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Home My WebLink AboutAudit presented FY End 09-30-08M�11 � i3luq PATTILLO, BROWN & HILL,L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS To the Honorable Mayor and Board of Alderman Town of Westlake, Texas We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate discretely presented component units of Town of Westlake, Texas as of and for the year ended September 30, 2008, and have issued our report thereon dated February 28, 2009. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U. S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated October 10, 2008, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U. S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Westlake, Texas are described in Note I to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2008. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. 115 SOUTH CHURCH STREET ■ HILLSBORO, TX 76645 ■ (254) 582 -2583 ■ FAX: (254) 582 -5731 ■ www.pbhepa.com AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544 -7778 ■ TEMPLE, TX (254) 791 -3460 WACO, TX (254) 772 -4901 ■ ALBUQUERQUE, NM (505) 266 -5904 Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the financial statements include management's estimate of accumulated depreciation. We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated February 28, 2009. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. 2 Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended_ solely for the use of the Board of Alderman and management of Town of Westlake, Texas and is not intended to be and should not be used by anyone other than these specified parties. PAt-& i I*w r Vj !,: f February 28, 2009 3 svxaT, `a`�vllsa^ fo u(no�, juawpvdaa aau�uz�, iCg _ p a,i b d a,j& 171 rY ~ re a, Fjj��rTr �a .�� I. L r •i �� 1'�..�r I i 17 i �' .%'%%✓�+ 3. ' {may• � I , i i Y: Vl r i SOOZ `0f jaguzajdaspapuy,,cva�jvasN aye ,coj, j,codalpjvzauvui,,, jvnuup' aazsuaya,cduzoq a vi Is a fio u (no 1 TOWN OF WESTLAKE, TEXAS TABLE OF CONTENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2008 Page Number INTRODUCTORY SECTION Letterof Transmittal ............................................ ............................... i — vi Certificate of Achievement ............................................ ............................... vii OrganizationalChart ............................................ ............................... viii Principal Town Officials ........................................ ............................... ix FINANCIAL SECTION Independent Auditor's Report ......................................................... ............................... 1-2 Management's Discussion and Analysis ........................................ ............................... 3-10 Basic Financial Statements Government -wide Financial Statements Statementof Net Assets ................................................... ............:.................. 11 Statementof Activities ..................................................... ............................... 12-13 Fund Financial Statements Balance Sheet — Governmental Funds .............................. ............................... 14-15 Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds ....................... ............................... 16-18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .......................... ............................... 19 Statement of Net Assets — Proprietary Funds ................... ............................... 20 Statement of Revenues, Expenses and Changes in Fund Net Assets — Proprietary Funds ......................... ............................... 21 (continued) TOWN OF WESTLAKE, TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2008 Page Number FINANCIAL SECTION (Continued) Required Supplementary Information (Continued) Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — Lone Star Public Facility Corporation ............ . ............................... 68 Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — 4B Economic Development Corporation ....... ............................... 69 Notes to Required Supplementary Information ........... ............................... 70 Individual Fund Schedule: Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — DebtService Fund .......................................... ............................... 71 STATISTICAL SECTION (Unaudited) Net Assets by Component ................................... ............................... 72 Changesin Net Assets ......................................... ............................... 73-74 Fund Balances — Governmental Funds ...................... ............................... 75 Changes in Fund Balance — Governmental Funds .......... ............................... 76-77 Taxable Sales by Industry Type .............................. ............................... 78 Ratios of General Bonded Debt Outstanding ................ ............................... 79 Ratios of Outstanding Debt by Type .......................... ............................... 80 Demographic and Economic Statistics ......................... ............................... 81 PrincipalEmployers .............................................. ............................... 82 (continued) INTRODUCTORY SECTION Town of Westlake February 28, 2009 Honorable Mayor, Board of Aldermen and the Citizens of the Town of Westlake, _ The Town of Westlake (the "Town ") Fiscal and Budgetary Policies requires that the Town's Finance Department prepare a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Accordingly, the Comprehensive Annual Financial Report for the Town of Westlake, Texas for the fiscal year ended September 30, 2008, is hereby issued. This report consists of management's representations concerning the finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making representations, the Town established a comprehensive internal control framework that is designed both to protect the Town's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town's comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatements. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Town's financial statements have been audited by Pattillo, Brown and Hill LLP, Independent Certified Public Accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended September 30, 2008, are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the Town's financial statements for the fiscal year ended September 30, 2008, are fairly presented in conformity with GAAP. The independent auditors' report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management's Discussion and Analysis (MD &A). This letter of transmittal is designed to complement the MD &A and should be read in conjunction with it. The Town's MD &A can be found immediately following the report of the independent auditor. 3 Village Circle #202 • Westlake, Texas 76262 Metro: 817- 430 -0941 • Fax: 817- 430 -1812 • www.westlake- tx.org Discretely presented component units are legally separate entities and not part of the primary government's operations. These component units are as follows: Texas Student Housing Authority - Ballpark Austin Project, Texas Student Housing Corporation -The Ridge at North Texas Project, Texas Student Housing Corporation -The Ridge at San Marcos, Texas Student Housing Authority -Town Lake Austin Project, Texas Student Housing Authority- College Station Project, and Texas Student Housing Authority. Services Provided The Town provides to its citizens those services that have proven to be necessary and meaningful and which the Town can provide at the least costs. Major services provided under the general government and enterprise functions are: Fire and emergency medical services, water and sewer utility services, park and recreational facilities, street improvements, education and administrative services. Economic Conditions and Outlook The information presented in the financial statements is perhaps best understood when it is considered from the broader of the specific environment within which the Town operates. Local Economy Westlake continues to be a leading community in the metroplex for new business locations and residential attractions. Highlights for fiscal year 2007 -2008 are as follows: Deloitte Announcement — formal designation of Westlake as the site for this learning and leadership center has been made by the company. Zoning, economic development agreements, concept plans, and an off -site development agreement have been approved to move this estimated $300 million project forward to begin construction during the fiscal year 2009. ° Terra Bella — Development of this 54.7 acre high -end single family subdivision began during this fiscal year. It features 28 lots along with 22.6 acres of open space containing approximately one mile of public trails that will connect to public trails in the adjacent Glenwyck Farms neighborhood. Retail Development (Westlake Corners) — Westlake's first stand -alone retail development was platted and a site plan approved. ° Fidelity Investments — Phase II construction began during fiscal year 2007 and a fiscal year 2009 completion date is planned. This includes a new building addition of approximately 600,000 sq. ft. and an additional 2,500 employees to the Westlake location. ° Residential Building Activity Level — 3 new single - family building permits have been issued thus far this fiscal year with an average permitted value of $2,210,905 (not including lot value). Sales tax collections increased by 22.5% for fiscal year 2008. Approximately 24% of the total revenues received were due to collections based on an economic development agreement; therefore, actual sales tax collections decreased by approximately 1 %. The large increase in taxes for fiscal year 2005 -2006 was due to an anomaly of approximately $943 thousand. iii Budget -to- actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. Long Range Planning Users of this document, as well as others interested in the programs and services offered by the Town of Westlake, are encouraged to read the Town's Fiscal Year 2008 -2009 Budget. The document details the Town's long -term goals and financial policies, and describes program accomplishments and initiatives. The Town's ability to respond to ongoing economic challenges will require careful long -range planning. The Town has responded by fiscal