HomeMy WebLinkAboutTownLake Audit 08-31-14
TEXAS STUDENT HOUSING AUTHORITY –TOWN LAKE
AUSTIN PROJECT
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................................................................................................8
Statement of Revenues, Expenses, and Changes in Net Position...................................9
Statement of Cash Flows...............................................................................................10
Notes to Financial Statements.......................................................................................11
SUPPLEMENTAL SCHEDULES
Schedule I –Schedule of Revenues and Expenses–Budget and Actual......................19
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
Texas Student Housing Authority –TownLakeAustin Project
Report on the Financial Statements
We have audited the accompanying financial statements of Texas Student Housing Authority –
Town Lake 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 financial statements 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 andthe 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 –Town Lake Austin Project
Page 2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of theProject as 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 failure to meet certain bond covenants. This gives the bondholders
the right to accelerate and demand payment on the bonds in full. This conditionraises
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 Project 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 pages 4–7, respectively, be presented to
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 States of 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 –Town Lake Austin Project
Page 3
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the Project’s basic financial statements. The Schedule of Revenues and
Expenses –Budget and Actual is presented for purposes of additional analysis and is not a
required part of the basic financial statements.
The Schedule of Revenues and Expenses –Budget and Actual is the responsibility of
management and was derived from and relates directly 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 the audit 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 Actual is fairly 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 –TOWNLAKE AUSTIN PROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
As staff of the Texas Student Housing Authority–Town Lake 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 Project for 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 a component unit of the Town of
Westlake and is thus considered a governmental entity, Governmental Accounting Standards
Board Statement 34, Basic Financial Statements—and Management’s Discussion and
Analysis—for State and Local Governments has been implemented. 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
$10,450,005,a decreaseof $1,635,217over the prior year(including a $601,573
adjustment to beginning net position to reflect the cumulative effect of implementing
GASB Statement No. 65).
Operating revenue of $3,102,367is $67,790morethan budget; and operating expenses
were $41,708lessthan budget.
At the end of the current fiscal year, the total cash balances were $52,023in unrestricted
cash and $471,487in restricted cash.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the Project’s basic
financial statements. The Project’sreport consists of three parts:Management’s Discussion and
Analysis, the basic financial statements, and notes to financial statements. The basic financial
statements include a statement of net position, statement of revenues, expenses and changes
in net position, anda statement of cash flows. Supplemental schedules follow the notes to the
financial statements.
The Project is being treated as a going concern. The Project is in default on its bonds and is not
financially able to make scheduled principal and interest payments on its outstanding debt. This
isconsidered an event of default by the Trustee, which gives the bondholders the right to
accelerate and demand payment of the bonds in full. Management and the property manager
are in the process of developing plans to increase occupancy and rental rates at the property to
improve its financial performance.
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TEXAS STUDENT HOUSING AUTHORITY –TOWNLAKE AUSTIN PROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
The statement of net positionpresents information on all of the Project’s assets and liabilities
with the difference between the two reported as net position.
TABLE 1
Business-Type Activities
20142013
Current and other assets$ 546,550$ 1,176,896
Capital assets12,974,11713,538,493
Total assets13,520,66714,715,389
Current liabilities23,970,6723,552,532
Noncurrent liabiltiieis-19,977,645
Total liabilities23,970,67223,530,177
Net position:
Net investment in capital assets(7,005,616)(6,767,257)
Unrestricted(3,444,389)(2,047,531)
Total net position$(10,450,005)$ (8,814,788)
The statement of revenues, expenses, and changes in net positionaccount for all of the
Project’s revenues and expenses regardless of when cash is paid or received.
