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HomeMy WebLinkAbout01-20-09 TSH Denton Agenda Packet HousING b71--"UD7Pr,-"NT AGENDA THE BOARD OF DIRECTORS OF THE TEXAS STUDENT HOUSING CORPORATION—DENTON PROJECT (AN INSTRUMENTALITY OF THE TOWN OF STLA ) January 20,2009 5:30 P.M. TEXAS STUDENT HOUSING OFFICE 3 VILLAGE CIRCLE, SUITE 207 WESTLAKE, TEXAS 1. CALL TO ORDER. 2. DISCUSS AND CONSIDER APPROVAL OF TSIIC — DENTON PROJECT ANNUAL AUDIT FOR FY 2007-2005 PRESENTED BY PATTILLO BROWN chi HILL,L.L.P. 3. DISCUSS AND CONSIDER APPROVAL OF AMENDED BYLAWS. 4. REVIEW AND APPROVE MINUTES OF JUNE 17,2005. 5. ADJOURN. CERTIF'ICA.TION I certify/hat the above notice was posted at the Town Hall of the Town of Westlake, 3 Village Circle, Westlake, Texas, n Friday,January 16, 2009,by 5 p.m.under the Open Meetings Act,Chapter 551 of the Texas Government Co i Sutter, utte ,TRMC,Town Secretary I you plan to attend this public meeting and have a disability that requires special needs, please advise the Town Secretary 48 hours in advance at 817-490-5710 and reasonable accommodations will be made to assist you. TEXAS THE RIDGE AT NORTH TEXAS PROJECT FINANCIAL REPORT AUGUST 31, 2008 TEXAS STUDENT HOUSING CORPORATION THE RIDGE AT NORTH TEXAS PROJECT TABLE OF CONTENTS AUGUST 31,2008 Page Number FINANCIAL SECTION IndependentAuditors' Report............................................................................................. 1 —2 Management's Discussion and Analysis ............................................................................ 3 — 6 Financial Statements: Statementof Net Assets................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets......................... ........ 8 Statementof Cash Flows ................................................................................................. 9 Notes to Financial Statements.......................................................................................... 10 — 18 SUPPLEMENTAL SCHEDULES Schedule I— Schedule of Revenues and Expenses............................................................. 19 Schedule II—Certificate of the Fixed Charges Coverage Ratio......................................... 20 ]FINANCIAL STATEMENTS PATTILLO, BROWN & PIILL, L.L.P, CERTIFIED PUBLIC ACCOUNTANTS E BUSINESS CONSULTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors Texas Student Housing Corporation— The Ridge at North Texas Project Westlake, Texas We have audited the accompanying financial statements of Texas Student Housing Corporation— The Ridge at North Texas Project (tire "Project"), as of and for the year ended August 3I , 2008, which collectively comprise the Project's basic financial statements as listed in the table of contents. Texas Student Housing Corporation— The Ridge at North Texas Project is a component unit of the Town of Westlake. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 the 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 opinion. As discussed in Note I, the financial statements present only the Project and do not purport to, and do not, present fairly the financial position of Texas Student Housing Corporation as of Aug fi ust 31 2008, and the changes in its financial position and cash flows, where applicable, for the period then ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Texas Student Housing Corporation — The Ridge at North Texas Project as of August 31, 2008, and the changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that Texas Student Housing Corporation — The Ridge at North Texas Project will continue as a going concern. As discussed in Note I to the financial statements, the Project is in default on its bonds and bondholders may choose to continue as a going concern. Management's plans in regard to these matters are discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 1 401 WEST HIGHWAY 6 E P.O.BOX 20725 ®WACO,TX 76792-0725 0(254)772-4901 ®FAX:(254)772-4920 0 www-pbliepa.com AFFILIATE OFFICES:BROWNS VILLE,TX(956)544-7778 E HILLSBORO,Tx(254)582-2583 TEMPLE,TX(254)791-3460 E WHITNEY,TX(254)694-4600 ®ALBUQUERQUE,N\I(505)266-5904 The management's discussion and analysis on pages 3 through 5 are not a required part of the basic financial statements but are supplemental information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the basic financial statements that collectively comprise the Project's basic financial statements. The accompanying supplemental information on pages 19 and 20 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplemental information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. r r January 14, 2009 2 MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS As staff of the Texas Student Housing Corporation (the "Corporation") — The Ridge at North Texas Project (the "Project"), we offer the readers of the Project's financial statements this narrative overview and analysis of the financial activities of the Project for the fiscal year ended August 31, 2008. We encourage readers to consider the information presented herein in conjunction with the Project's financial statements which follow this section. As the Corporation is a component unit of the Town of Westlake and is thus considered a governmental entity, Governmental Accounting Standards Board Statement 34, Basic Financial Statements—and Management's Disczssion and Analysis—for State and Local Governments has been implemented. The reader should note that this financial report addresses only the financial condition of the Project itself for 2008. FINANCIAL HIGHLIGHTS • The liabilities of the Project exceeded its assets at the close of the fiscal year by $8,727,759, an increase of$506,891 over the prior year. The primary reason for this increase in debt service payments. • Operating revenue of$4,073,240 is $317,048 less than budget. Operating expense is $266,821 better than budget. Major components of the expense variance were utilities, and turnover expenses as compared to budget. • At the end of the current fiscal year, the total cash balances were $723,592 in unrestricted cash and $2,413,934 in restricted cash. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Project's basic financial statements. The Project's report consists of three parts, Management's Discussion and Analysis, the basic financial statements, and notes to financial statements. The basic financial statements include a statement of net assets, statement of revenues, expenses and changes in net assets, a statement of cash flows and supplemental schedules. The Project is being treated as a going concern. The Project is in default on its bonds and is not financially able to make scheduled principal and interest payments on its outstanding debt. They are considered an event of default by the Trustee, which gives the bondholders the right to accelerate and demand payment of the bonds in full. Management and the property manager are in the process of developing plans to increase occupancy and rental rates at the property to improve its financial performance. 