HomeMy WebLinkAboutBallpark Audit 08-31-07 i
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TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
FINANCIAL REPORT
AUGUST 31, 2007
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TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
TABLE OF CONTENTS
AUGUST 31,2007
Page
Number
FINANCIAL SECTION
Independent Auditors' Report............................................................................................. 1 -2
Management's Discussion and Analysis............................................................................ 3-6
Financial Statements:
Statement of Net Assets................................................................................................... 7
Statement of Revenues, Expenses and Changes in Net Assets........................................ 8
Statement of 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
PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Texas Student Housing Authority—
Ballpark Austin Project
Westlake, Texas
We have audited the accompanying financial statements of Texas Student Housing Authority —
Ballpark Austin Project (the "Project"), as of and for the year ended August 31, 2007, as listed in the
table of contents. Texas Student Housing Authority—Ballpark Austin Project is a component unit of the
Town of Westlake. These financial statements are the responsibility of the Project management. Our
responsibility is to express an opinion on these financial statements based on our audit. i
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We conducted our audit in accordance with auditing standards generally accepted in the United
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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 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 Authority as of August 31,
2007, 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 Authority — Ballpark Austin Project at August 31,
2007, and the respective changes in its 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—Ballpark Austin 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 the Trustee or Service Agent may
choose to continue as a going concern. Management's plans in regard to these matters are discussed in
Note I. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
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401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pbhcpa.com
AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460■WHITNEY,TX(254)694-4600■ALBUQUERQUE,NM(505)266-5904
The management's discussion and analysis on pages 3 through 6 is not a required part of the
basic financial statements but is supplementary 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 financial statements that
collectively comprise the Texas Student Housing Authority — Ballpark Austin Project's basic financial
statements. The accompanying supplemental information on pages 20 and 21 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 basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
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January 24, 2008
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MANAGEMENT'S DISCUSSION AND ANALYSIS E'
As staff of the Texas Student Housing Authority (the "Authority") — Ballpark Austin Project (the
"Project"), we offer the readers of the Project's financial statements this narrative overview and analysis
of the financial activities of the Project for the fiscal year ended August 31, 2007. We encourage readers
to consider the information presented herein in conjunction with the Project's financial statements which
follow this section. As the Authority 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 Discussion and Analysis for State and Local Governments
has been implemented. The reader should note that this financial report addresses only the financial
condition of the Project itself for 2007.
FINANCIAL HIGHLIGHTS
• The liabilities of the Project exceeded its assets at the close of the fiscal year by
$9,936,876. Of this liability, a total of $338,450 is carried as a liability to JPI, the
former management company, and management is of the opinion that pending a
settlement with JPI,this liability may be forgiven.
• Operating revenue of $3,359,388 is $61,485 more than budget; however, operating
expense is $114,446 less than budget, not including depreciation and amortization.
• At the end of the current fiscal year, the total cash balances were $320,171 in
unrestricted cash and$2,120,077 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.
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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 1
TEXAS STUDENT HOUSING AUTHORITY-
BALLPARK AUSTIN PROJECT
NET ASSETS
Business-type Activities
2007 2006
Current and other assets $ 5,351,810 $ 5,840,834
Capital assets 25,917,825 27,188,235
Total assets 31,269,635 33,029,069
Long-term liabilities 36,637,924 37,232,924
Other liabilities 4,568,587 4,016,669
Total liabilities 41,206,511 41,249,593
Net assets:
Invested in capital assets,
net of related debt ( 9,855,099) ( 9,094,604)
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Restricted ( 719,602) 50,763
Unrestricted 637,825 823,317
Total net assets $(_1,936,876 J $( 8,220,524)
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-
BALLPARK AUSTIN PROJECT
CHANGES IN NET ASSETS
Business-type Activities
2007 2006
Total operating revenue $ 3,359,388 $ 3,206,589
Total operating expenses 2,964,501 2,884,438
Total operating income 394,887 322,151
Interest income 134,855 153,574
Interest expense ( 2,246,094) ( 2,167,464)
Total nonoperating loss ( 2,111,239) ( 2,013,890)
CHANGE IN NET ASSETS ( 1,716,352) ( 1,691,739)
NET ASSETS,BEGINNING ( 8,220,524) ( 6,192,401)
PRIOR PERIOD ADJUSTMENT - ( 336,384)
NET ASSETS,ENDING $( 9,936,870 $( 8,220,524)
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The statement of cash flows recaps how cash changed from year to year.