TABLE 2
Business-Type Activities
20142013
Total operating revenue$ 3,102,367$ 3,061,901
Total operating expenses(2,102,684)(2,189,675)
Total operating income999,683872,226
Interest income331
Interest expense(2,033,330)(1,999,982)
Total nonoperating expenses(2,033,327)(1,999,951)
CHANGE IN NET POSITION(1,033,644)(1,127,725)
NET POSITION, BEGINNING(8,814,788)(7,687,063)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE(601,573)-
NET POSITION, ENDING$(10,450,005)$ (8,814,788)
The statement of cash flows recaps how cash changedyear over year.
5
TEXAS STUDENT HOUSING AUTHORITY –TOWNLAKE AUSTIN PROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
NOTES TO THE 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 Installment Sale Agreement. As of August 31, 2014
these balances were as follows:
Revenue Fund$ 303,010
Debt Service Reserve Fund102,230
Repair and Replacement Fund48,153
Fee and Expense Fund18,103
Initial Purchase Fund(9)
Total$ 471,487
Non-Restricted Cash
Non-restricted cash is available for general use of the project.
Bonds Payable
As of August 31, 2014, the following amounts on the Series 2002 A-1 and 2002 A-2 were
payable:
Series 2002 A-1$14,890,492
Series 2002 A-25,089,241
Total$19,979,733
For the Fiscal Year ending on August 31, 2014, the total principal and interest payment is
calculated at $1,514,531. A total of $326,017in principal was paid during 2014.
6
TEXAS STUDENT HOUSING AUTHORITY –TOWNLAKE AUSTIN PROJECT
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2014
(unaudited)
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
Leases at Town Lake 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,
2015is forecast at 91%.However rental rates, again due to competitive pressures,will not see
a large increase.
CONTACTING THE AUTHORITY’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.
7
FINANCIAL STATEMENTS
TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
STATEMENT OF NET POSITION
AUGUST 31, 2014
ASSETS
Current assets
Cash $ 52,023
Restricted cash471,487
Accounts receivable23,040
Total current assets546,550
Capital assets
Land2,182,816
Other capital assets, net of accumulated depreciation10,791,301
Total capital assets12,974,117
Total assets13,520,667
LIABILITIES
Current liabilities
Accounts payable230,132
Accrued liabilities6,714
Unearned revenue and prepaid rent152,364
Accrued interest 3,601,729
Bonds payable19,979,733
Total current liabilities23,970,672
NET POSITION
Net investment in capital assets(7,005,616)
Unrestricted(3,444,389)
Total net position$(10,450,005)
The Notesto Financial Statements are
an integral part of this statement.
8
TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEAR ENDED AUGUST 31, 2014
OPERATING REVENUE
Rental income$ 3,019,984
Other income82,383
Total operating revenue
3,102,367
OPERATING EXPENSES
Personnel expenses262,869
Contract services42,958
Utilities619,018
Travel2,183
Repairs and maintenance78,181
Turnover expenses228,633
Advertising and promotion41,346
Administration expenses142,390
Management fees120,730
Depreciation expense564,376
Total operating expenses
2,102,684
OPERATING INCOME
999,683
NON-OPERATING REVENUE (EXPENSES)
Interest income3
Interest expense(2,033,330)
TOTAL NON-OPERATING EXPENSES
(2,033,327)
CHANGE IN NET POSITION
(1,033,644)
NET POSITION, BEGINNING
(8,814,788)
Cumulative adjustment from change in accounting principle(601,573)
NET POSITION, ENDING
$(10,450,005)
The Notesto Financial Statements are
an integral part of this statement.
9
TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from tenants$ 3,063,951
Cash paid to employees(262,869)
Cash paid to suppliers(1,325,392)
Net cash provided by operating activities1,475,690
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Payments on bonds payable(326,017)
Interest paid (1,188,216)
Net cash used in capital and related financing activities(1,514,233)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments3
Net change in cash and cash equivalents(38,540)
Cash and cash equivalents at beginning of year562,050
Cash and cash equivalents at end of year$ 523,510
Cash$ 52,023
Restricted cash471,487
Total cash and cash equivalents$ 523,510
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income$ 999,683
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation expense564,376
Changes in operating assets and liabilities:
Accounts receivable(9,767)
Accounts payable(49,953)
Unearned revenue and prepaid rent(28,649)
Net cash provided by operating activities$ 1,475,690
The Notesto Financial Statements are
an integral part of this statement.