conservatism and implementing operating budget efficiencies that have resulted in its maintaining healthy fund balances in its General Fund, Visitors Association Fund and Utility Fund. Cash Management The Town utilizes its investment policy and its bank depository contract in the management of all cash. Under the bank depository contract, the Town operating accounts earns 1.00% less than the bank's daily fed funds rate. During the fiscal year ended September 30, 2008, the average rate on the operating account balances was 1.72 percent. The Town's remaining cash is invested in a government investment pool as allowed by State of Texas Statutes and by the Town's investment policy. The average rate received on the funds invested in the government investment pool was 3.23 percent. The average balance of the Town's investment portfolio for fiscal year 2008 was approximately $6.1 million. The overall portfolio provided $188,459 in investment income. The Town requires that all deposits be collateralized with securities being held in safekeeping by either an approved, independent third party financial institution or the Town's designated depository. Collateral is monitored monthly to ensure that the market value of the pledged securities equals or exceeds the related deposit or investment balance. Investments are always executed delivery- versus - payment method. That is, funds are not wired or paid until verification has been made that the correct security has been received. Securities are held on behalf of the Town by the Town's agent. All collateral shall be subject to verification and audit by the Finance Director and the Town's independent auditors. Risk Management The Town of Westlake is a member of the Texas Municipal League Intergovernmental Risk Pool (TML - IRP), an inter -local agency offering workers' compensation, liability, and property protection to Texas political subdivisions. TML -IRP provides Texas governmental entities with cost - effective and stable option for risk financing and loss prevention services. Risk Management is a joint effort involving the Town's Elected Officials, Town Departments, and TML - IRP. Policies and procedures are implemented on an operational level to minimize risk exposure. These policies and procedures provide emphasis on safety and training, financial transparency and oversight, and compliance with all applicable laws. TML -IRP also conducts loss - prevention analysis of the Town's policies, procedures and covered properties, and provides recommendations where appropriate to reduce potential risk. The Town's TML -IRP policy includes General Liability insurance coverage with an annual aggregate limit of $2 million. This policy also includes Law Enforcement and Errors & Omissions Liability, each u Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Westlake Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2007 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. ti CE Otrjp 2 UtN'I[OS ATES�yN President uLCiC� •• _ +�� iii +�Y Executive Director vii ELECTED OFFICIALS Tim Brittan Alderman Carol Langdon Alderwoman Mayor Don Redding Mayor Pro -Tem Larry Corson Alderman Rebecca Rollins Alderwoman APPOINTED OFFICIALS Tom Brymer Town Manager Stan Lowry Town Attorney Debbie Piper, CPA Finance Director Ginger Awtry Assistant to the Town Manager Jarrod Greenwood Public Works Superintendent Troy Meyer Facilities Director Parks / Recreation Director ix Kim Sutter, TRMC Town Secretary Todd Wood, SPHR, IPMA -CP Director of Human Resources and Administrative Services Amanda DeGan Municipal Court Administrator Don Wilson Director of Public Safety Eddie Edwards Director of Planning and Development FINANCIAL SECTION fwkKi PATTILLO, BROWN & HILL,L.L_P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Board of Aldermen Town of Westlake, Texas We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate discretely presented component units of the Town of Westlake, Texas (the "Town "), as of and for the year ended September 30, 2008, which collectively comprise the Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express opinions 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate discretely presented component units of the Town of Westlake, Texas,-as of September 30, 2008, and the respective changes in financial position and cash flows, where applicable, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have issued a report dated February 28, 2009, on our consideration of the Town's internal control over financial reporting and our tests of compliance with certain provisions of laws, regulations, contracts, grants and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 115 SOUTH CHURCH STREET ■ HILLSBORO, TX 76645 ■ (254) 582 -2583 ■ FAX: (254) 582 -5731 ■ www.pbhepa.com AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544 -7778 ■ TEMPLE, TX (254) 791 -3460 WACO, TX (254) 772 -4901 ■ ALBUQUERQUE, NM (505) 266 -5904 MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS The Town of Westlake is pleased to present this overview and analysis of the financial activities of the Town for the fiscal year ended September 30, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. - FINANCIAL HIGHLIGHTS ■ The Assets of the Town exceeded its liabilities at the close of the most recent fiscal year by $21,883,552. (Net assets). ■ As of the close of the current fiscal year, the Town of Westlake's governmental funds reported combined ending fund balances of $9,234,304, an increase of $3,607,428 in comparison with the prior year. ■ At the end of the current fiscal year, fund balance for the general fund was $2,806,738, a decrease of $289,561 in comparison with the prior year. Of this total fund balance, $2,503,099 is unreserved. This represents 58% of total general fund expenditures and is equivalent to 213 operating days. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town's basic financial statements. The Town's basic financial statements comprise three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves. Government -wide fmancial statements The government -wide financial statements are designed to provide readers with a broad overview of the Town's finances, in a manner similar to a private- sector business. The government -wide financial statements are prepared utilizing the economic resources measurement focus and the accrual basis of accounting. The statement of net assets presents information on all of the Town's assets and liabilities with the difference between the two reported as net assets. Over time, increases or decreases in the Town's net assets serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All of the revenues and expenses are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. 3 The basic governmental fund financial statements can be found on pages 14 -19 of this report. Proprietary funds - There are two types of proprietary funds, Enterprise Funds and Internal Service Funds. The Town maintains one type of proprietary fund — an enterprise fund. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The Town uses enterprise funds to account for its water and sewer activities and its cemetery activities. All activities associated with providing such.services are accounted for in this fund, including administration, operation, maintenance; debt service, capital improvements, billing and collection. The Town's intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. The Town has no Internal Service Funds (fund to report activities that provide supplies and services for the Town's other programs and activities, i.e. self insurance and fleet management.) The basic proprietary fund financial statements can be found on pages 20 - 22 on this report. Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the Town's own programs. The accounting used for fiduciary funds is similar to the accounting used for proprietary funds. The Town of Westlake does not currently have any fiduciary funds. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 27 - 61 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents schedules that further support the information in the financial statements. The schedules are presented immediately following the notes to the financial statements and can be found on pages 62 - 71. GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of the government's financial position. In the case of the Town, assets exceeded liabilities by $21,883,552 at the close of the most recent fiscal year. The largest portion of the Town's net assets, $11,920,177 (55 %), reflects its investment in capital assets (e.g. land, buildings, equipment, improvements, construction in progress, and infrastructure), less any debt used to acquire capital assets still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. 5 contribution of $169,034 related to the cemetery increased revenue. However increased water /sewer expenses and transfers out kept a decrease in net assets although smaller than in 2007. The following table provides a summary of the Town's operations for fiscal year ended September 30, 2008, with comparative totals for the fiscal year ended September 30, 2007. Change in Net Assets Expenses: General government Governmental Activities Business Activities - 2,031,460 To Public safety 2008 2007 2008 2007 2008 2007 Revenues: - 129,641 86,560 Economic development 473,451 120,753 - - 473,451 Program revenues: Public works 1,013,804 455,481 - - 1,013,804 455,481 Visitor services Charges for services $ 1,581,684 $ 1,662,291 $ 2,039,406 $ 1,657,186 $ 3,621,090 $ 3,319,477 Operating grants 2,672,698 Interest on long -term debt 991,184 869,327 - - 991,184 869,327 and contributions 1,296,378 1,257,058 - - 1,296,378 1,257,058 Capital grants and - 13,299 - Total expenses 10,053,319 8,102,180 2,424,064 2,206,618 12,477,383 contributions - - 169,034 - 169,034 - General revenues: Taxes Sales taxes 3,590,575 2,197,756 - - 3,590,575 2,197,756 Hotel occupancy taxes 527,662 458,471 - - 527,662 458,471 Mixed beverage taxes 16,177 14,066 - - 16,177 14,066 Franchise taxes 649,108 560,312 - - 649,108 560,312 Unrestricted grants 2,500,817 2,259,643 - - 2,500,817 2,259,643 Interest on investments 188,459 261,622 32,103 46,158 220,562 307,780 Miscellaneous 564,973 466,654 44,071 36,936 609,044 503,590 Total revenues 10,915,833 9,137,873 2,284,614 1,740,280 13,200,447 10,878,153 Expenses: General government 2,031,460 1,941,289 - - 2,031,460 1,941,289 