,815,0007,901,63113,716,631
2025-20297,615,0006,009,18813,624,188
2030-203415,280,0006,893,43822,173,438
Totals$34,205,000$34,801,634$ 69,006,634
NOTE 6. NET POSITION
Net positionrepresentthe residual assets after liabilities are deducted. Net position is
reported in the following categories.
Net Investment in Capital Assets –The component of net position that reports the capital
assets less both accumulated depreciation and the outstanding balance of related debt,
excluding unspent proceeds, that is directly attributable to the acquisition, construction,
or improvement of these capital assets.
Restricted Net Position –The component of net position calculated by reducing the
carrying value of restricted assets by the amount of any related liabilities.
Unrestricted –The residual difference between the assets and liabilities that is not
reported in net investment in capital assets and restricted net position.
NOTE 7. MANAGEMENT FEES
Beginning June 1, 2004, the Project retained Asset Campus Management for property
management and recorded property management fees of approximately $197,000for the
year ended August 31, 2014.
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
NOTES TO FINANCIAL STATEMENTS
NOTE 8. CONCENTRATIONS
The Project consists of one property in Austin, Texas, and is dependent upon the Austin
area and the higher education facilities in the Austin area for revenues.
NOTE 9. CUMULATIVE EFFECT OF ADOPTION OF GASB STATEMENT NO. 65
As a result of the implementation of GASB Statement No. 65, Items Previously Reported as
Assets and Liabilities, an adjustment has been made to write off all unamortized bond
issuance costs from previous years. As a result, beginning net position has been reduced by
$2,145,311.
NOTE 10. GOING CONCERN
The 2014 financial statements were prepared assuming the Project will continue as a going
concern. The Project’s bonds payable are considered to be in default due to the
discontinuance of certain principal and interest payments and a fixed charges coverage ratio
of less than 1.0. These are considered an event of default by the Trustee, which gives the
bondholders the right to accelerate and demand payment of the bonds in full. Management
and the property manager attempted to develop and implementplans to increase occupancy
and rental rates at the property to improve its financial performance; however, these plans
were not successful in identifying sufficient funds to cure the existing maturity default. As a
result, management and the bondholder entered into a termination agreement on June 18,
2014.
NOTE 11. SUBSEQUENT EVENTS
The Projecthas evaluated all events or transactions that occurred after August 31, 2014,
and up through February 5, 2015, the date the financial statements were issued.
Because one or more events of default had occurred under the terms of the Project’s bond
indenture, the bondholder and bond insurer instructed the beneficiary (UMB Bank) to
commence exercising beneficiary’s rights to foreclose under the deed of trust and to offer
the property for sale toward the satisfaction of the Project’s indebtedness. On October 7,
2014, the Ballpark Austin property was soldinsatisfaction of the bonds.
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SUPPLEMENTAL SCHEDULES
TEXAS STUDENT HOUSING AUTHORITY –BALLPARK AUSTIN PROJECT
SCHEDULE I-SCHEDULE OF REVENUES AND EXPENSES
BUDGET AND ACTUAL
FOR THE YEAR ENDED AUGUST 31, 2014
BudgetActualVariance
REVENUE AND OTHER SUPPORT:
Rental income$3,809,681$3,983,818$ 174,137
Other income99,00099,511511
Interest income-7878
Total revenue and other support
3,908,6814,083,407174,726
OPERATING EXPENSES
Personnel expenses356,375366,402(10,027)
Contract services64,72058,0886,632
Utilities608,390625,623(17,233)
Travel2,7002,973(273)
Repairs and maintenance80,39583,288(2,893)
Turnover expenses532,195848,045(315,850)
Advertising and promotion82,15073,2778,873
Administration expenses65,660166,501(100,841)
Total operating expenses
1,792,5852,224,197(431,612)
REVENUE AVAILABLE FOR FIXED CHARGES
2,116,0961,859,210(256,886)
OTHER EXPENSES
Management fees192,875197,122(4,247)
Depreciation-860,676(860,676)
Interest expense-3,417,687(3,417,687)
Total other expenses
192,8754,475,485(4,282,610)
EXCESS (DEFICIENCY) OF REVENUE
OVER (UNDER) EXPENSES
$1,923,221($ 2,616,275)($ 4,539,496)
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TEXAS STUDENT HOUSING AUTHORITY–BALLPARK AUSTINPROJECT
SCHEDULE II –CERTIFICATE OF THE FIXED CHARGES COVERAGE RATIO
We are providing this letter, as required by the Trust Indenture by and between Texas Student
HousingAuthority –Ballpark Austin Project (the Project) and the Bank of New York (the
Trustee), datedDecember 1, 2001, relating to Texas Student Housing Authority –Ballpark
Austin Project StudentHousing Revenue Bonds the “Indenture,” to certify the Fixed Charges
Coverage Ratio as of August 31, 2014.
The Fixed Charges Coverage Ratio is defined in the Indenture as the ratio of revenue available
for fixedcharges to fixed charges. Further, fixed charges are defined in the Indenture as the
sum of all cashoutflows related to the Project that the Issuer cannot avoid without violating
long-term contractual orlegal obligations (those obligations which extend for a period greater
than one year), including, but notlimited to, (i) interest on indebtedness other than short-term
indebtedness, and (ii) scheduled paymentsof principal on indebtedness other than short-term
indebtedness, provided that maximum annual debtservice shall be used for purposes of
computing (i) and (ii) above.
The audited financial statements indicate revenue available for fixed charges for the 12-month
periodendedAugust 31, 2014, to be $1,859,210.
Based on the above revenues and fixed charges utilizing Bond A and Bond B, we calculate that
the fixed charges coverage ratio as of August 31, 2014, to be .76which is based on 12 months
of operations.
Based on the above revenues and fixed charges utilizing Bond A, Bond B and Bond C, we
calculate that the fixed charges coverage ratio as of August 31, 2014, to be .66which is based
on 12 months of operations.
Based on the above budgeted revenues and fixed charges utilizing Bond A and Bond B, we
calculate thatthe fixed charges coverage ratio as of August 31, 2014, to be .87which is based
on 12 months ofoperations.
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