3 The statement of net assets presents information on all of the Project's assets and liabilities with the difference between the two reported as net assets. TABLE I TEXAS STUDENT HOUSING CORPORATION- THE RIDGE AT NORTH TEXAS PROJECT NET ASSETS Business-type Activities 2008 2007 Current and other assets $ 3,970,679 S 3,839,895 Capital assets 21,695,260 22,699,714 Total assets 25,665,939 26,539,609 Current liabilities 34,393,698 34,760,477 Total liabilities 34,3931698 34,760,477 Net assets: Invested in capital assets, net of related debt ( 8,222,476) ( 7,690,537) Restricted 299,112 656,013 Unrestricted ( 804,395) ( 1,186,344) Total net assets $( 8,727,759) S( 8,220,868) The statement of revenues, expenses and changes in net assets accounts for all of the Project's revenues and expenses regardless of when cash is paid or received. TABLE 2 TEXAS STUDENT HOUSING AUTHORITY- THE RIDGE AT NORTH TEXAS PROJECT CHANGES IN NET ASSETS Business-ty pe Activities 2008 2007 Total operating revenue S 4,073,240 S 3,999,846 Total operating expenses ( 2,469,428) ( 27766,614) Total operating income 1,603,812 1,233,232 Interest income 173,109 79,589 Interest expense ( 2,283,812) ( 2,864,714) Total nonoperating loss ( 2,110,703) ( 2,785,125) CHANGE IN NET ASSETS ( 506,891) ( 1,551,893) NET ASSETS, BEGINNING ( 8,220,868) { 6,668,975) NET ASSETS, ENDING $( 8,727,759) $( 8,220,868) The statement of cash flows recaps how cash changed from year to year. 4 FINANCIAL ANALYSIS OF THE PROJECT'S FUNDS Notes to financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Restricted cash. Restricted cash represents monies held in escrow by the trustee and are restricted for the payment of expenses as outlined in the Installment Sale Agreement. As of August 31, 2008, these balances were as follows: Revenue Fund $ 109 Bond Fund, Series 2001A 155,803 Bond Fund, Series 2001B 69 Debt Service Reserve Fund, Series 2001A 3 Bond Reserve Fund-CD 2,237,187 Debt Service Reserve Fund,Series 2002B 364 Repair and Replacement Fund 8 Trustee Fee Fund 3,246 Series A Principal Fund 17,099 Series B Principal Fund 39 Denton(UNT)Operating Reserve 7 Total S 2,413,934 Nonrestricted cash. Nonrestricted cash is available for general use of the Project. Bonds payable. As of August 31, 2008, since the bonds are in default, all amounts are considered due immediately. 2001A Bonds S 27,495,000 2001B Bonds 3,240,000 Less discounts ( 822,264) Total S 29,912,736 For the fiscal year ending August 31, 2009, the total principal and interest payment is calculated at $2,620,593. A total of$510,000 in principal was paid during 2008. ECONOMIC FAC'T'ORS AND NEVI' YEAR'S BUDGET Leases at the Project are primarily 12-month leases, however, due to competitive and market conditions, a relatively minor number of 6 and 10-month leases exist. These leases do bring a monthly premium over the 12-month leases. Occupancy for the fiscal year ending August 31, 2009, forecasts at 85%. Rental rates will see a small increase. This is exacerbated by the fact that university of North Texas does not allow freshmen to live in off-campus housing. CON'T'AC'T'ING THE PROJEC'T'S FINANCIAL MANAGEMENT This financial report is designed to provide the reader with a general overview of the Project's finances and to demonstrate the Project's accountability for the money it receives. If you have any questions about this report, or need additional information, please contact Pete Ehrenberg at (817) 490-5723. 5 TEXAS STUDENT HOUSING CORPORATION THE RIDGE AT NORTH TEXAS PROD STATEMENT OF NET ASSETS AUGUST 31, 2008 ASSETS Current assets: Cash $ 723,592 Restricted cash 2,413,934 Accounts receivable, net reserve of$2,857 8,351 Prepaid expenses 18,315 Property management receivable 31,420 Total current assets 3,195,612 Capital assets: Land 2,200,000 Other capital assets, net of accumulated depreciation 19,495 260 Total capital assets 216957260 Other assets: Deferred financing costs, net of amortization 775.067 Total other assets 775,067 Total assets 25.665.939 LIABILITIES Current liabilities: Trade accounts payable 56,220 Accrued liabilities 394,189 Management and development fees payable 831,011 Deferred revenue and prepaid rent 579,983 Accrued interest 2,114,822 Property management advance 499.737 Bonds payable 297917,736 Total current liabilities 34,393,698 NET ASSETS Invested in capital assets,net of related debt ( 8,222,476) Restricted for debt service 299,112 Unrestricted ( 804,395) Total net assets $( 8,727,759) The accompanying notes are an integral part of these financial statements. 6 TEXAS STUDENT HOUSING CORPORATION THE RIDGE AT NORTH 'TEXAS PROJECT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED AUGUST 31, 2008 OPERATING REVENUES Rental $ 3.920,227 Other 153,013 Total operating revenues 4,073,240 OPERATING EXPENSES Personnel 303.404 Contract services 47,697 Utilities 356,274 Repairs and maintenance 54;614 Turnover 123,892 Advertising and promotion 45,834 Administration 148,930 Management fees 166,780 Replacements 145,064 Depreciation and amortization 1,075,878 Travel t061 Total operating expenses 2,469,428 OPERATING INCOME 1.603,812 NONOPERATING REVENUES (EXPENSES) Interest income 173.109 Interest expense ( 2,283,812) Total nonoperating revenues (expenses) ( 2,110,703) CHANGE IN NET ASSETS ( 506,891) NET ASSETS, BEGINNING ( 8,220;868) NET ASSETS, ENDING $( 8,727,759) The accompanying notes are an integral part of these financial statements. 7 TEXAS STUDENT HOUSING CORPORATION THE RIDGE AT NORTH TEXAS PROJECT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31,2008 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tenants $ 4,016,916 Cash paid to employees ( 263,176) Cash paid to suppliers { 1,258.335) Net cash provided by operating activities 2,495,405 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Payments on bonds payable ( 472;515) Interest paid ( 2,036,536) Net cash used in capital and related financing activities ( 2,509,051) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 173.109 Net cash provided by investing activities 173,109 NET CHANGE IN CASH AND CASH EQUIVALENTS 159,463 CASK AND CASH EQUIVALENTS, BEGINNING 2,978,063 CASK AND CASH EQUIVALENTS, ENDING $ 3.137.526 Cash $ 723.592 Restricted cash 2,413,934 Total cash and cash equivalents $ 3,137.526 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 1,603,512 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 1,038,393 Changes in operating assets and liabilities: Accounts receivable ( 5,260) Trade accounts payable ( 130,704) Deferred revenue ( 51,064) Other current liabilities 40,228 Net cash provided by operating activities $ 2,495.405 The accompanying notes are an integral part of these financial statements. 8 TEXAS STUDENT HOUSING CORPORATION— THE RIDGE AT NORTH TEXAS PROJECT NOTES TO FINANCIAL STATEMENTS AUGUST 31,2008 I. GENERAL STATEMENT Texas Student Housing Corporation—The Ridge at North Texas (the "Project"), a Texas nonprofit organization, was incorporated on May 17, 2001, a component unit of the Town of Westlake, Texas (the "Town") pursuant to Section 53.35(b) of the Texas Education Code, as amended (the "Act"). The Project's primary purpose is to purchase, own and operate a student housing facility known as Texas Student Housing Corporation—The Ridge at North Texas. The Project was purchased from Jefferson Commons—Denton, L.P. on July 17, 2001. The Project obtained its financing through the issuance of Texas Student Housing Corporation — Denton Project Texas Student Housing Revenue Bonds (University of North Texas Project), Series 2001A and Subordinate Series 2001B (the "Bonds"). The Bonds were issued through a Trust Indenture (the "Trust Indenture") by and between the Corporation and The Bank of New York (the "Trustee"). The Series 2001A and Subordinate Series 2001B bonds were issued in the face amounts of $29,105,000 and S5,250,000, respectively. The accompanying financial statements present the operations of the Project, whose revenue streams