Public safety 1,795,782 1,738,080 - - 1,795,782 1,738,080 Culture and recreation 129,641 86,560 - - 129,641 86,560 Economic development 473,451 120,753 - - 473,451 120,753 Public works 1,013,804 455,481 - - 1,013,804 455,481 Visitor services 312,777 217,992 - - 312,777 217,992 Education 3,305,220 2,672,698 - - 3,305,220 2,672,698 Interest on long -term debt 991,184 869,327 - - 991,184 869,327 Water and sewer - - 2,410,765 2,206,618 2,424,064 2,206,618 Cemetery - - 13,299 - 13,299 - Total expenses 10,053,319 8,102,180 2,424,064 2,206,618 12,477,383 10,308,798 Excess (deficiency) before transfers 862,514 1,035,693 ( 139,450) ( 466,338) 723,064 569,355 Transfers 220,819 33,976 ( 220,819) ( 33,976) - - Change in net assets 1,083,333 1,069,669 ( 360,269) (500,314) 723,064 569,355 Prior period adjustment 398,967 - - - 398,967 - Net assets, beg. of year 14,671,957 13,602,288 6,089,564 6,589,878 20,761,521 20,192,166 Net assets, end of year $ 16,154,257 $ 14,671,957 $ 5,729,295 $ 6,089,564 $ 21,883,552 $ 20,761,521 FINANCIAL ANALYSIS OF THE TOWN'S FUNDS Governmental funds. The focus of the Town's governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a town's net resources available for spending at the end of the fiscal year. 7 FISCAL YEAR 2008 EVENTS • Deloitte Announcement - formal designation of Westlake as the site for this learning and leadership center has been made by the company. Zoning, economic development agreements, concept plans, and an off -site development agreement also have been recently approved to move this estimated $300 million project forward to construction some time in 2009. • Fidelity Regional Headquarters Phase II - currently under construction and scheduled to be completed in the third quarter of calendar year 2009; this expansion will double Fidelity's current 600,000 sq. ft. campus • Retail Development (Westlake Corners) - Westlake's first stand -alone retail development began at the intersection of SH 170 and US 377 with zoning and site planning. Construction is planned to begin later this year. • Development of -Terra Bella - this 54.7 acre high -end single family subdivision will open for building permit issuance soon. It features 28 lots along with 22.6 acres of open space containing approximately one mile of public trails that will connect to public trails in the adjacent Glenwyck Farms neighborhood. • Westlake Academy Arts & Sciences Center - General obligation bonds totaling $2.5 million were issued by the Town in April of this year to fund a portion of the cost of this estimated approximate $5.2 million Phase I addition to the Academy physical plant. This addition will add much needed expanded science laboratory /class room space for Academy students. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS The Town continues its conservative budget approach in fiscal year 2008 -2009. Due to the continued uncertainty of commercial development in Westlake, there will be a continued emphasis of maintaining basic service levels without implementing a property tax. This philosophy has enabled Westlake staff to prioritize short and mid -term goals according to available resources. • The general fund revenue budget has increased from the final 2008 audited revenues by approximately $390 thousand. The larger items contributing to this increase include: an additional $180 thousand related to gas well site and drilling permits; $266 thousand attributed to the additional building permits and inspection plan reviews associated with the Deloitte project; increase of $42 thousand for development fees; and a reduction in estimated sales tax revenues of approximately $131 thousand. J Governmental Activities Business Activities Total 2008 2007 2008 2007 2008 2007 General obligation bonds $ 9,850,000 $ 7,365,000 $ - $ - $ 9,850,000 $ 7,365,000 Certificates of obligation 11,375,000 11,755,000 - - 11,375,000 11,755,000 Contractual obligations 224,265 245,885 5,763,022 5,822,299 5,987,287 6,068,184 Capital leases 15,264 23,000 - - 15,264 23,000 Deferred amounts (685,352) (729,688) - - (685,352) (729,688) Total long -term debt $ 20,779,177 $ 18,659,197 $ 5,763,022 $ 5,822,299 $ 26,542,199 $ 24,481,496 FISCAL YEAR 2008 EVENTS • Deloitte Announcement - formal designation of Westlake as the site for this learning and leadership center has been made by the company. Zoning, economic development agreements, concept plans, and an off -site development agreement also have been recently approved to move this estimated $300 million project forward to construction some time in 2009. • Fidelity Regional Headquarters Phase II - currently under construction and scheduled to be completed in the third quarter of calendar year 2009; this expansion will double Fidelity's current 600,000 sq. ft. campus • Retail Development (Westlake Corners) - Westlake's first stand -alone retail development began at the intersection of SH 170 and US 377 with zoning and site planning. Construction is planned to begin later this year. • Development of -Terra Bella - this 54.7 acre high -end single family subdivision will open for building permit issuance soon. It features 28 lots along with 22.6 acres of open space containing approximately one mile of public trails that will connect to public trails in the adjacent Glenwyck Farms neighborhood. • Westlake Academy Arts & Sciences Center - General obligation bonds totaling $2.5 million were issued by the Town in April of this year to fund a portion of the cost of this estimated approximate $5.2 million Phase I addition to the Academy physical plant. This addition will add much needed expanded science laboratory /class room space for Academy students. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS The Town continues its conservative budget approach in fiscal year 2008 -2009. Due to the continued uncertainty of commercial development in Westlake, there will be a continued emphasis of maintaining basic service levels without implementing a property tax. This philosophy has enabled Westlake staff to prioritize short and mid -term goals according to available resources. • The general fund revenue budget has increased from the final 2008 audited revenues by approximately $390 thousand. The larger items contributing to this increase include: an additional $180 thousand related to gas well site and drilling permits; $266 thousand attributed to the additional building permits and inspection plan reviews associated with the Deloitte project; increase of $42 thousand for development fees; and a reduction in estimated sales tax revenues of approximately $131 thousand. J BASIC FINANCIAL STATEMENTS l TOWN OF WESTLAKE, TEXAS jSTATEMENT OF NET ASSETS SEPTEMBER 30, 2008 ASSETS Cash and cash equivalents Accounts receivables (net of allowance) Internal balances Inventories Other assets Restricted cash and cash equivalents Deferred charges Capital assets: Land Buildings and improvements Wastewater treatment rights Machinery and equipment Construction in progress Less: accumulated depreciation Total capital assets Total assets LIABILITIES Accounts payable Customer deposits payable Unearned revenue Accrued interest payable Noncurrent liabilities: Due within one year Due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Debt service Tourism 1,451,154 Future projects 3,459,226 Court security and technology 154,454 Unrestricted 6,895,822 Total net assets $ 16,154,257 Government Discretely Governmental Business -type Presented Activities Activities Total Component Units $ 8,547,031 $ 1,079,732 1,156,039 693,291 593,678 ( 593,678) - 99,371 45,774 9,243 - - 106,600 386,363 - 9,386,531 - 21,032,225 12,853,855 - 635,199 2,005,738 3,367,943 613,845 39,130 ( 5,391,853) ( 3,406,530) 27,646,486 13,489,597 38,375,371 14, 884,156 1,039,914 233,652 - 114,300 - 464,245 402,023 2,579,643 545,271 64,082 20,233,906 5,698,939 22,221,114 9,154,861 4,193,601 7,726,576 $ 9,626,763 1,849,330 99,371 55,017 106,600 386,363 9,386,531 33,886,080 635,199 5,373,681 652,975 ( 8,798,383) 41,136,083 53,259,527 1,273,566 114,300 464,245 2,981,666 609,353 25,932,845 31,375,975 11,920,177 1,451,154 - 3,459,226 - 154,454 ( 1,997,281) 4,898,541 $ 5,729,295 $ 21,883,552 The accompanying notes are an integral part of these financial statements. 11 $ 6,708,384 927,273 82,437 6,409,886 5,117,351 13,622,885 114,609,998 5,878,062 ( 29,466,457) 104,644,488 123,889,819 4,565,876 4,468,900 12,741,471 82,368,563 57,574,104 161,718,914 ( 33,838,179) ( 1,025,853) ( 2,965,063) $( 37,829,095) 3,590,575 Net (Expense) Revenue and 527,662 Changes in Net Assets - Primary Government Discretely Governmental Business -type Presented Activities Activities Total Component Units 220,819 $( 1,435,945) $ - $( 1,435,945) $ - ( 1,674,553) - ( 1,674,553) - ( 129,641) - ( 129,641) - ( 473,451) - ( 473,451) - 876,619 - 876,619 - ( 312,777) - ( 312,777) - ( 3,034,325) - ( 3,034,325) - ( 991,184) - ( 991,184) - ( 7,175,257) - ( 7,175,257) - - ( 373,459) ( 373,459) - 157,835 157,835 - - ( 215,624) ( 215,624) - ( 7,175,257) ( 215,624) ( 7,390,881) - 3,590,575 - 527,662 - 16,177 - 649,108 - 2,500,817 - 188,459 32,103 564,973 44,071 220,819 ( 220,819 8,258,590 ( 144,645 1,083,333 ( 360,269; 14,671,957 6,089,564 398,967 1 $ 16,154,257- $ 5,729,295 $( 7,170,468) $( 7,170,468) 3,590,575 - 527,662 - 16,177 - 649,108 - 2,500,817 - 220,562- 414,056 609,044 33,308 8,113,945 447,364 723,064 ( 6,723,104) 20,761,521 ( 30,707,024) 398,967 ( 398,967) $ 21,883,552 $( 37,829,095) 13 1,451,154 3,233,471 76,570 - - - 3,459,226 - - - - - - 154,454 - - - 505,665 13,459 512,793 4,169,470 3,233,471 - 76,570 505,665 13,459 512,793 9,234,304 $ 3,396,916 $ - $ 182,791 $ 505,665 $ 13,459 $ 512,793 27,646,486 ( 20,794,837) 68,304 $ 16,154,257 15 Property Lone Star 4B Economic Total Capital Grant FM 1938 Tax Reduction Public Facility Development Governmental Projects Fund Fund Fund Corporation Corporation Funds $ 3,195,831 $ - $ 182,791 $ 319,911 $ 13,459 $ - $ 8,547,031 - - - 185,754 - 185,754 1,087,735 201,085 - - - - 327,039 738,024 - - - - - - 45,774 $ 3,396,916 $ - $ 182,791 $ 505,665 $ 13,459 $ 512,793 $ 10,418,564 43,321 - 106,221 - - - 1,039,914 120,124 - - - - - 144,346 163,445 - 106,221 - - - $ 1,184,260 1,451,154 3,233,471 76,570 - - - 3,459,226 - - - - - - 154,454 - - - 505,665 13,459 512,793 4,169,470 3,233,471 - 76,570 505,665 13,459 512,793 9,234,304 $ 3,396,916 $ - $ 182,791 $ 505,665 $ 13,459 $ 512,793 27,646,486 ( 20,794,837) 68,304 $ 16,154,257 15 Debt - 14,948 Property Lone Star Service Capital Grant FM 1938 Tax Reduction Public Facility Fund Projects Fund Fund Fund Corporation $ - $ - $ - $ - $ 897,644 $ - - - 7,474 - - - - 43,472 - - 1,158 429 - 860,760 - 187,548 - - - 904,232 7,474 187,548 898,802 429 - - 14,948 - - - - 67,995 - 362,804 - - - 463,918 - - - - 395,000 - - - - - 923,944 - - - - - - 33,000 - - - - 1,318,944 564,913 14,948 362,804 - - (1,318,944) 339,319 (7,474) (175,256) 898,802 429 1,318,944 543,602 7,474 251,826 - - - 2,500,000 - - - - - (251;826) - - {547,611) - 1,318,944 2,791,776 7,474 251,826 (547,611) - - _ 3,131,095 - 76,570 351,191 429 - 102,376 - - 154,474 13,030 $ - $ 3,233,471 $ - $ 76,570 $ 505,665 $ 13,459 17 TOWN OF WESTLAKE, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES j AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2008 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balance - total governmental funds Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the current period. The issuance of long -term debt (e.g., bonds, leases) provided current financial resources to governmental funds, while repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long -term debt and related items. Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in net assets of governmental activities The accompanying notes are an integral part of these financial statements. 19 $ 3,607,428 ( 290,597) ( 2,042,644) ( 190,854) $ 1,083,333 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Business -type Activities- Enterprise Funds Utility Cemetery Fund Fund Total OPERATING REVENUES: Charges for services Miscellaneous revenue Total operating revenue OPERATING EXPENSES: Payroll costs Professional and contract services Depreciation Amortization of wastewater treatment rights Water purchases Other operating costs Total operating expenses OPERATING INCOME NON - OPERATING REVENUES (EXPENSES): Interest income Interest expense Total non - operating revenues (expenses) INCOME (LOSS) BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS Transfer in Transfer out Capital contributions Total transfers and capital contributions CHANGE IN NET ASSETS TOTAL NET ASSETS, BEGINNING TOTAL NET ASSETS, ENDING $ 2,037,306 $ 2,100 $ 2,039,406 44,071 - 44,071 2,081,377 2,100 2,083,477 150,438 - 150,438 101,577 13,299 114,876 417,030 - 417,030 31,760 - 31,760 746,437 - 746,437 507,473 - 507,473 1,954,715 13,299 1,968,014 126,662 ( 11,199) 115,463 32,103 - 32,103 ( 456,050) - ( 456,050) ( 423,947) - ( 423,947) ( 297,285) ( 11,199) ( 308,484) 15,000 3,594 18,594 (239,413) - (239,413) - 169,034 169,034 ( 224,413) 172,628 ( 51,785) ( 521,698) 161,429 ( 360,269) 6,089,564 - 6,089,564 $ 5,567,866 $ 161,429 $ 5,729,295 The accompanying notes are an integral part of these financial statements. 21 TOWN OF WESTLAKE, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Business -tvpe Activities - Enterprise Funds The accompanying notes are an integral part of these fmancial statements. 22 Utility Cemetery Total Fund Fund Current Year CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,881,179 $ 2,100 $ 1,883,279 Cash payments to employees /retirees ( 150,438) - ( 150,438) Cash payments for goods and services ( 1,233,109) ( 13,216) ( 1,246,325) Net cash provided by operating activities 497,632 ( 11,116) 486,516 -, CASH FLOWS FROM NONCAPITAL . FINANCING ACTIVITIES Net interfund borrowings 79,972) 3,594 ( 76,378) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital contributions - 69,663 69,663 Principal paid on debt ( 59,278) - ( 59,278) Interest paid on debt ( 60,790) - ( 60,790) Purchase of property and equipment ( 18,281) - ( 18,281) Net cash used by capital and related financing activities ( 138,349) 69,663 ( 68,686) CASH FLOWS FROM INVESTING ACTIVITIES Investment earnings 32,103 - 32,103 NET INCREASE IN CASH AND CASH EQUIVALENTS 311,414 62,141 373,555 CASH AND CASH EQUIVALENTS, BEGINNING 812,777 - 812,777 I CASH AND CASH EQUIVALENTS, ENDING $ 1,124,191 $ 62,141 $ 1,186,332 RECONCILIATION OF TOTAL CASH AND CASH EQUIVALENTS Cash and cash equivalents $ 1,017,591 $ 62,141 $ 1,079,732 Restricted cash and cash equivalents 106,600 - 106,600 Total cash and cash equivalents $ 1,124,191 $ 62,141 $ 1,186,332 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 126,662 $( 11,199) $ 115,463 Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation and amortization 448,790 - 448,7.90 Changes in operating asets and liabilities: Receivables (185,625) - (185,625) Other assets 585 - 585 Accounts payable 121,793 83 121,876 Customer deposits payable 11,620 - 11,620 Deferred revenue ( 26,193 - ( 26,193) Net cash provided by operating activities $ 497,632 $( 11,116) $ 486,516 The accompanying notes are an integral part of these fmancial statements. 22 Texas Student - 4,565,876 2,562,422 Housing 3,000,764 - 12,741,471 Authority - Texas Student - College Station Housing 93,571 161,718,914 Project Authority Total $ 3,992,273 $ 393,264 $ 6,708,384 791,135 32,947 927,273 18,227 5,236 82,437 928,518 - 6,409,886 - - 5,117,351 2,899,597 - 13,622,885 27,727,646 - 114,609,998 2,594,804 5,878,062 ( 5,374,718) - ( 29,466,457) 33,577,482 431,447 123,889,819 674,801 - 4,565,876 2,562,422 93,571 4,468,900 3,000,764 - 12,741,471 32,070,000 - 82,368,563 - - 57,574,104 38,307,987 93,571 161,718,914 ( 4,222,671) - ( 33,838,179) - - ( 1,025,853) ( 507,834) 337,876 ( 2,965,063) $( 4,730,505) $ 337,876 $( 37,829,095) 24 Net (Expense) Revenue and Chanizes in Net Assets Primary Government Governmental Business -type Activities Activities Total $ - $( 262,620) $( 262,620) - ( 1,439,635) ( 1,439,635) - ( 1,906,031) ( 1,906,031) - ( 983,692) ( 983,692) - ( 680,000) ( 680,000) - ( 1,898,490) ( 1,898,490) - ( 7,170,468) ( 7,170,468) - ( 7,170,468) ( 7,170,468) - 414,056 414,056 - 33,308 33,308 - 447,364 447,364 - ( 6,723,104) ( 6,723,104) 398,967 ( 31,105,991) ( 30,707,024) ( 398,967) - ( 398,967) $ - $( 37,829,095) $( 37,829,095) 26 TOWN OF WESTLAKE, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2008 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Westlake, Texas (the "Town ") was incorporated under the provisions of the laws of the State of Texas on December 26, 1956. The Town operates under a Board - Manager form of government and provides the following services as authorized by the laws of the State of Texas: public safety; cultural and recreation; and economic development. A. Reporting Entity The accompanying financial statements comply with the provisions of the GASB statements No.14 and 39. "The Financial Reporting Entity," in that the Town's basic financial statements include the accounts of the Town's financial reporting entity, including the primary government, organizations for which the Town is financially accountable and other organizations for which the nature and significance of their relationship with the Town are such that inclusion would cause the Town's financial statement to be misleading or incomplete. The criteria for including organizations as component units within the Town's reporting entity, includes whether: • The organization is legally separate (can sue and be sued in their own name); • The Town holds the corporate powers of the organization; • The Town appoints a voting majority of the organization's board; • The Town is able to impose its will on the organization; • The organization has the potential to impose a financial benefitiburden on the Town; and • There is fiscal dependency by the organization on the Town. Component units are blended with the balances and transactions of the Town if one of the following criterion are met: ■ The component unit is substantially the same governing body as the Town; or ■ The component unit provides services entirely (or almost entirely) to the Town or benefits the Town exclusively (or almost exclusively) .; or ■ The Town is able to impose its will on the component unit. (continued) 27 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Component Units (Continued) Blended (Continued) Westlake Academy ( "Academy') is an open - enrollment charter school, as provided by Subchapter I), Chapter 12, of the Texas Education Code. The Town of Westlake ( "Charter Holder ") applied for and became the first municipality in Texas to ever receive this special charter designation. The board consists of six trustees and is appointed by the Town's governing body. Currently, all the members of the board of trustees are members of the Town's governing body. The Academy's year -end is August 31. C. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the non- fiduciary activities of the Town. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues includes _ 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements. D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. (continued) 29 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Westlake Academy Fund — to account for all financial resources of the Academy. Lone Star Public Facilities Corporation — to account for activity relating to the Lone Star Public Facilities Corporation. 4B Economic Development Corporation — to account for activity relating to 4B Economic Development Corporation. Debt'Service Fund — to account for resources accumulated and payments made for principal and interest on long -term general obligation debt of governmental funds in a Debt Service Fund. Capital Projects Fund —to account for proceeds from long -term financing and revenue and expenditures related to authorized construction and other capital asset acquisitions. Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Town's Enterprise Fund are charges to customers for sales and services. Operating expenses for the Enterprise Fund include the_ cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. The Town reports the following major proprietary fund: Utility Fund — to account for revenues and expenses related to providing water and sewer services to the general public on a continuing basis. Enterprise Fund equity is segregated into contributed capital and retained earnings. Cemetery Fund — to account for the operations of the Town's cemetery. Private- sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private - sector guidance for their business -type activities and Enterprise Funds, subject to this same limitation. The Town has elected not to follow subsequent private- sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government - wide financial statements. Exceptions to this general rule are charges between the Town's water and wastewater function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. (continued) 31 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Inventories Inventories, which are expended as they are consumed, are stated at the lower of cost or market on a first -in, first -out basis. Fund Changes and Transactions Between Funds Legally authorized transfers are treated as operating transfers and are included in the results of operations of both governmental and proprietary funds. The Town allocates an indirect cost percentage of the salaries, wages and related costs of personnel who perform administrative services as well as other indirect costs necessary for the operation of various funds. Expenses are budgeted and paid from the appropriate fund. Capital Assets All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at their fair market value on the date donated. Assets capitalized have an original cost of $5,000 or more and over three years of life. The cost of nominal maintenance and repairs that do not add value to the asset or materially extend assets' lives are not capitalized. Depreciation has been calculated on each class of depreciable property using the straight -line method. Estimated useful lives are. as follows: Assets Years Water and sewer system Buildings Machinery and equipment Improvements Information systems and software (continued) 33 10 -50 20 -50 4 -10 5 -30 3 I. II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at. the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government -wide Statement of net Assets The governmental fund balance sheet includes a reconciliation between fund balance — total governmental funds and net assets — governmental activities as reported in the government -wide statement of net assets. One element of that reconciliation explains, "Long -term liabilities are not due and payable in the current period and therefore are not reported in the funds." The details of this $20,794,837 difference are as follows: Certificates of obligation bonds $ 21,449,265 Deferred charges for issuance costs (to be amortized over life of debt) (1,071,715) Capitalized lease obligations 15,264 Accrued interest payable 402,023 Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities $ 20,794,837 (continued) 35 II. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS (Continued) Explanation of Certain Differences Between the Governmental Fund Statement of Revenue, Expenditures and Changes in Fund Balances and the Government -wide Statement of Activities Another element of that reconciliation states, "Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this $190,854 difference are as follows: Municipal court fines $ 123,614 Accrued interest 7,509 Amortization of deferred charge on refunding 44,336 Amortization of issuance costs 15,395 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets ofgovernmental activities $ 190,854 III. DETAILED NOTES ON ALL FUNDS Deposits and Investments Legal provisions generally permit the Town to invest in certificates of deposit, repurchase agreements, public funds investment pools, direct obligations of the United States of America or its subdivisions and state and local government securities. The Town did not engage in repurchase or reverse repurchase agreement transactions during the current year. During the year ended September 30, 2008, the Town had investments with TexPool. TexPool, a public funds investment pool created by the Treasurer of the State of Texas acting by and through the Texas Treasury-Safekeeping Trust Company, which is empowered to invest funds and acts as custodian of investments purchased with local investment funds. These investments are not required to be categorized because the investor is not issued securities, but rather it owns an undivided beneficial interest in the assets of the respective funds. The fair value of the position in TexPool is the same as the value of the pool shares. On September 1, 1989, local government investment pools became authorized investments for the majority of public entities in Texas. The Interlocal Cooperation Act was amended by the 71St Texas Legislature to facilitate the creation of local government investment pools in Texas. This act permits the creation of investment pools to which a majority of political subdivisions (local governments) may delegate, by contract, the authority to make investments purchased with local investment funds and to hold legal title as custodian of the investments. TexPool was organized to conform with the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the Public Funds Investment Act, Chapter 2256 of the Texas Government Code. (continued) 37 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) The Town's entire cash deposits in the bank of $468,323 on September 30, 2008, were covered by federal depository insurance or by collateral. Carrying Weighted Average Component units Amount Fair Value Maturity (Days) Investments: Cash and cash equivalents $ 6,708,384 $ 6,708,384 N/A Total $ 6,708,384 $ 6,708,384 Interest Rate Risk. This is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Town manages its exposure to interest rate risk is by investing in investment pools which purchase a combination of shorter term investments with an average maturity of less than 29 days thus reducing the interest rate risk. The Town monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The Town has no specific limitations respect to this metric. Credit Risk This 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. Presented above is the minimum rating required by (where applicable) the Public Funds Investment Act, the Town's investment policy, or debt agreements, and the actual rating as of year -end for each investment type. (continued) 39 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Depreciation was charged to departments of the primary government as follows: Governmental activities: General government $ 515,114 Public safety 72,201 Public works 178,305 Total depreciation expense - governmental activities $ 765,620 A summary of discretely presented component units' capital assets at September 30, 2008, follows: Texas Student Housing Authority - Ballpark Austin Project Beginning Ending Balance Additions Deletions Balance Capital assets, not being depreciated: Land Total capital assets, not being depreciated . Capital assets, being depreciated: Building Furniture and fixtures Total capital assets, being depreciated Less accumulated depreciation for: Building Furniture and fixtures Total accumulated depreciation Total capital assets, being depreciated, net Capital assets, net $ 4,788,265 $ - $ - $ 4,788,265 4,788,265 - - 4,788,265 21,345,305 - - 21,345,305 6,993,063 - - 6,993,063 28,338,368 - - 28,338,368 4,031,890 711,511 - 4,743,401 3,176,918 257,282 - 3,434,200 7,208,808 968,793 - 8,177,601 21,129,560 ( 968,793) - 20,160,767 $ 25,917,825 $( 968,793) $ - $ 24,949,032 (continued) 41 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Authority - Town Lake Austin Project Beginning Ending Balance Additions Retirements Balance Capital assets, not being depreciated: Land $ 2,182,816 $ - $ - $ 2,182,816 Total capital assets, not being depreciated 2,182,816 - - 2,182,816 Capital assets, being depreciated: Building and improvements Capitalized purchase costs Land improvements Unit appliances Furniture and fixtures Total capital assets, being depreciated Less accumulated depreciation for: Building and improvements Capitalized purchase costs Land improvements Unit appliances Furniture and fixtures Total accumulated depreciation Total capital assets, being depreciated, net Capital assets, net 13,270,150 - - 13,270,150 887,095 - - 887,095 2,806,596 - - 2,806,596 295,134 - - 295,134 915,951 - - 915,951 18,174,926 - - 18,174,926 1,768,268 627,913 - 2,396,181 118,280 28,484 - 146,764 374,212 - - 374,212 168,648 - - 168,648 523,266 - - 523,266 2,952,674 656,397 - 3,609,071 15,222,252 ( 656,397) - 14,565,855 $ 17,405,068 $ 6( 56,397) $ - $ 16,748,671 (continued) 43 III. DETAILED NOTES ON ALL FUNDS (Continued) Interlocal Agreement with Trophy Club/Westlake Department of Public Safety (Continued) The Agreement called for eight principal and interest payments to the Town, with interest calculated at a stated rate of 6.75 %. Effective June 1, 2002, the Trophy Club /Westlake Department of Public Safety was officially dissolved. The Town of Trophy Club continued to repay the remaining debt according to the terms of the note. The note matured during the current fiscal year and was paid in full. Capital Leases The Town entered into a lease agreement as lessee for financing the acquisition of a vehicle for the warrant division of the municipal court. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of their future minimum lease payments as of the inception date. Governmental Activities Asset: Machinery and equipment $ 23,000 Less: Accumulated depreciation (9,200) Total $ 13,800 The future minimum lease obligations and the net present value of these minimum lease payments as of September 30, 2008, were as follows: Year Ending Sept. 30 2009 2010 Total minimum lease payments Less: amount representing interest Present value of minimum lease payments Governmental Activities $ 8,331 8,331 16,662 (1,398) $ 15,264 (continued) 45 III. DETAILED NOTES ON ALL FUNDS (Continued) General Long -term Debt (Continued) Debt service requirements for deferred rebates to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2009 $ 22,863 $ 12,895 $ 35,758 2010 24,178 11,581 35,759 2011 25,568 10,190 35,758 2012 27,038 8,720 35,758 2013 28,593 7,165 35,758 2014 -2016 96,025 11,249 107,274 Total $ 224,265 $ 61,800 $ 286,065 The Certificates of Obligation, Series 2002 and 2003 require the Town to provide certain updated financial information and operating data to certain information vendors annually, as permitted by SEC Rule 15c2 -12 (the "Rule "). The issuer will provide the updated information to each nationally recognized municipal securities information repository ( "NRMSIR ") and to any state information depository ( "SID ") that is designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC "). During the fiscal year, the Town issued General Obligation bonds of $2.5 million. These bonds are being used for the construction of an Arts & Sciences Center. Proprietary Long -term Debt Elevated