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, 2007, these
balances were as follows:
Bond Fund,Series 2001A Senior Interest $ 118,684
Bond Fund,Series 2001C Sub C 16
Debt Service Reserve 2001A Senior 1,823,681
Debt Service Reserve 2001B Sub B 841
Repair and Replacement Fund 1,280
Minimum Scholarship Fund 1,893
Trustee Fee Fund 5,426
Tax and Insurance Fund 72,581
Senior Bonds Principal 95,675
Total $ 2,120,077
Nonrestricted cash. Nonrestricted cash is available for general use of the Project.
Bonds payable. As of August 31, 2007, the following amounts on the Series A, B and C Bonds were
owed:
Series A $ 31,905,000
Series B 2,330,000
Series C 3,000,000
Less discounts ( 1,462,076)
Total $ 35,772,924
For the fiscal year ending August 31, 2008, the total principal and interest payment is calculated at
$2,459,157. A total of$570,000 in principal was paid during 2007.
Fixed charge cover ratio. The bond indenture provides for a fixed charge coverage ratio of 1.25 when
payments on the A and B Bond Series are considered and 1.15 when payments on the C Bond Series are
added. At this time, the Project has only realized a ratio of .85 and .78, respectively, and is thus
technically in default of the indenture.
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ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
Leases at the Project are primarily 12-month leases, however, due to competitive and market conditions,
a relatively minor number of 10-month leases exist. These leases do bring a monthly premium over the
12-month leases. Occupancy for the fiscal year ending August 31, 2008, indicates a substantial increase
to 100%; however,rental rates, again due to competitive pressures, will not see an increase.
Net operating revenue for next year is projected at $1,901,224. This negative gap between cash
available for debt service and cash required for debt service will result in the necessity to invade both j
Series A and Series B debt service reserve funds.
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CONTACTING THE PROJECT'S FINANCIAL MANAGEMENT
This financial report is designed to provide the reader with a general overview of the Project's finances
and to demonstrate the Project's accountability for the money it receives. If you have any questions
about this report, or need additional information, please contact Pete Ehrenberg at (817) 490-5723, or
Hank Smyth at(817) 281-5053.
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TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
STATEMENT OF NET ASSETS
AUGUST 31,2007
ASSETS
Current assets:
Cash $ 320,171
Restricted cash 2,120,077
Accounts receivable 36,262
Prepaid expenses 8,225
Total current assets 2,484,735
Capital assets:
Land 4,788,265
Other capital assets,net of accumulated depreciation 21,129,560
Total capital assets 25,917,825
Intangible assets:
Deferred financing costs,net of amortization 2,867,075
Total intangible assets 2,867,075
Total assets 31,269,635
LIABILITIES
Current liabilities:
Accounts payable 63,424
Management and development fees payable 496,483
Accrued liabilities 332,348
Deferred revenue and prepaid rent 241,653
Accrued interest 2,839,679
Bonds payable 595,000
Total current liabilities 4,568,587
Long-term liabilities:
Bonds payable 35,177,924
Deferred purchase price 1,460,000
Total long-term liabilities 36,637,924
Total liabilities 41,206,511
NET ASSETS
Invested in capital assets,net of related debt ( 9,855,099)
Restricted for debt service ( 719,602)
Unrestricted 637,825
Total net assets $( 9,936,876)
The accompanying notes are an integral part of these fmancial statements.