are pledged for the bonds described herein. The Corporation was also established to acquire educational facilities and housing facilities to be used by the students, faculty and staff of institutions of higher education and facilities incidental, subordinate or related thereto or appropriate within the State of Texas. The Project was operated and managed under the terms of the (a) Property Management and Leasing Agreement by and between the Corporation and JPI Campus Quarters Management, L.P. ("JPI") and (b) the Asset Management Agreement by and between the Corporation and JPI Apartment Management, L.P., up until September 30, 2004. The Project subsequent to September 30, 2004, is managed and operated by Asset Campus Housing under the terms of a Property Management and Leasing Agreement. The 2008 financial statements were prepared assuming the Project will continue as a going concern. The Project's bonds payable are considered to be in default due to the discontinuance of principal and interest payments. These are considered an event of default by the Trustee, which gives the bondholders the right to accelerate and demand payment of the bonds in frill. Management and the property manager are in the process of developing and implementing plans to increase occupancy and rental rates at the property to improve its financial performance. 9 II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A surrunary of the Project's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: A. ReportinV, Entity For financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 14 as amended by GASB Statement No. 39. The criteria used is as follows: Financial Accountabilitti — The primary government is deemed to be financially accountable if it appoints a voting majority of the organization's governing body and 1) is able to impose its will on that organization; or 2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Additionally, the primary government may be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board appointed by a higher level of goverrunent or a jointly appointed board. B. Measurement Focus and Basis of Accounting The Project uses the economic resources measurement focus. This means that all assets, liabilities, equity, revenues, and expenses are accounted for using the accrual basis of accounting. Revenue is recognized when earned and expenses are recognized when they are incurred. In applying the requirements of GASB Statement No. 20, the Project has chosen to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. C. Assets, Liabilities and Net Assets or Equity Income Taxes The Project is an instrumentality of the Town and, therefore, its income is not subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code. (continued) 10 II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reporting Entity (Continued) Cash and Cash Equivalents The Project considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. At August 31, 2008, the Project had no such investments included in cash and cash equivalents. In addition, the Project has restricted cash of$2,413,934 that is held by the Trustee for the bonds payable under provisions of the Trust Indenture. During the year ended August 31, 2008, the investment income received from cash was $173,109. See Note III for risk disclosures and breakdown of restricted cash accounts. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions. Accounts Receivable Accounts receivable are stated at amounts management expects to collect from outstanding balances. Management writes off uncollectible amounts through a reduction to revenue and a credit to accounts receivable based on its assessment of the outstanding receivables. At year- end, management assesses the accounts receivable balance and establishes a valuation allowance based on historical experience and an evaluation of the outstanding balances. An allowance of$2,87 has been provided at August 31, 2008. Deferred Financing Costs Costs associated with the issuance of bonds are deferred and amortized over the term of the bonds. Advertising Costs All adverting costs are expensed as they are incurred. Advertising costs for the year ended August 31, 2008, were approximately $46;000. Capital Assets Property and equipment have been recorded at the date of acquisition at cost. Routine maintenance and repair costs to ready the units for the next period are expensed as incurred. (continued) 11 IL SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Assets, Liabilities and Net Assets or Equity (Continued) Capital Assets (Continued) Expenditures directly related to the improvement of property are capitalized at cost. The Project capitalizes the cost of roof replacements and expenditures for other major property improvements. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Estimated Asset Class Useful Lives Building 30 years Furniture and fixtures 3-20 years III. DETAILED NOTES ON ALL FUNDS A. Cash and Investments At August 31, 2008, the carrying amount of Texas Student Housing Authority—The Ridge at North Texas Project deposits (cash with interest bearing accounts and restricted cash held in interest bearing accounts) was in total $3,137,526 of which $2,413,934 represented restricted cash. Restricted Cash Restricted cash represents amounts placed on deposit in accounts and held by the Trustee, which are restricted for the payment of expenses as required by the Trust Indenture. At August 31, 2008, restricted cash consists of the following funds and accounts: Fund/Account Description Revenue Fund $ 109 Bond Fund, Series 2001A 155,803 Bond Fund, Series 2001B 69 Repair and Replacement Fund 8 Trustee Fee Fund 3,246 Series A Principal Fund 17,099 Series B Principal Fund 39 Operating Reserve Fund 7 Debt Service Reserve Fund, Series 2001A 3 Debt Service Reserve Fund, Series 2001B 364 Bond Reserve Fund-CD 2,237,187 Total $ 2,413,934 (continued) 12 III. DETAILED NOTES CAN ALL FUNDS (Continued) A. Cash and Investments (Continued) Restricted Cash (Continued) The following is a brief description of the funds and accounts making up the restricted cash balance at year-end, as defined by the Trust Indenture: Revenue Fund — The Revenue Fund was established for monthly deposits from the depository account that holds general revenues of the Project. All monies are deposited in the Revenue Fund and then properly distributed to the other funds, as required by the Trust Indenture. Amounts in the fund at year-end represent amounts that have not been distributed to the other funds due to timing of the interfund transfers. .Bond Fund— The Trustee makes monthly deposits in the Bond Fund pursuant to the Trust Indenture. Amounts in the Bond Fund shall be used solely to fund the payment of principal and interest on the bonds, for the redemption of the bonds at or prior to maturity, and to purchase bonds on the open market. hl the event of default, amounts in this fund may pay the fees and expenses of the Trustee prior to making any payments to the bondholders. This fiend has two accounts, the Series 2001A and the Series 2001B accounts. Repair and Replacement Fund— Amounts in the Repair and Replacement Fund may be (a) used to pay the maintenance and repair costs related to the Project, which the Project is obligated to pay pursuant to the Trust Indenture and (b) transferred to the Bond Fund to pay principal of or interest on the bonds to the extent there are insufficient monies in the Bond Fund. Surplus Fund— The Trustee shall deposit