10
TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE 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
(the Town), Texas, pursuant to Section 53.11 of Chapter 53 of the Texas Education Code,
as amended. The Authority’s purposeamong other thingsis to acquire, finance, and
operate student housing facilities.The Authority operates several student housing facilities
in Texas and one of the housing projectsis theTown LakeAustin Project (the Project). The
Projectwas purchasedfrom Jefferson Commons -Austin, L.P., a Delaware limited
partnership onDecember 17,2002. The Projectobtained its financing through the issuance
of Texas Student Housing Authority-Student Housing Revenue Bonds (Jefferson
Commons at Town Lake Project) Series 2002A-1 andA-2(the Bonds). The Bonds were
issued through a Trust Indenture (the Trust Indenture) by and between the Authorityand
The Bank of New York (the Trustee). The Series 2002 A-1 and Series 2002 A-2bonds
were issued in the face amounts of $19,480,000and $5,670,000,respectively.The
accompanying financial statements present the operations of theoneProject, whose
revenue streams are pledged for the bonds described herein.
TheProjectwasoperated and managed under the terms of the (a) Property Management
and Leasing Agreement by and between the Authorityand JPI Campus Quarters
Management, L.P. (JPI) and (b) the Asset Management Agreement by and between the
Authorityand JPI Apartment Management, L.P., up until February 2005. The Project is now
managed and operated by Asset Campus Housing(ACH) under the terms of a Property
Management and Leasing Agreement dated March 1, 2005. The property management
agreements are collectively referred to as the “Agreements”.
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 isable 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 dependent on 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.
11
TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –CONTINUED
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 of accounting. Revenue is recognized when earned and expenses are recognized
when they are incurred.
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 revenuesand expenses. Actual results could vary from the
estimates that are used.
Income Taxes
The Project is an instrumentality of the Town and, therefore, its incomeis 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 $471,487that is held by the Trustee for the
Bonds payable under provisions of the Indenture. During the year ended August 31,
2014the investment income received from cash was $3.See Note 3 for risk disclosures
and breakdown of restricted cash accounts.
AccountsReceivable
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.
Advertising Costs
All advertising costs are expensed as they are incurred. Advertising costsfor the year
ending August 31, 2014was$41,346.
12
TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –CONTINUED
Capital Assets
Property and equipment have been recorded at the date ofacquisition 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 expenses for other major property
improvements.
The Indenture provides for areplacement fund requirement. Depreciation is computed
using the straight-line method over the estimated useful lives as follows:
Estimated
Asset ClassUseful Lives
Building and improvements30
Furniture, fixtures, and equipment3-20
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.
NOTE 3. CASH AND INVESTMENTS
At August 31, 2014, the carrying amount of Texas Student Housing Authority –Town Lake
Austin Project deposits (cash with interest bearing accounts and restricted cash held in
interest bearing accounts) was $523,510,of which $471,487represented restricted cash.
Restricted Cash
Restricted cash representsamounts placed on deposit in accountsandheld by the
Trustee, which are restricted for the payment of expenses as required by the Trust
Indenture. At August 31, 2014,restricted cash consists of the following funds and
accounts:
Revenue Fund$ 303,010
Debt Service Reserve Fund102,230
Repair and Replacement Fund48,153
Fee and Expense Fund18,103
Initial Purchase Fund(9)
Total$ 471,487
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TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. CASH AND INVESTMENTS –CONTINUED
Restricted Cash –Continued
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:
Revenue Fund –The RevenueFund was established for monthly deposits from the
depository account that holds general revenues of the Project. All monies are deposited
in the Revenue Fund and then properly distributed to the other funds, as required by the
Trust Indenture. Amounts inthe fund at year-end represent amounts that have not been
distributed to the other funds due to timing of the interfund transfers.