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TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
STATEMENT OF REVENUES,EXPENSES
AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31,2007
OPERATING REVENUES
Rental income $ 3,337,504
Other income 21,884
Total operating revenues 3,359,388
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OPERATING EXPENSES
Personnel 310,303 j
Contract services 52,696
Utilities 539,017
Repairs and maintenance 29,271
Turnover 103,915
Advertising and promotion 85,318
Administration 152,441
Management fees 166,902
Replacements 133,934
Depreciation 1,270,410
Amortization 120,294
Total operating expenses 2,964,501
OPERATING INCOME 394,887
NONOPERATING REVENUES (EXPENSES)
Interest income 134,855
Interest expense ( 2,246,094)
Total nonoperating revenues (expenses) ( 2,111,239)
CHANGE IN NET ASSETS ( 1,716,352)
NET ASSETS,BEGINNING ( 8,220,524)
NET ASSETS,ENDING $ 9,936,876
The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
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STATEMENT OF CASH FLOWS
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FOR THE YEAR ENDED AUGUST 31,2007
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CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from tenants $ 3,366,371
Miscellaneous other income 21,884
Cash paid to employees ( 261,050)
Cash paid to suppliers ( 1,338,575)
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Net cash provided by operating activities 1,788,630
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments on bonds payable 509,915
Interest paid ( 2,722,745)
Net cash used in capital and related financing activities ( 2,212,830)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 134,855
Net cash provided by investing activities 134,855
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 289,345)
CASH AND CASH EQUIVALENTS,BEGINNING 2,729,593
CASH AND CASH EQUIVALENTS,ENDING $ 2,440,248
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income $ 394,887
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation and amortization 1,390,704
Changes in operating assets and liabilities:
Accounts receivable 34,698
Prepaid assets 44,687
Trade accounts payable ( 84,768)
Deferred revenue ( 5,831)
Development fees payable ( 193,033)
Management fees payable 158,033
Other current liabilities 49,253
Net cash provided by operating activities $ 1,788,630
The accompanying notes are an integral part of these fmancial statements.
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TEXAS STUDENT HOUSING AUTHORITY—
BALLPARK AUSTIN PROJECT
NOTES TO FINANCIAL STATEMENTS
AUGUST 31,2007
I. GENERAL STATEMENT
Texas Student Housing Authority (the "Authority"), a higher education authority, was established
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on January 23, 1995, as a duly constituted authority of the Town of Westlake, Texas, pursuant to
Section 53.11 of Chapter 53 of the Texas Education Code, as amended. The Authority's purpose
among other things is to acquire, finance, and operate student housing facilities. The Authority
operates several student housing facilities in Texas and one of the housing projects is the Ballpark
Austin Project (the "Project"). The Project was purchased from Jefferson Commons — Austin,
L.P., a Delaware limited partnership on December 27, 2001. The Project obtained its financing
through the issuance of Texas Student Housing Authority — Student Housing Revenue Bonds
(Austin, Texas Project), Series 2001A, Series 2001B and Subordinate Series 2001C. The bonds
were issued through a trust indenture by and between the Authority and the Bank of New York,
the, trustee. The Series 2001A, 2001B and Subordinate Series 2001C Bonds were issued in the
face amounts of $34,175,000, $2,470,000 and $3,000,000, respectively. The accompanying
financial statements present the operations of the Project, whose revenue streams are pledged for
the bonds described herein.
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The 2007 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 full.
Management and the property manager are in the process of developing and implementing plans to
increase occupancy and rental rates at the property to improve its financial performance.
II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Project's significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
A. Reporting Entity
For financial reporting purposes, management has considered all potential component units.
The decision to include a potential component unit in the reporting entity was made by
applying the criteria set forth in GASB Statement No. 14 as amended by GASB Statement
No. 39. The criteria used is as follows:
(continued)
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II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A. Reporting Entity(Continued)
Financial Accountability— The primary government is deemed to be financially
accountable if it appoints a voting majority of the organization's governing body
and 1) 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 government 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.
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, 2007, the Project had no such
investments included in cash and cash equivalents.
In addition, the Project has restricted cash of $2,120,077 that is held by the trustee for the
bonds payable under provisions of the trust indenture. During the year ended August 31,
2007, the investment income received from cash was $134,855. See Note III for risk
disclosures and breakdown of restricted cash accounts.