Water Storage Facility On October 9, 2000, the Town approved an interlocal agreement with the City of Keller, which provided for the joint construction, operation, maintenance and use of an elevated water storage facility and appurtenances. The Town recorded a contractual obligation of $1,466,000 based on the terms of the interlocal agreement, which requires 20 annual principal and interest payments to the City of Keller, with payments due each September 30 at interest rates ranging from 5.0% to 5.65 %. (continued) 47 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long -term Debt Texas Student Housing Authority - College Station Project The Project's installment note payable is summarized as follows: Interest Lender /Security/Due Date Rate Balance Cambridge Student Housing Financing Company, L.P.; substantially all assets and assignment of rents; due November 1, 2039 8.00% $ 32,070,000 The Project's installment note is payable monthly with principal and interest payments of $231,545 until November 1, 2039. The following is a summary of long -term debt transactions of the Project for the year ended August 31, 2008: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year $ 32,345,000 $ - $ 275,000 $ 32,070,000 $ 32,070,000 The Project's original developer refinanced the installment note through a secondary offering with Cambridge Student Housing Financing Company, L.P. The debt certificates were sold to private investors in the following classes: Class (Series) Offering Total A $ 17,500,000 B 4,900,000 C 4,820,000 D 5,380,000 Total $ 32,600,000 Each class has certain rights and privileges, as contained in the private placement memorandum. As a part of the offering, the Project entered into a trust agreement with J. P. Morgan Trust Company, N.A. (the "Trustee ") for the purpose of determining that each class is paid in accordance with the private placement memorandum. At August 31, 2008, the Project was not in compliance with the fixed charge coverage ratio, which constitutes a default of the lending agreement. Upon default, the lender may accelerate the maturity of the unpaid portion of the principal payable under the installment sale agreement. However, the Authority does not anticipate this event will occur, since foreclosure by private interests would result in the loss of tax - exempt status for the Project. (continued) 49 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long -term Debt (Continued) Texas Student Housing Authority - The Ridge at San Marcos (Continued) During 2005, the Project ceased making the required principal and interest payments required by the loan and financing agreement. This constitutes an event of the default under provisions of the indenture and permits the trustee at the direction of the servicing agent to declare the principal and all interest then due to be immediately due and payable. As a result, the outstanding principal at August 31, 2008, has been shown as a current liability in the accompanying financial statements. In addition, the Project was not in compliance with certain debt covenants as of August 31, 2008. Year Ending August 31, Principal Interest Total 2009 $ 19,580,869 $ 3,577,542 $ 23,158,411 Texas Student Housing Authority - Ballpark Austin Project The long -term debt activity of the Ballpark Austin Project is as follows: Beginning Balance Revenue Bonds: 2001A Bonds $ 31,905,000 2001B Bonds 2,330,000 2001C Bonds 3,000,000 Less discounts ( 1,462,076) Amounts Ending Due Within Increases Decreases Balance One Year $ - $ 560,000 $ 31,345,000 $ 585,000 35,000 - $ 2,365,000 105,000 - - $ 3,000,000 - - ( 60,085) ( 1,401,991) - Total $ 35,772,924 $ 35,000 $ 499,915 $- 35,308,009 $ 690,000 (continued) 51 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long -term Debt (Continued) Texas Student Housing Corporation - The Ridge at North Texas (Continued) The debt originally was to be amortized through 2031 with varying monthly principal payment amounts ranging from $2,618,093 to $3,465,280 for interest and principal. The annual requirements to amortize all debts outstanding as of August 31, 2008, are as follows and have not been adjusted for the default of the bonds. Under the original terms of the Indenture, a total of $540,000 in principal and $2,079,992 in interest is due in fiscal 2009. The total interest to be paid will depend on the ultimate maturities of the bonds. Year Ending August 31, Principal Interest Total 2009 $ 30,735,000 $ 34,237,678 $ 64,972,678 The Town of Westlake does not have any liability for the payment of debt of the discretely presented component units as the bonds are non - recourse to both the Town and Texas Student Housing Authority. Deferred Revenue Deferred revenue in the proprietary fund of $464,245 relates to the collection of the entire amount due on six Ductbank leases as follows: One 20 -year lease with AT &T local network services and five 20, 25 and 30 -year leases with Verizon Southwest for use of the Town's Ductbank. Commitments and Contingencies Lease Obligations The Town has commitments relative to municipal services, and contractual relationships concerning certain utilities and public safety resources, which are normal in its ongoing activity. Noncancellable obligations consist of agreements for services at September 30, 2008. Minimum lease payments and contractual obligations under these noncancellable leases and agreements as of September 30, 2008, are as follows: Year Ending September 30, Amount 2009 $ 221,999 2010 221,999 2011 140,635 Total $ 584,633 Rental expenditures in 2008 were $221,568. (continued) 53 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions Interfund receivables and payables at September 30, 2008, were as follows: Due from Other Funds General fund: Visitors Association fund $ - Utility fund 65,554 Capital projects fund 120,124 Visitors Association fund: General fund 24,222 Capital projects fund: General fund - Utility fund 201,085 4B Economic Development fund: Utility fund 327,039 Enterprise fund: General fund - 4B Economic Development fund Capital projects fund - $ 738,024 (continued) 55 Due to Other Funds $ 24,222 120,124 65,554 327,039 201,085 $ 738,024 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions (Continued) Transfers are used to (1) move revenues collected in the special revenue funds to finance various programs in accordance with budgetary authorizations, (2) move receipts restricted for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, (3) reimburse one fund for services provided to another fund and (4) pay for property purchased in advance of bond issuance. Receivables Water Purchase and Wastewater Treatment Contracts The Town has a contract with the City of Fort Worth, Texas, to purchase water. Under the contract, the Town may obtain from the City of Fort Worth, a supply of potable water at a reasonable rate based on water usage. The rate charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2008 was $746,437. IV. OTHER INFORMATION Retirement Plan Plan Description The Town provides pension benefits for all of its fulltime employees through a nontraditional, joint contributory, hybrid defined contribution plan in the statewide Texas Municipal Retirement System ( "TMRS "), one of 827 administered by TMRS, an agent multiple- employer public employee retirement system. All assumptions for the December 31, 2007, valuations are contained in the 2007 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P. O. Box 149153, Austin, Texas 78714 -9153. (continued) 57 General Governmental Funds - Property Tax Visitors Westlake Reduction Association Academy Fund 413 Economic Development Corporation Enterprise Fund Utility Fund Total Receivables: Sales tax $ 371,508 $ - $ - $ 185,754 $ 185,754 $ - $ 743,016 Other taxes - 85,019 - - - - 85,019 Franchise fees 161,498 - - - - - 161,498 Accounts - - - - - 693,291 693,291 Other 19,732 - 78,470 - - - 98,202 Gross receivables 552,738 85,019 78,470 185,754 185,754 693,291 1,781,026 Less: Allowance for uncollectibles - - - - - - - Net total receivables $ 552,738 $ 85,019 $ 78,470 $ 185,754 $ 185,754 $ 693,291 $ 1,781,026 Water Purchase and Wastewater Treatment Contracts The Town has a contract with the City of Fort Worth, Texas, to purchase water. Under the contract, the Town may obtain from the City of Fort Worth, a supply of potable water at a reasonable rate based on water usage. The rate charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2008 was $746,437. IV. OTHER INFORMATION Retirement Plan Plan Description The Town provides pension benefits for all of its fulltime employees through a nontraditional, joint contributory, hybrid defined contribution plan in the statewide Texas Municipal Retirement System ( "TMRS "), one of 827 administered by TMRS, an agent multiple- employer public employee retirement system. All assumptions for the December 31, 2007, valuations are contained in the 2007 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P. O. Box 149153, Austin, Texas 78714 -9153. (continued) 57 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) Schedule of Actuarial Liabilities and Funding Progress Actual Valuation Date Actuarial value of assets Actuarial accrued liability Percent funded Unfunded (overfunded) actuarial accrued liability (UAAL) Annual covered payroll UAAL as a percentage of covered payroll Net pension obligation (NPO at the beginning of period Annual required contribution (ARC) Contributions made NPO at the end of the period Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method Investment Rate of Return Projected Salary Increases Includes Inflation at Cost -of- living Adjustments Payroll Growth Assumption Withdrawal Rates for Male /Female 12/31/05 12/31/06 12/31/07 $ 597,993 $ 773,412 $ 792,775 635,973 821,401 1,059,135 94.0% 94.2% 74.9% 37,980 47,989 266,360 1,243,374 1,300,610 1,257,653 3.1% 3.7% 21.2% 98,388 98,030 108,827 98,388 98,030 108,827 Actuarial Assumptions Projected Unit Credit - Level Percent of Payroll 25 Years. - Closed Period - Amortized Cost (to accurately reflect the requirements of GASB Statement No. 25, paragraphs 36e and 138) - 7.0% - Varies by age and service 3.0 % - 0.0% 3.0% - Mid - Low /Mid -Low At its December 8, 2007 meeting, the TMRS Board of Trustees adopted actuarial assumptions to be used in the actuarial valuation for the year ended December 31, 2007. A summary of actuarial assumptions and definitions can be found in the December 31, 2007 TMRS Comprehensive Annual Financial Report (CAFR). (continued) 59 IV. OTHER INFORMATION (Continued) Continent Liabilities Various claims and lawsuits are pending against the Town. In the opinion of Town management, after consultation with legal counsel, the potential loss on all claims and lawsuits will not materially effect the Town's financial position. Prior Period Adiustment A prior period adjustment in the amount of $398,967 was made on the government -wide financial statements in order to properly present previously discretely presented component units as blended component units in the current fiscal year. Subsequent Event On November 14, 2008, the Ridge at San Marcos was given a deed -in -lieu by the bondholder, MuniMae, and assets and liabilities pertaining to the facility are no longer under the control of Texas Student Housing Authority. 