any remaining amount in the Revenue Fund into the Surplus Fund. Amounts on deposit in the Surplus Fund will be released to the Project if certain release tests are satisfied. If the release tests are not satisfied, the Trustee will retain the monies on deposit in the Surplus Fund. Trustee Fee Fund—Amounts are deposited in the Trustee Fee Fund on a monthly basis and are intended to pay the fees to the Trustee at year-end. Series A Principal Fund — Amounts in the Series A Principal Fund represent sinking fund payments set aside for repayment of the principal balance on the Series A Bonds. Series B Principal Fund — Amounts in the Series B Principal Fund represent sinking fund payments set aside for repayment of the principal balance on the Series B Bonds. (continued) 13 III. DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) Restricted Cash (Continued) ®peratina Reserve Fund — Amounts in the Operating Reserve Fund may be transferred to the property Manager to fund operations if the transfer from the Revenue Fund is not sufficient to pay operating expenses. Amounts may also be transferred to the Bond Fund to pay principal and interest on the bonds; to the extent there are insufficient monies in the Bond Fund on any interest payment date. Debt Service Reserve 2001A Account — The amounts on deposit in this account are to be used for the purpose of playing principal and interest on the Series 2001A Bonds as they become due in the event there should be insufficient funds in the Bond Fund. Debt Service Reserve 20018 Account — The amounts on deposit in this account are to be used for the purpose of paying principal and interest on the Series 2001 B Bonds as they become due in the event there should be insufficient fiends in the Bond Fund. The Public Fluids Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies relating to a governmental entity's cash and investments. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an instrument. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. Texas Student Housing Corporation — The Ridge at North Texas Project is not significantly exposed to interest rate risk as all investments earn a variable rate. Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The Public Funds Investment Act has a minimum rating that is required for investments. Texas Student Housing Corporation — The Ridge at North Texas Project holds all of its cash and investments with the bond Trustee and commercial banks. (continued) 14 III. DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) Concentration of Credit Risk The investment policy of Texas Student Housing Corporation — The Ridge at North Texas Project is subject to the indenture agreement of the bonds. As of August 31, 2008, the Project held all of its restricted cash balances with the Trustee, which represents 77% of the total cash and investments held at August 31, 2008. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counteiparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balances less FDIC insurance at all times. As of August 31, 2008, the Project has unrestricted cash of $723,592 (bank balance $737,766). Of the bank balances, $100,000 was covered by federal depository insurance while the remaining $637,766 was uncollateralized. The Project has a Bank Deposit Guarantee Bond from the Project's depository in the amount of$3.000,000. B. Property Management Advance and Management fees As of August 31, 2008, the Project has recorded a liability to JPI for amounts received of approximately $499,737. These advances have been made to the Project according to the terms of the Agreements. Further, the Agreement requires interest to accrue on the advances at the "Prime Rate" as published in The Wall Street Journal, plus 100 basis points 9.25% at August 31, 2008). As of August 31, 2008, the financial statements include accrued interest related to the Property Management advance in the amount of approximately $428,570 with expense for 2008 of approximately $78,598. (continued) 15 III. DETAILED NOTES ON ALL FUNDS (Continued) B. Property Management Advance and Management Fees (Continued) In addition, the Project owes JPI property and asset management fees for the management of the Denton Property. As of August 31, 2008, the Project has recorded $831,011 in unpaid property and asset management fees. Interest accrues at 12% on unpaid management fees. Accrued interest of approximately $352,373 and current year expense of $99,721 has been recorded at August 31, 2008. The Project owes management fees of approximately $110,000 to ACH at August 31, 2008, which is included in other current liabilities. C. Capital Assets Capital asset activity for the Project for the year ended August 31ti 2008, was as follows: Beginning Ending Balance Balance Capital assets,not being depreciated: Land $ 2,200,000 $ $ 2,200,000 Total capital assets; not being depreciated 2,200,000 - 2,200,000 Capital assets,being depreciated: Buildina 25,705,000 25,705,000 Furniture and fixtures 1,253.841 1 253,841 Total capital assets, being depreciated 26,958,841 - 26,958,841 Less accumulated depreciation for: Building ( 4,274,208) ( 856,833) ( 5J3 1,041) Furniture and fixtures ( 2,184,919) ( 147,621) ( 2,332,540) Total accumulated depreciation ( 6,459,127} ( 1,004,454) ( 7,463.581) Total capital assets, being depreciated,net 20,499.714 ( 1.004,454) - 19,495,260 Capital assets,net $ 22,699,714 $( 1,004,454) $ $ 21,695,260 D. Bonds Pavable The bonds are tax-exempt governmental obligations under the Internal Revenue Code. The bonds payable represent amounts due to the bondholders, via the Trustee, and payable under the terms of the Trust Indenture dated July 1, 2001. The Bonds are payable solely from the revenues pledged and assigned under the terms of the Trust Indenture. The Town of Westlake does not have any liability for the payment of the bonds, as the bonds are non- recourse to both the Town of Westlake and Texas Student Housing Authority. Interest rates on the bonds range from 5.00% to 11.00% and are payable semi-annually on July 1 and January 1 of each year thereafter. (continued) 16 III. DETAILED NOTES OIL ALL FUNDS (Continued) D. Bonds Parable (Continued) At August 31, 2008, the Project was not in compliance with certain covenants of the Indenture including insufficient funds in some of the required funds discussed in Note II and the fixed charge ratio. Upon certain events of default either the Trustee, or owners of not less than 25% in aggregate principal of the bonds then outstanding, may declare the principal and all interest then due to be immediately due and payable. Generally accepted accounting principles require that if the events of default occur, the liability should be disclosed as current on the financial statements. In addition, all required principal payments on the Series B bonds had not been made at August 31, 2008. 