Debt Service Reserve Fund –The amounts on deposit in this account are to be used for
the purpose of paying principal and interest on the Bonds in the event the principal and
interest is not paid by issuer in accordance with the terms of the indenture and written
notice of the Servicing Agent.
Repair and Replacement Fund –Amounts in the Repair and Replacement Fund may be
used to make mandatory repairs of the Project pursuant to the Trust Indenture.
Fee and Expense Fund –The amounts on deposit in this account represent money set
aside for future payments to the Program Administrator.
Initial Purchase Fund –The amounts on deposit in this account represent monies that
were withheld from the seller at closing and were to be paid once certain operating
criteria were met. These conditions have not been met yet.
The Public Funds Investment Act (Government Code Chapter 2256) contains specific
provisions in the areas of investment practices, management reports and establishment
of appropriate policies relating to a governmental entity’s cash and investments.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the
fair value of an instrument. Generally, the longer the maturity of an investment the
greater the sensitivity of its fair value to changes in market interest rates. TheProject is
not significantly exposed to interest rate risk as all investments earn a variable rate.
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. TheProject holds all of its cash
and investments with the Bond Trustee and commercial banks.
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TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. CASH AND INVESTMENTS –CONTINUED
Concentration of Credit Risk
The investment policy of theProject is subject to the indenture agreement of the Bonds.
As of August 31, 2014, the Project held all of its restricted cash balances with the
Trustee, which represents 90.1% of the total cash and investments held at August 31,
2014.
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 government 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 thata
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, the Project has totalcash of$523,510(bank balance $510,985).
Of the bank balance, $250,000 was covered by federal depository insurance, while the
remaining balancewas collateralizedby a Bank Deposit Guarantee Bondin the amount
of $2 million.
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TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. CAPITAL ASSETS
Capital asset activity for the Project for the year ended August 31, 2014, was as follows:
BeginningRetirements/Ending
BalanceAdditionsReclassificationsBalance
Capital assets , not being depreciated:
Land$2,182,816$-$ -$2,182,816
Total capital assets,
not being depreciated2,182,816- -2,182,816
Capital assets, being depreciated:
Building and improvements13,270,150 --13,270,150
Capitalized purchase price887,095 --887,095
Land improvements2,806,596--2,806,596
Unit appliances295,134 --295,134
Furniture and fixtures915,951--915,951
Total capital assets,
being depreciated18,174,926- -18,174,926
Less accumulated depreciation for:
Building and improvements(4,533,968)(442,338)-(4,976,306)
Capitalization purchase cost(284,840)(28,485)-(313,325)
Land improvements(789,356)(93,553) -(882,909)
Unit appliances(295,134) --(295,134)
Furniture and fixtures(915,951)- -(915,951)
Total accumulated depreciation(6,819,249)(564,376)-(7,383,625)
Total capital assets,
being depreciated, net11,355,677(564,376)-10,791,301
Capital assets, net$13,538,493$ (564,376)$ -$12,974,117
NOTE 5. BONDS PAYABLE
The Bonds are tax-exempt governmental obligations under the Internal Revenue Code. The
Bonds payable represent amounts due to the bondholders, via the Trustee, and payable
under the terms of the Trust Indenture dated November 1, 2002. The Bonds are payable
solely from the revenues generated by the Project and are secured by the revenues pledged
and assigned under the terms of the Trust Indenture. The Town of Westlake does not have
any liability for the payment of the Bonds, as the Bonds are non-recourse to both the Town
of Westlake and Texas Student Housing Authority. Interest rates on the Bonds range from
7.76% to 8.69% and are payable monthly eachyear thereafter.