61 REQUIRED SUPPLEMENTARY INFORMATION TOWN OF WESTLAKE, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2008 REVENUES Taxes Sales Mixed beverages Franchise Federal program revenues Interest income Building permits and fees Fines and penalties Contributions from others Other miscellaneous income Total revenues EXPENDITURES Current General government and administration Public safety Cultural and recreational Public works Economic development Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING FUND BALANCE, ENDING General Fund 1,404,544 1,554,822 1,516,346 Variance Budgeted Amounts 1,756,729 Favorable Original Amended Actual (Unfavorable) $ 2,000,000 $ 1,677,460 1,795,287 $ 117,827 14,943 13,300 16,177 2,877 535,278 610,815 649,108 38,293 3,000 5,865 12,540 6,675 165,811 82,811 83,834 1,023 1,472,746 1,259,249 1,108,083 ( 151,166) 665,683 610,772 554,376 ( 56,396) 128,750 - - - 19,783 86,523 90,929 4,406 5,005,994 4,346,795 4,310,334 ( 36,461) 1,404,544 1,554,822 1,516,346 38,476 1,784,119 1,756,729 1,716,369 40,360 131,023 134,333 129,641 4,692 647,463 479,054 415,805 63,249 368,259 468,117 495,071 ( 26,954) 4,335,408 4,393,055 4,273,232 119,823 670,586 ( 46,260) 37,102 83,362 219,750 40,000 38,328 ( 1,672) ( 212,250) ( 290,017) ( 364,991) ( 74,974) 7,500 ( 250,017) ( 326,663) ( 76,640 678,086 ( 296,277) ( 289,561) 6,716 3,096,299 3,096,299 3,096,299 - $ 3,774,385 $ 2,800,022 $ 2,806,738 $ 6,716 62 TOWN OF WESTLAKE, TEXAS WESTLAKE ACADEMY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED AUGUST 31, 2008 64 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES State program revenues $ 2,375,628 $ 2,724,570 $ 2,673,680 $( 50,890) Federal program revenues 28,288 54,061 55,193 1,132 Interest income 15,000 20,000 22,335 2,335 Other miscellaneous income 578,498 519,652 496,726 ( 22,926) Total revenues 2,997,414 3,318,283 3,247,934 ( 70,349) EXPENDITURES Education 3,317,529 3,451,786 3,305,220 146,566 Total expenditures 3,317,529 3,451,786 3,305,220 146,566 NET CHANGE IN FUND BALANCE ( 320,115) ( 133,503) ( 57,286) 76,217 FUND BALANCE, BEGINNING 691,740 691,740 691,740 - FUND BALANCE, ENDING $ 371,625 $ 558,237 $ 634,454 $ 76,217 64 TOWN OF WESTLAKE, TEXAS PROPERTY TAX REDUCTION FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES l IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2008 1 REVENUES Taxes Sales Interest income Total revenues EXPENDITURES General government Total expenditures l EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES I OTHER FINANCING SOURCES (USES) Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING i FUND BALANCE, ENDING i 1 66 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) $ 1,000,000 $ 838,730 $ 897,644 $ 58,914 30,000 3,000 1,158 ( 1,842) 1,030,000 841,730 898,802 57,072 57,072 841,730 898,802 1,030,000 ( 286,583) ( 418,140) ( 547,611) ( 129,471) 286,583) ( 418,140) ( 547;611) ( _ 129,471) 743,417 423,590 351,191 ( 72,399) 154,474 154,474 154,474 - $ 897,891 $ 578,064 $ 505,665 $( 72,399) 66 TOWN OF WESTLAKE, TEXAS LONE STAR PUBLIC FACILITY CORPORATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2008 REVENUES Interest income Total revenues EXPENDITURES General government Total expenditures NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING FUND BALANCE, ENDING Budgeted Amounts Original Amended Variance Favorable Actual (Unfavorable) 425 429 4 - 425 429 4 13,030 13,030 13,030 - $ 13,030 $ 13,455 $ 13,459 $ 4 68 TOWN OF WESTLAKE, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2008 (Unaudited) BUDGETARY INFORMATION - The Town follows these procedures annually in establishing the budgetary data reflected in the budgetary comparison schedules: 1. The Town Manager submits to the Board of Aldermen a proposed budget for the fiscal year commencing the following October 1. The budget includes proposed expenditures and the means of financing them. Prior to October 1, the budget is legally adopted through passage of an ordinance. This budget is reported as the Original Budget in the budgetary comparison schedules. 3. During the fiscal year, changes to the adopted budget may be authorized, as follows: a) Items requiring Board of Alderman action - appropriation of fund balance reserves; transfers of appropriations between funds; transfers between departments within funds; new inter -fund loans or advances; and creation of new capital projects or increases to existing capital projects. b) Items delegated to the Town Manager - transfers within departments 4. Annual budgets are legally adopted and amended as required for the general, special revenue and debt service funds. Project length budgets are adopted for the capital projects funds. All budgets are adopted on a basis consistent with generally accepting accounting principles. Budgets are adopted for the proprietary funds annually only as a management tool. There are no legally mandated budgetary constraints for the proprietary funds. 5. Budget amounts are reflected after all authorized amendments and revisions. This budget is reported as the Final Budget in the budgetary comparison schedules. 6. The appropriated budget is prepared by fund, function and department. The Town's management may make transfers of appropriations within a department. Transfers of appropriations between departments require the approval of the Board of Aldermen. The legal level of budgetary control is the department level. The Board of Aldermen made several supplementary budget appropriations during the year. 7. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting under which purchase orders, contracts and other commitments for the expenditure of resources are recoded to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Encumbrances lapse at year -end and do not constitute expenditures or liabilities because the commitments must be reappropriated and honored during the subsequent year. 8. Expenditures exceeded appropriations in the FM 1938 Fund for the year. The deficit was covered by operating transfers in from other funds. 70 INDIVIDUAL FUND SCHEDULE TOWN OF WESTLAKE, TEXAS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2008 Final Budgeted Amounts Actual REVENUES Contributions Total revenues EXPENDITURES Debt service Principal retirement Interest and other fiscal charges Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING l FUND BALANCE, ENDING 71 Variance Favorable (Unfavorable) 395,000 395,000 - 921,314 923,944 ( 2,630) 1,316,314 1,318,944 ( 2,630) ( 1,316,314) ( 1,318,944) ( 2,630) 1,316,314 1,318,944 2,630 1,316,314 1,318,944 2,630 STATISTICAL SECTION STATISTICAL SECTION (Unaudited) This part of the Town of Westlake, Texas' comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the Town's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the Town's financial performance and well -being have changed over time. 72-77 Revenue Capacity These schedules contain information to help the reader assess the Town's most significant local revenue sources. Although sales taxes are the Town's most significant local revenue source, information about principal revenue payers is confidential under Texas statutes, and; therefore, not disclosed. Trend information about sales tax revenue is provided in Table S. 78 Debt Capacity These schedules present information to help the reader assess the affordability of the Town's current levels of outstanding debt and the Town's ability to issue additional debt in the future. 79-80 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town's financial activities take place. 81-82 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the Town's financial report relates to the services the Town provides and the activities it performs. 83 -85 Sources: Unless otherwise noted, the information in these schedules is derived from annual financial reports for the relevant year. Governmental activities: Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets Business -type activities: Invested in capital assets, net of related debt Unrestricted Total business -type activities net assets Primary government: Invested in capital assets, net of related debt Restricted Unrestricted Total primary government net assets Table 1 TOWN OF WESTLAKE, TEXAS NET ASSETS BY COMPONENT LAST FIVE FISCAL YEARS (Accrual Basis of Accounting - unaudited) Fiscal Year 2004 2005 2006 2007 2008 $ 9,084,603 $ 7,975,910 $ 9,171,657 $ 9,646,644 $ 4,193,601 124,185 - 1,406,756 1,719,771 5,064,834 1,246,351 1,557,394 3,023,875 3,305,542 6,895,822 $ 10,455,139 $ 9,533,304 $ 13,602,288 $ 14,671,957 $ 16,154,257 $ 8,118,139 $ 8,450,781 $ 8,436,729 $ 8,097,807 $ 7,726,576 ( 1,462,451) ( 1,621,273) ( 1,846,851) ( 2,008,243) ( 1,997,281) $ 6,655,688 $ 6,829,508 $ 6,589,878 $ 6,089,564 $ 5,729,295 $ 17,202,742 $ 16,426,691 $ 17,608,386 $ 17,744,451 $ 11,920,177 124,185 - 1,406,756 1,719,771 5,064,834 ( 216,100) ( 63,879) 1,177,024 1,297,299 4,898,541 $ 17,110,827 $ 16,362,812 $ 20,192,166 $ 20,761,521 $ 21,883,552 Note: The Town began to report accrual information when it implemented GASB Statement 34 in fiscal year 2004 Source: Annual financial reports. 