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 Revenue Bonds: 2001A Bonds $ 28,005,000 - $ 510,000 $ 27,495,000 $ 27,495,000 2001 B Bonds 3,240,000 - 3,240,000 3,240,000 Less discounts ( 859,749) - ( 37,485) ( 822,264) ( 822,264) Total $ 30,385,251 $ $ 471515 $ 29,912,736 $ 29,912,736 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 2008. The total interest to be paid will depend on the ultimate maturities of the bonds. Year Ending August 31, Principal Interest Total 2008 $ 30,735,000 $ 34,237,678 $ 64,972,678 E. Net Assets Net assets represent the residual assets after liabilities are deducted. These assets are reported in the following categories: Invested in Capital Assets, Net of Related Debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. (continued) 17 III. DE'T'AILED NOTES ON ALL FUNDS (Continued) E. Net Assets (Continued) Restricted fox Debt Service results when constraints placed on net asset use are either externally unposed by creditors, grantors and the like, or imposed by law through constitutional provisions or enabling legislation. F. Concentrations The Project consists of one property in Denton, Texas and is dependent upon the Denton area and the higher education facilities in the Denton area for revenue. G. Commitments and ContinIzencies The Project has yet to have an arbitrage calculation performed for its outstanding debt. After that analysis, the Project may incur a liability for interest earned in accordance with Internal Revenue Service regulations. 18 Cl Y TP '14 ou PLEMENTAL SCHEDULES TEXAS STUDENT HOUSING CORPORATION THE RIDGE AT NORTH TEXAS PROJECT SCHEDULE I-SCHEDULE OF REVENUES AND EXPENSES BUDGET AND ACTUAL FOR THE YEAR ENDED AUGUST 31, 2008 Budget Actual Variance REVENUES AND OTHER SUPPORT Rental $ 4,284,328 $ 3,920,227 $( 3647101) Other 105,960 153,013 47,053 Interest - 173,109 173.109 Total revenues and other support 4,390288 4246,349 ( 143,939) OPERATING EXPENSES Persomiel 340,201 303,404 36,797 Contract services 62,300 47,697 14,603 Utilities 506,952 356,274 150,678 Repairs and maintenance 45,805 54,614 ( 8,809) Turnover 154,325 123,892 30,433 Advertising and promotion 57,198 45,834 11,364 Administration 179,071 148,930 3 0,141 Travel 2.675 1,061 1,614 Total operating expenses 1.348.327 1.081.706 266.821 REVENUES AVAILABLE FOR FIXED CHARGES 3,041,761 3;164,643 121882 OTHER EXPENSES Management fees 197,563 166,780 30,783 Replacements 135,500 145,064 ( 9,564) Depreciation and amortization 1,075,878 1,075,878 - Interest 2,283,812 2,283,812 Total other expenses 3,692,75 3) 3.671,534 21219 EXCESS OF EXPENSES OVER REVENUES $( 650,992) $( 506,891) $ 144,101 19 TEXAS STUDENT HOUSING CORPORATION THE RIDGE AT NORTH TEXAS PROJECT SCHEDULE II-CERTIFICATE OF THE FIXED C1€ARGES COVERAGE RATIO FOR THE YEAR ENDED AUGUST 31,2008 We are providing this letter, as required by the Trust Indenture by and between Texas Student Housing Corporation — The Ridge at North Texas (the "Project'') and The Bank of New York (the "Trustee"), dated July 1, 2001, as amended on March 22, 2005, relating to Texas Student housing Corporation — Denton Project Texas Student Housing Revenue Bonds (University of North Texas project) the "Indenture," to certify the fixed charges coverage ratio as of August 31, 2008. The fixed charges coverage ratio is defined in the Indenture as the ratio of revenue available for fixed charges to fixed charges. Further, fixed charges are defined in the Indenture as the sum of all cash outflows related to the Project that the Issuer cannot avoid without violating long-term contractual or legal obligations (those obligations which extend for a period greater than one year), including, but not limited to, (i) interest on indebtedness other than short-term indebtedness, and (ii) scheduled payments of principal on indebtedness other than short-term indebtedness, provided that maximum annual debt service shall be used for purposes of computing (1) and (ii) above. The audited financial statements indicate revenue available for fixed charges for the year ended August 31, 2008, to be $3,164,643. Based on the above revenues and fixed charges, we calculate that the fixed charges coverage ratio as of August 31, 2008, to be .90, which is based on one year of operations and is not in compliance with the Indenture. 20 AMENDEDED AND RESTATED BYLAWS of TEXAS STUDENT HOUSING:A �W-)4-t4-- =Cor){)ration-I.)entori Proicct ARTICLE I POWERS AND OPERATIONS IN GENERAL SECTION 1.1. Powers of,— the Corporation The Texas Student Housing A tl c ity-4l�-�-u4hi-wi4�,'')C_oi-t)oratio _Deiito«Proiec_t_�th Cc B porado n) shall have all of the powers and authority granted to "Higher Education Authorities"created under Section 53.11, Texas Education Code,as amended (the"Act"). The .x;4;. e Cor)oration shall be managed by the Board of Directors(the`Board of Directors") in accordance with the Act. SECTION 1.2. Supervision by a fd of Aldermen.the Town Council. As the instrumentality of the Town of Westlake (the "Town"), the : t-hoa i and its policies are subject to supervision by the Ta nls Be a_- of Aldermen (the- "BeaFd of ldennen.n)Town Council(the Council) SECTION 1.3. Student Assistance Program. (a) The A+46of4y-*C or:poration_shall establish a program(the"Student Assistance Program")to provide assistance to students attending institution(s)of higher education whose principal campus is located in the State of Texas. (b) Students qualifying for assistance shall be referred to as"Recipients,"who in order to qualify must: (i) be a graduate of a high school located in the State of Texas, (ii) attend an institution of higher education whose principal campus is located in the State of Texas,and (iii) meet the requirements promulgated from time to time by the Board of Directors. (c) Recipients may be provided use of student housing facilities owned by the -A+J 4zK+Fit-y Cojj2g)rLtion at a cost Iess than the cost paid by other students residing in the same student housing facility(the assistance provided to each Recipient shall be referred to as a"Scholarship''). (d) The Student Assistance Program shall be funded exclusively from those funds(if any)of the Authority that are (i) not subject to a lien and/or pledge securing the -' t-i4 C'or .oration's=5 bonds or other obligations, TSHA.BYLAWS—Page I TAM.vl.4120(2004 (ii) not required for the timely payment of the operation and maintenance expenses, and (iii) authorized by the Board of Directors. (e) ^ E,=Ct3r1}c�^anon funds not used to provide funds for the Student Assistance Program may be used for any lawful purpose. SECTION 1.4. Regulations. The A+&eHt-1�,-C.or oration by action of the Board of Directors, may promulgate regulations (the "Regulations") governing the ity Cod'I�oratio��'s operations and implementation of the Student Assistance Program. The Regulations shall not conflict with,and shall be subject to,these Bylaws. ARTICLE I1 THE BOARD OF DIRECTORS SECTION 2.1. Number Appointment Term Disqualifications and Removal of Directors. (a) The Board of Directors shall consist of seven Directors. (b) Successor Directors(including Directors filling vacancies)shall be appointed by the (c) The term of each Director shall be two years. (d) As a Director's term expires,the Director shall continue to serve until a successor is appointed and assumes office; provided that, if a Director is removed or resigns,the Director's office shall be deemed vacant upon the removal or resignation. (e) Any Director may be removed at any time (with or without cause) by the (f) No officer or employee of the Town may serve as a Director. SECTION 2.2. Resignation. Any Director may resign at any time. A resignation shall be made by written instrument and shall take effect at the time specified therein or, if no time is specified,at the time of its receipt by the president or the secretary of the A uthcarrityCorporatior - The acceptance of a resignation is not necessary to make it effective unless expressly provided in the instrument of resignation. SECTION 2.3. Committees. (a) With respect to the management of then =itCortttigg.the Board of Directors, by resolution