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TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5. BONDS PAYABLE–CONTINUED
The following is a summary of long-term debt transactions of the Project for the yearended
August 31, 2014:
Amounts
BeginningEnding Due Within
Balance IncreasesDecreasesBalanceOne Year
Revenue Bonds:
2002 A-1 Bonds$ 15,216,509$ -$ (326,017)$ 14,890,492$354,491
2002 A-2 Bonds5,089,241 - -5,089,241-
Total$20,305,750$ -$(326,017)$19,979,733$ 354,491
The debt is to be amortized on the A-1 Bonds through 2033 and the A-2 Bonds through
2038. The A-2 Bonds have no regular principal payments until the year 2033. The Bonds
also had a clause for an initial purchase release draw. The requirements for that draw were
not met and during 2006, the funds held inthe Initial Purchase Fund were applied to
principal on the Bonds. The annual requirements to amortize all debts outstanding as of
August 31, 2014, are as follows:
Year EndingGovernmental Activities
August 31,PrincipalInterestTotal
Past Due$ -$ 3,345,538$ 3,345,538
2015354,4911,914,2712,268,762
2016382,9981,508,6391,891,637
2017413,7971,477,8401,891,637
2018447,0741,444,5631,891,637
2019483,0261,408,6111,891,637
2020-20243,064,1486,394,0379,458,185
2025-20294,510,9424,947,2439,458,185
2030-203310,323,2572,467,62912,790,886
Totals$ 19,979,733$ 24,908,371$ 44,888,104
As of August 31, 2014, the Project was not in compliance with certain covenants of the
Indenture and, therefore, the bonds payable are considered to be in default. Generally
accepted accounting principles require that if the events ofdefault occur, the liability should
be disclosed as current on the financial statements.
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TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE AUSTIN PROJECT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. NET POSITION
Net position representsthe residual assets after liabilities are deducted. Net position is
reported in the following categories:
Net investment in capital assets consists of capital assets, net of accumulated
depreciation and reduced by outstanding balances for bonds, notes, and other debt that
are attributed to the acquisition, construction, or improvement of those assets.
Restricted Net Position results when constraints placed on net positionuse are either
externally imposed by creditors, grantors and the like, or imposed by law through
constitutional provisions or enabling legislation.
Unrestricted Net Position consists of the portion of net position after net investment in
capital assets and restricted fordebt service has been satisfied.
NOTE 7. MANAGEMENT FEES
The Project paid JPI property and asset management fees for the Project through
February 28, 2005. Effective March 1, 2005, the Project entered into a management
agreement with ACH and began paying management fees to ACH at that date. During 2014,
the Project recorded management fees of $120,730to ACH.
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
$601,573.
NOTE 10. GOING CONCERN
The 2014financial 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 not making full
principal and interest paymentsand, therefore, are reported as current liabilities. This is
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 and implementing plans to increase occupancy
and rental rates at the property to improve its financial performance.
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SUPPLEMENTAL SCHEDULE
TEXAS STUDENT HOUSING AUTHORITY –
TOWN LAKE 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 $2,933,266$3,019,984$ 86,718
Other 101,31182,383(18,928)
Total revenue and other3,034,5773,102,36767,790
OPERATING EXPENSES
Personnel296,672262,86933,803
Contract services82,26042,95839,302
Utilities542,040619,018(76,978)
Repairs and maintenance71,40478,181(6,777)
Turnover 263,530228,63334,897
Advertising and promotion76,90041,34635,554
Travel3,7502,1831,567
Management fees121,383120,730 653
Administration122,077142,390(20,313)
Total operating expenses1,580,0161,538,30841,708
REVENUE AVAILABLE FOR FIXED CHARGES1,454,5611,564,059109,498
NONOPERATING REVENUE (EXPENSES)
Depreciation and amortization-(564,376)(564,376)
Interest -33
Interest expense-(2,033,330)(2,033,330)
Total non-operating expenses-(2,597,703)(2,597,703)
Excess (Deficiency) of expenses
over (under) revenue$1,454,561$(1,033,644)$(2,488,205)
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