72 NET (EXPENSE) REVENUES Governmental activities Business -type activities Total primary government net expense GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental activities: Taxes: Sales Hotel Occupancy Mixed Beverage Franchise Unrestricted grants and contributions Investment earnings Miscellaneous Transfers Total governmental activities Business -type activities: Investment earnings Miscellaneous Transfers Total business -type activities Total primary government CHANGE IN NET ASSETS Governmental activities Business -type activities Total primary government TOWN OF WESTLAKE, TEXAS CHANGES IN NET ASSETS LAST FIVE FISCAL YEARS (Accrual basis of accounting - Unaudited) Fiscal Year 2004 $( 3,552,346) ( 501,421) ( 4,053,767) 868,046 440,849 10,511 337,222 937,187 33,180 134,717 2,761,712 3,245 3,245 2,764,957 ( 790,634) ( 498,176) $( 1,288,810) 2005 $( 4,563,527) 205,146 ( 4,358,381) $ 994,606 381,221 13,846 352,115 1,722,198 41,802 64,047 71,857 3,641,692 2,416 ( 71,857) ( 69,441) 3,572,251 ( 921,835) 135,705 $( 786,130) 2006 2007 2008 $( 1,103,114) ( 275,940) ( 1,379,054) $ 1,810,706 415,544 13,674 457,004 1,822,200 98,824 448,827 45,319 5,112,098 25,604 56,025 45,319) 36,310 5,148,408 4,008,984 ( 239,630) $ 3,769,354 Note: The Town began to report accrual information when it implemented GASB Statement 34 in fiscal year 2004 Source: Annual financial reports. . $( 5,182,831) ( 549,432) ( 5,732,263) $ 2,197,756 458,471 14,066 560,312 2,259,643 261,622 466,654 33,976 6,252,500 46,158 36,936 ( 33,976) 49,118 6,301,618 1,069,669 ( 500,314) $ 569,355 $( 7,175,257) ( 215,624) ( 7,3901881) $ 3,590,575 527,662 16,177 649,108 2,500,817 188,459 564,973 220,819 8,258,590 32,103 44,071 ( 220,819) ( 144,645) 8,113,945 1,083,333 ( 360,269) $ 723,064 Table 2 74 (Concluded) REVENUES Taxes Licenses, fees and permits Fines and penalties State program revenues Federal program revenues Investment earnings Contributions Otherrevenues Total revenues Table 4 TOWN OF WESTLAKE, TEXAS CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST NINE FISCAL YEARS (Modified Accrual Basis of Accounting - unaudited) Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 $ 3,086,618 $ 2,663,738 $ 1,863,255 $- 1,874,312 $ 1,656,628 $ 1,741,788 $ 2,696,928 $ 3,230,605 $ 4,783,522 477,849 700,313 253,919 508,154 802,060 740,027 748,016 900,121 1,108,083 7,867 857,217 401,755 548,375 680,794 1,007,142 751,036 651,090 554,376 Public safety - 409,512 1,007,589 53,309 995,784 1,597,362 1,925,043 2,387,733 2,673,680 Cultural and recreational - 5,967 10,472 311,298 462,315 285,392 75,662 49,200 75,207 349,321 343,107 351,243 151,591 33,180 41,786 98,824 261,622 188,459 Public works - - - 68,979 1,286,611 1,324,264 4,964,085 1,079,768 1,048,308 102,380 1,475 233,675 16,099 184,221 292,690 547,184 552,579 607,812 4,024,035 3,708,633 3,103,847 3,463,138 6,101,593 7,030,451 11,806,778 9,112,718 11,039,447 EXPENDITURES General government 1,834,741 857,217 1,592,597 1,087,368 1,725,211 2,243,162 2,542,295 1,385,492 1,516,346 Public safety - 409,512 1,007,589 1,282,112 1,547,857 1,554,115 1,627,641 1,665,879 1,731,317 Cultural and recreational - 5,967 10,472 14,043 9,099 96,617 91,444 86,560 129,641 Economic development - 661,077 1,093,673 56,832 53,006 35,758 35,759 141,197 495,071 Public works - - - 68,979 125,499 112,764 434,716 276,789 846,604 Protective inspection - - - 187,922 80,935 - - Visitor services - - - 131,395 172,542 448,604 393,115 226,992 312,777 Education - - - 156,870 1,368,113 1,877,398 2,249,998 2,672,698 3,305,220 Debt service Principal - - - 1,475,400 - - 350,000 470,000 395,000 Interest - - 78,012 836,533 986,534 1,028,104 1,028,634 1,240,950 923,944 Bond issuance cost 33,000 Capital outlay - 174,959 1,344,137 14,096,533 2,917,185 263,681 371,860 836,787 463,918 Total expenditures 1,834,741 2,108,732 5,126,480 19,393,987 8,985,981 7,660,203 9,125,462 9,003,344 10,152,838 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES $ 2,189,294 $ 1,599,901 $( 2,022,633) $(15,930,849 $( 2,884,388) $( 629,752) $ 2,681,316 $ 109,374 $ 886,609 76 (Continued) Table 5 TOWN OF WESTLAKE, TEXAS TAXABLE SALES BY INDUSTRY TYPE LAST THREE FISCAL YEARS (Unaudited) Town direct sales tax rate $ 3,623,538 $ 2,992,308 $ 2,719,431 2.00% 2.00% 2.00% Note: Information on sales tax by NAILS was not available prior to 2006. Comparison will be made to the prior year until ten -year prior comparison can be made. Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the Town's sales tax revenue. Source: Texas State Comptroller reports. 78 Fiscal Year NAICS Industry Type 2006 2007 2008 11 Agriculture, Forestry, Fishing and Hunting $ 31 $ 67 $ 54 21 Mining 2,321 - 1,012 22 Utilities 463,222 212,336 194,359 23 Construction 81,542 200,791 635,134 31 -33 Manufacturing 1,120,328 360,010 186,128 42 Wholesale Trade 248,702 284,082 178,003 44 -45 Retail- 408,556 253,293 493,309 48 -49 Transportation and Warehousing 63 491 - 51 Information 538,210 223,672 246,591 52 Financial and Insurance 10,162 343,446 120,187 53 Real Estate and Rental and Leasing 178,047 204,398 102,515 54 Professional, Scientific, and Technical Services 111,746 452,018 180,288 56 Admin and Support and Waste Management & Remediation Services 245,562 45,809 105,811 61 Education Services 895 317 85 62 Health Care and Social Assistance 10 - 109 71 Arts, Entertainment and Recreation 49,474 224,101 177,446 72 Accommodation and Food Services 34,021 57,084 65,779 81 Other Services (except Public Administration) 130,476 130,392 32,621 92 Public Administration 170 - - Town direct sales tax rate $ 3,623,538 $ 2,992,308 $ 2,719,431 2.00% 2.00% 2.00% Note: Information on sales tax by NAILS was not available prior to 2006. Comparison will be made to the prior year until ten -year prior comparison can be made. Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the Town's sales tax revenue. Source: Texas State Comptroller reports. 78 Table 7 TOWN OF WESTLAKE, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST NINE FISCAL YEARS (Unaudited) 80 Business -Type Governmental Activities Activities General Certificates Total Percentage Fiscal Obligation of Capital Other Other Primary of Personal Per Year Bonds Obligation Leases Obligations Obligations Government Income Capita 2000 $ - $ - $ - $ - $ 4,679,944 $ 4,679,944 54% $ 22,608 2001 - - - - 6,145,944 6,145,944 55% 24,102 2002 - 12,400,000 - 373,230 6,113,904 18,887,134 146% 65,353 2003 - 18,810,000 - 287,417 6,100,577 25,197,994 180% 83,162 2004 - 18,810,000 - 303,943 6,027,387 25,141,330 161% 76,650 2005 - 18,810,000 - 285,662 5,980,921 25,076,583 144% 70,638 2006 - . 18,460,000 - - 266,329 5,878,381 24,604,710 70% 35,250 2007 7,365,000 11,755,000 23,000 245,885 5,822,299 25,211,184 69% 35,862 2008 9,850,000 11,375,000 15,264 240,927 5,763,022 27,244,213 65% 34,706 Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements. No debt was issued until fiscal year 2000 See Table 8 for personal income and population data. 80 i TOWN OF WESTLAKE, TEXAS PRINCIPAL EMPLOYERS CURRENT FISCAL YEAR (Unaudited) 2008 Table 9 Note: Information on the Principal Employers from 1999 is not available. Information will be accumulated over the next ten years until a ten -year prior comparison can be made. Source: Maguire Partner's tenant records and contact with employers of the Town. 82 Percentage of Estimated Total Town Employer Employees Employment Fidelity Investments 2,691 38.21% First American Real Estate Solutions 1,800 25.56% Wells Fargo 400 5.68 % Chrysler Financial 1,000 14.20% McKesson Corporation 215 3.05% Sonitrol 156 2.22% Marriott Solana Hotel 150 2.13% Walco International 145 2.06% Vaquero Club 132 1.87% Levi Strauss 92 1.31% Town of Westlake/Westlake Academy 77 1.09% Pfizer, Inc. 50 0.71% Total 6,908 98% Note: Information on the Principal Employers from 1999 is not available. Information will be accumulated over the next ten years until a ten -year prior comparison can be made. Source: Maguire Partner's tenant records and contact with employers of the Town. 82 Table 11 TOWN OF WESTLAKE, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General government Building permits issued N/A N/A 57 19 115 168 219 192 150 82 Building permit values N/A N/A $ 8,684,000 $ 12,495,020 $ 23,620,817 $ 46,698,935 $ 56,415,093 $ 42,910,780 $ 46,923,814 $ 180,707,159 Police (Contract with Keller PD' Motor vehicle stop,, 3,968 3,968 3,968 3,968 9,993 9,237 9,586 8,992 10,045 10,357 Traffic accident investigation: 86 86 86 86 91 180 163 164 225 208 Part I crimes 16 16 16 16 46 19 26 30 25 26 DWI arrests 55 55 55 55 117 70 86 56 53 45 Fire/EMS Fire runs N/A N/A N/A N/A 108 78 148 136 153 169 Ambulance runs N/A N/A N/A N/A 150 115 135 207 251 159 Inspections N/A N/A N/A N/A N/A N/A 89 161 96 132 Public Works - General Street resurfacing (sq. footage; 0 0 0 0 1.65 1.30 - 1.35 1.01 - Potholes repaired 0 0 0 0 0 40 40 20 0 20 Public Works - Utility Number of water consumer; 0 N/A 67 102 130 177 271 338 386 419 Water main breaks 0 N/A N/A N/A N/A 1 3 3 2 4 Avg daily consumption MG (water, 0 0.054 0.269 0.404 0.382 0.501 0.817 1.031 0.729 0.999 Peak daily consumption MG (water; 0 N/A 2.203 1.820 1.244 1.423 2.198 2.677 1.978 2.060 System capacity - MG (water; 0 0.685 0.685 0.685 0.685 1.685 1.685 1.685 1.685 1.685 Water purchased (in gallons x 000) 0 19,554 98,229 147,423 138,288 183,356 298,124 376,264 266,158 364,764 Water sold (in gallons x 1000) 0 N/A N/A 154,702 127,998 150,869 230,657 338,085 246,280 340,743 Wastewater Number of new sewer connection! 0 N/A 40 75 105 139 179 211 235 240 Avg daily sewage treatment N/A 0.0302 0.0490 0.0630 0.0610 0.0710 0.0950 0.1270 0.1320 0.1370 (thousands of gallons) Source: Various City department,, Notes: N/A represents information that is unavailable First year for the water /sewer system was fiscal year 2001 84 COMPLIANCE SECTION M4$11 PATTILLO, BROWN & HILL,L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Aldermen Town of Westlake, Texas 3 Village Circle, Suite 202 Westlake, Texas 76262 Members of the Board: We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the Town of Westlake, Texas, (the "Town ") as of and for the year ended September 30, 2008, which collectively comprise the Town's basic financial statements and have issued our report thereon dated February 28, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Town's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Town's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Town's financial statements that is more than inconsequential will not be prevented or detected by the Town's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Town's internal control. 86 115 SOUTH CHURCH STREET ■ HILLSBORO, TX 76645 ■ (254) 582 -2583 ■ FAX: (254) 582 -5731 IN www.pbhepa.com AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544 -7778 ■ TEMPLE, TX (254) 791 -3460 WACO, TX (254) 772 -4901 ■ ALBUQUERQUE, NM (505) 266 -5904