adopted by a majority of the Directors present,may designate one or more committees that,to the extent provided in the resolution,shall have the authority of the Board of Directors in the management of the .oration Each committee shall consist of two or more Directors. Committees that do not have TSHA.BYLAWS—Page 2 TAM.0.4/20/2004 the authority of the Board of Directors in the management of the A t€tl��r y- =orl�{�rati,o.... be designated by resolution of the Board of Directors and membership on any committee is not limited to Directors. (b) With respect to the administration of the Student Assistance Program, an Education Leadership Advisory Committee (the "Advisory Committee") empowered to advise the Board of Directors concerning student needs, assistance, and other matters relating to Scholarships, may be established by the President. The Advisory Committee shall be composed of five members and shall include two Directors. The President shall be empowered to appoint and remove all members of the Advisory Committee. SECTION 2.4. Compensation of Directors. Directors are not entitled to receive any compensation for their services as officers, except for reimbursement of their actual expenses incurred in the performance of their official duties. ARTICLE III THE OFFICERS AND DUTIES SECTION 3.1. Officers. 1 (a) The officers of the A °' —Corporation shall be a president (the "President"), a vice president (the "Vice President"), a secretary (the "Secretary"), an assistant secretary (the "Assistant Secretary"), a treasurer (the "Treasurer"), an assistant treasurer (the "Assistant Treasurer"), an executive director(the"Executive Director"), and such other officers as the Board of Directors may from time to time appoint. (b) The President and Vice President shall be Directors, but no other officers are required to be Directors. (c) The same person may hold more than one office,except that the President shall not hold the office of Secretary. SECTION 3.2. Appointment Term Removal Vacancy of Offices. (a) Each officer shall be appointed by the Board of Directors for a teen of two years and, in the absence of resignation or removal, shall continue to serve until his/her successor is appointed and assumes office, except that the Executive Director shall automatically cease being an officer upon the removal or resignation of the Executive Director. (b) Each officer is subject to removal from office(with or without cause)at any time by the vote of a two-thirds majority of the Directors in office. (c) A vacancy in any office shall be filled in the same manner as the original appointment for the unexpired term thereof. TSHA.BYLAWS—Page 3 TAM.v 1.4/20/2004 SECTION 3.3 President. (a) The President is the chief executive officer of the A�u' �s-Cornorationand, subject to the actions of the Board of Directors,shall have general charge and supervision of the management ofthe affairs of the Authority. (b) The President shall preside at all meetings of the Board of Directors. (c) The President shall cause all orders and resolutions of the Board of Directors to be put into effect. (d) The President shall sign and execute all legal documents and instruments in the name of the Au,t -4�N-Corl?ol�ation_when authorized to do so by the Board of Directors; provided that, the Board of Directors may delegate the signing and execution thereof to some other officer or to an agent of the "„ iy-orporation. SECTION 3.4. Vice President. (a) In the event of the absence or disability of the President,the Vice President shall discharge the powers and duties of the President. (b) The Vice President shall perform such additional duties as may be assigned from time to time by the Board of Directors. SECTION 3.5. Secretary. (a) The Secretary shall have charge of the records and correspondence of the A°Y y Corporation under the direction of the President. (b) The Secretary is responsible for the giving of notice of meetings of the Board of Directors. (c) The Secretary shall attend the Board of Directors meetings and shall take and keep minutes of, and record all votes cast at,the meetings. (d) The Secretary shall discharge such other duties as may be assigned from time to time by the President or the Board of Directors. SECTION 3.6. Assistant Secretary. (a) In the event of the absence or disability of the Secretary, the Assistant Secretary shall discharge the powers and duties of the Secretary. (b) The Assistant Secretary shall perform such additional duties as may be assigned from time to time by the Board of Directors. SECTION 3.7. Treasurer. (a) To the extent not otherwise provided in any resolution of the Board of Directors relating to the issuance of bonds or other obligations of the.''°,�—`—C:_:ofporation to instruments authorized by the Board of TSHA.BYLAWS-Page 4 TAM.v 1.4/20/2004 Directors to provide security therefor,the Treasurer shall have the custody of all the funds and securities of the A-utl��-C t�s�,D0rat.ii»7._and shall deposit them to the credit of the A�rtl city C c 1.13c>_ tigi.i,in such banks or other depositories as the Board of Directors may designate. (b) The Treasurer shall keep proper books of account and other records showing at all times the amount of the funds and other property belonging to the Aught =Corporation of all receipts and disbursements of the A no'Comoration. (e) Under the direction of the Board of Directors,the Treasurer shall disburse all money and sign all checks and other instruments drawn on or payable out of the funds of the.^+ACor..,oration and shall make transfers and other dispositions of the funds and securities of the Aut CC moratio�i as may be ordered by the Board of Directors. (d) The Treasurer shall also discharge such additional duties as may be assigned from time to time by the Board of Directors. (e) Upon the request of the President and/or the Board of Directors,the Treasurer shall render an accounting of all transactions of the Treasurer and of the financial condition of the A-i+ i; =Corporation. (f) The Treasurer shall give bond only if required to do so by the Board of Directors. SECTION 3.8. Assistant Treasurer. (a) In the event of the absence or disability of the Treasurer, the Assistant Treasurer shall discharge the powers and duties of the Treasurer. (b) The Assistant Treasurer shall perform such additional duties as may be assigned from time to time by the Board of Directors. SECTION 39. Executive Director. (a) The Executive Director shall be appointed by the President,on terms approved by the Board of Directors and consented to by the Beafd of^ldefl=i°n Town Council.In connection with the employment of the Executive Director,the m-*- Cc-rppr�jt-i'gi*shall enter into an employment contract with the Executive Director, which contract shall be approved by the Board of Directors and consented to by the Beaf" Aldeizffleii Town Council. (b) The Executive Director shall (i) report and be accountable to the Board of Directors, the , and the President, (ii) carryout instructions given by the President, and (iii) be subject to removal(for cause or without cause)at anytime by the President and/or the TSHA.BYLAWS—Page 5 TAKN11.4/20/2004 (c) If the Executive Director is removed, the Au E.-+ €N-_C'orporatioi' shall hire, as a successor Executive Director,the person appointed by the President on terms approved by the Board of Directors and consented to by the (d) Without any action by the Board of Directors,the Executive Director shall serve ex gfflicio as both Assistant Secretary and Assistant Treasurer. SECTION ').10. Compensation of Officers. Officers who are not Directors may receive compensation for their services as officers on terns approved by the Board of Directors. ARTICLE IV MEETINGS SECTION 4.1. Meetings of Directors. (a) The Board of Directors shall hold its meetings at the principal office of the -uth w- C.--oit_ion provided that if the President determines that with respect to ally regular orspecial meeting,an alternative meeting place is appropriate,the President may designate an alternative place for such meeting. (b) The time and place of each meeting of the Board of Directors shall be provided in each notice of meeting. (c) Regular meetings of the Board of Directors shall be held at the times designated by resolution of the Board of Directors. (d) Special meetings of the Board of Directors shall be held whenever called by the President or the Secretary or by the Board of Directors at the time and place specified by the officer calling the special meeting. (e) Unless otherwise indicated in the notice of a special meeting, any matter that may be acted upon by the Board of Directors at a regular meeting may be acted upon at a special meeting. (f) Except as otherwise provided by law,notice to Directors of a regular meeting is not required. Notice of the time and place of each special meeting shall be given to each Director (either by personal delivery, United States mail, telephone, telecopy, or any other lawful means) not later than two hours in advance of the meeting. Notice of any Board of Directors meeting to persons other than Directors shall be given if and to the extent required by law. (g) Attendance by a Director at a meeting shall constitute a waiver by the Director of any notice of meeting,unless the Director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. A waiver of a notice in writing, signed by any person entitled to notice(whether before or after the tirne for giving the notice)shall be deemed to be the equivalent to the giving of notice. SECTION 4.2. Quorum. TSHA.BYLAWS-Page 6 TAM.v 1.4!20/2004 A majority of the number of Directors fixed by these bylaws as constituting the Board of Directors shall constitute a quorum for the transacting of the business of the A-+ `+y(orp'o-ra_t 7n. The act of a majority of the Directors present at ameeting at which a quorum is in attendance shall constitute the act of the Board of Directors except as otherwise required by law or by these Bylaws. SECTION 4.3. Order of Business. The Board of Directors shall consider the matters before it in such order as the presiding officer of the Board of Directors may determine. ARTICLE V ADMINISTRATION SECTION 5.1. Staffing. (a) Upon the recommendation of the President and the approval of the Board of Directors, the A-�•Viefity—_Qojr)oratios�__may hire full or part-time employees to carry out the functions of the (b) Staff functions of the A�C,oworat_ion may be performed by employees of the Town if and to the extent approved by the Beard f"ldeF::en Town Council and if the Town is reimbursed for all actual costs of the performance of the staff functions. (c) The Executive Director shall be the senior staff member of the and all employees of the-A+F ity Corporation shall report to the Executive Director. SECTION 5.2. Engagement of Consultants. (a) To assist the At"F4�=Cor oration in acquiring, financing, and managing the 4iefit�,,-Is Corljoration.'s projects and administering the Student Assistance Program and other activities of the _- �,{;orporation,the Authority shall retain a general counsel(the"General Counsel"),a finance counsel (the"Finance Counsel"), a special finance counsel (the"Special Finance Counsel"), a financial adviser(the "Financial Adviser"), and a real estate and finance consultant(the "Real Estate and Finance Consultant"). Collectively,the General Counsel,the Finance Counsel,the Special Finance Counsel,the Financial Adviser, and the Real Estate and Finance Consultant shall be referred to as the "Consultants." (b) Each of the Consultants shall be designated by resolution of the Board of Directors and the Boafd of A ldefnien Town Council and shall be responsible directly to the President,the Board of Directors, and the BeaFd efAldefmen Town Council. (e) Each of the Consultants shall be employed pursuant to a written agreement that (i) shall preclude the Consultants from having any conflicts-of-interest with either the A titer._,or�E�i7t_i��n._or the Town and (ii) shall prescribe the compensation payable to the Consultant. With respect to the relationship between the A-utli-er-ity-Corporation and the Town,the interest of the Town shall be paramount. (f) The General Counsel shall not be compensated for services rendered. (g) Each Consultant entitled to compensation shall be compensated on the basis of effort and,as a condition to being compensated,shall furnish the Board of Directors with a written statement that describes in TSHA.BYLAWS-Page 7 TAMvI A/20/2004 reasonable detail the services rendered,the number of hours spent in rendering the services,and the amount charged for the services. SECTION 5.3. Responsibilities of Executive Director. The Executive Director shall be responsible for the following: (a) If the A-€+#Kii ty-Corporation has oversight responsibilities, including, but not limited to, approval of budgets,monitoring the perfonnance of the A+tl+€ y C>rpor_atic t�ss.property manager(s)(if any), obtaining insurance, and other related matters, for any project that the Autlw+t-�—C'rppc at on—has financed and/or owns, the Executive Director, with respect to the provisions that are contained in the documents governing the acquisition,financing,operations,and management of the project(collectively,such documents shall be referred to as the "Project Administration Documents"), shall certify in writing to the Board of Directors at least once each calendar quarter the following: (1) the is in compliance with all material requirements applicable to the A-u�ri -Corporation that are contained in the Project Administration Documents, (ii) the project is being managed by the Authority's property manager(s)in compliance the Project Administration Documents, (iii) the budget for the project has been timely submitted to the Board of Directors and is in compliance with the Project Administration Documents, and (iv) such other matters as may be requested by the President and/or the Board of Directors. (b) If the Executive Director is unable to certify to the matters referred to in Section 5.3(a)above, the Executive Director shall provide a written statement to the President stating in reasonable detail the reasons that the Executive Director cannot make such certification. (c) No later than 60 days prior to the beginning of each fiscal year,the Executive Director shall prepare and submit to the Board of Directors an annual budget containing all material revenues and expenses relating to all corporate activities of the A-€+t�--Cor n}oratioji. (d) With respect to any project budget that is required to be approved by the Board of Directors, the Executive Director shall make written recommendations to the Board of Directors regarding the budget. (e) The Executive Director shall provide to the Board of Directors and the BeaFd of ldei-Men Town Council a monthly transaction report showing all income received and expenses paid during each calendar month. Upon the request of the President or a majority of the Board of Directors, the Executive Director shall provide any financial report,to the extent reasonably possible,to the Board of Directors and the Beard f A'dean°^ Town Council. (f) In performing the duties assigned to the Executive Director, the Executive Director shall confer with each of the Consultants to the extent the Executive Director believes that consultation is appropriate to assure that the duties of the Executive Director will be performed properly. SECTION 5.4. Records. TSHA.BYLAWS—Page 8 TAM.vl.4/20/2004 (a) The t 4--Corz�ario_n,shall keep complete corporate and financial records,including all banking records, and minutes of the proceedings of its Board of Directors and of committees (if any)of the Board of Directors in accordance with applicable law. (b) The records and minutes shall be made available for inspection at all reasonable times by any (i) Director, and (ii) Town representative authorized by the ° •a efAidefiBe Town Council. (c) The Secretary and Assistant Secretary,under the supervision of the Executive Director,shall be responsible for keeping and maintaining the Al. » Corporation's records. SECTION 5.5. Authorization to Write Checks. The President,the Treasurer,the Executive Director,the Assistant Treasurer and the Secretary each E,t,.,..,+.� C; shall be authorized to write checks on behalf of the n,� orj)orationfrom any bank or trust account maintained by the r^. =Corporation for any purpose authorized by the Board of Directors;provided tat, with respect to any check in excess of$5,000,the check must be signed by two officers at least one of which must be a Director. SECTION 5.6. Administrative Fees. The s��- may prescribe fees payable by applicants for financial participation and/or assistance by the ' hFCorpc?ration and such other fees and charges as the Board of Directors detennines appropriate to defray the administrative expenses incurred in the operation of the A€ut4+&F4-y Corporation or to be used for any other lawful purposes. SECTION 5.7. Fiscal Year. i The fiscal year of the."• - HFrCorporation shall be the annual period determined by resolution of the Board of Directors. SECTION 5.8. Amounts Owning to Town. The +iq C:orvoration_.shall pay any amounts owed to the Town for pennitting its employees to provide staffing for the A Corporation upon receipt(or as promptly thereafter as practicable)from any of its funds available for such payment. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.1. Time for Taking Effect. These Bylaws shall take effect upon their adoption by the Board of l defff e Town Council and the Board of Directors. SECTION 6.2. Seal. TSHA.BYLAWS—Page 9 TAM.v l.4/20/2004 The official seal of the.^ .<rp<> Itt�n...shall be as determined by the Board of Directors. The I seal shall not be necessary to the proper execution by the officers of the lty-C:or}3oratio« of any document or instrument unless otherwise specified by the Board of Directors. SECTION 6.3. Amendments. These Bylaws may be amended at any time, and from time to time, by resolutions adopted by the Board of Directors and the Beafd of kideimeft Town Council. SECTION 6.4. Interpretation. These Bylaws shall be liberally construed to effect the purposes of the Ado Corporation. If any part of these Bylaws is ruled invalid by a court of competent jurisdiction,the remainder of these Bylaws shall remain in effect to the fullest extent possible under the application of such ruling. References in these Bylaws to the singular number shall include the plural and vice versa(unless the context otherwise.requires). SECTION 6.5. Special Requirements. The -Corporation shall comply with the following special requirements: j 2o (a) The " �a �:��r ratioij_shall maintain its books and records separate and apart from any other legal entity. (b) The k==tjjari-Ay Corporation shall not commingle its assets with the assets of any other legal entity. (c) The ion shall maintain financial records separate from any other legal entity. j (d) The A+Al+e Corporation shall maintain an"anus-length"relationship with all other legal entities except as otherwise may be required by law. {e) The A ,C )jp_gjtgbon._shall pay the salaries of its own employees. SECTION 6.6. Financial Relationship with Town. (a) As the duly created instrumentality of the Town,the����:=-�=wg- ,c?rp{?�'at�o��shail be required to compensate the Town for overseeing the activities of the - -oorat`ton and providing facilities and staff to the At efit-YCorporation. Upon receipt of a resolution adopted by the B ' "' °ri"°" Town Council assessing an oversight and facilities fee payable by the �Cor.orationto the Town, the Authe:ity- tion shall be obligated to pay the fee in the amount and on terms authorized by the Baa l e€ ^ �nen Town Council without any action being the to be taken by the Board of Directors. Notwithstanding any provision in these Bylaws,the President and/or the Executive Director shall be authorized to pay any fees payable by the at e-Corporatio to the Town by check or otherwise without any action being required to be taken by any other officer or director. (b) As the duly created instrumentality of the Town, upon dissolution of the A-�l i CorPoratio ,the following actions shall be taken: TSHA.BYLAWS-Page 10 TAMA.4/20/2004 1„�i!„�re4e� (i) all assets, including real and personal property of all types, owned by the �r� Cor��oratiorl at the time of such dissolution shall be transferred to the Town after all debts, liabilities, and obligations of the A+Ah-a=ity—C'orpof'ation have been paid or otherwise satisfied without any action being required to be taken by the Board of Directors, and (ii) the officers and directors of the A,# Corporation shall take any action necessary or appropriate to effect the transfer of the Authority's assets to the'Town. TSHA.BYLAWS—Page I I TAM.vi.4/20/2004 IL UD-E-`NT HousING MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE TEXAS STUDENT HOUSING CORPORATION—DENTON PROJECT (AN INSTRUMENTALITY OF THE TOWN OF WESTLA ) June 17, 2008 PRESENT: Chair Jim Carter and Directors George Ledak, Jac Irvine, and Chuck Schultz. ABSENT: Directors Jill McKean, Larry Darlage, and Melanie Lekkos. OTHERS PRESENT: President Hank Smyth, General Counsel Scott Bradley, Finance Manager Pete Ehrenberg, and Secretary Kim Sutter. 1. CALL TO ORDER. Chairman Carter called the meeting at 7:09 p.m. 2. CONSIDER APPROVAL OF MINUTES OF THE MEETING OF THE TEXAS STUDENT HOUSING CORPORATION—DENTON PROJECT HELD JANUARY 29,2008. Chair Carter introduced the item and asked for a motion: MOTION: Director Ledak made a motion to approve the minutes as presented. Director Irvine seconded the motion. The motion carried by a vote of 4-0. 3. CONSIDER APPROVAL OF THE FY 2008-2009 BUDGET. Finance Manager Pete Ehrenberg addressed the Board regarding the item and advised that the budget is based on an occupancy of 85%. . MOTION: Director McKean made a motion to approve the FY 2008-2009 budget as presented. Director Ledak seconded the motion. The motion carried by a vote of 4-0. TSHC—Denton Project Page 2 of 2 Minutes June 17,2008 4. ADJOURN. There being no further business before the Board, Chairman Carter declared the meeting adjourned at 7:12 p.m. The Minutes are approved and certified to be a true and correct reflection of the actions of the officers and members of the Board, and is hereby certified to be an official copy thereof, on file among the official records of the Board, on this the 20 day of January 2009. Jim Carter, Chairman ATTEST: Kim Sutter, TRMC, Secretary