(continued)
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II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Assets, Liabilities and Net Assets or Equity(Continued)
Accounts Receivable
Accounts receivable are stated at amounts management expects to collect from outstanding
balances. Management writes off uncollectible amounts through a reduction to revenue and a
credit to accounts receivable based on its assessment of the outstanding receivables. At year-
end, management assesses the accounts receivable balance and establishes a valuation
allowance based on historical experience and an evaluation of the outstanding balances. As
of August 31, 2007, management has determined that all accounts doubtful of collection have
been charged to operations and an allowance is not required.
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, 2007, were approximately$85,000.
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.
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.
The trust indenture (dated December 1, 2001) provides for a repair and replacement fund
requirement. The covenant states that no less frequently than every five years following the
date of issuance of the bonds, the Project will cause a professional engineer or firm of such
engineers to conduct a physical assessment of the Project and to submit a written report
concerning the physical condition of the Project and the engineer's recommendations for
capital improvements needed at the Project.
Depreciation is computed using the straight-line method over the estimated useful lives as
follows:
Estimated
Asset Class Useful Lives
Building 30
Furniture, fixtures and equipment 3 -20
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M. DETAILED NOTES ON ALL FUNDS
A. Cash and Investments
At August 31, 2007, the carrying amount of Texas Student Housing Authority — Ballpark
Austin Project deposits (cash with interest bearing accounts and restricted cash held in
interest bearing accounts)was in total $2,440,248 of which$2,120,077 represented restricted
cash. The following is the breakdown of the 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 31,2007,restricted cash consists of the following funds and accounts:
Fund/Account Description
Bond Fund,Series 2001A Senior Interest $ 118,684
Bond Fund,Series 2001C Sub C 16
Debt Service Reserve 2001A Senior 1,823,681
Debt Service Reserve 2001B Sub B 841
Repair and Replacement Fund 1,280
Minimum Scholarship Fund 1,893
Trustee Fee Fund 5,426
Tax and Insurance Fund 72,581
Senior Bonds Principal 95,675
Total $ 2,120,077
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.
(continued)
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III. DETAILED NOTES ON ALL FUNDS (Continued) '
A. Cash and Investments (Continued)
Restricted Cash (Continued)
Bond Fund— The trustee makes monthly deposits in the Bond Fund pursuant to
the trust indenture. Amounts in the Bond Fund shall be used solely to fund the
payment of principal and interest on the bonds, for the redemption of the bonds at
or prior to maturity, and to purchase bonds on the open market. In the event of
default, amounts in this fund may pay the fees and expenses of the trustee prior to
making any payments to the bondholders. This fund has three accounts, the
Series 2001A, 2001B and the Series 2001C accounts.
Repair and Replacement Fund— Amounts in the Repair and Replacement Fund
may be a) used to pay the maintenance and repair costs related to the Ballpark
Austin property, 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.
Operating 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 2001 Account—The amounts on deposit in this account are
to be used for the purpose of paying principal and interest on the Series 2001A
bonds as they become due in the event there should be insufficient funds in the
Bond Fund.
(continued)
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III. DETAILED NOTES ON ALL FUNDS (Continued)
A. Cash and Investments (Continued)
Restricted Cash (Continued)
Debt Service Reserve 2001E Account— The amounts on deposit in this account
are to be used for the purpose of paying principal and interest on the Series 2001B
Bonds as they become due in the event there should be insufficient funds in the
Bond Fund.
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Proiect Fund— Amounts in the Project Fund are held and disbursed for costs of j
the Project.
Residual Fund — Amounts in the Residual Fund related to three accounts — the
Subordinate Bond Amortization Account — Series C, the Issuer Education
Account and the Supplemental Management Fee Account. Based on release,tests
funds are then transferred to each respective account. In addition, insurance funds
are held to pay costs of maintaining insurance on the Project.
The Public Funds Investment Act (Government Code Chapter 2256) contains specific
provisions in the areas of investment practices, management reports and establishment of
appropriate policies relating to a governmental entity's cash and investments.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an instrument. Generally, the longer the maturity of an investment the greater the
sensitivity of its fair value to changes in market interest rates. Texas Student Housing
Authority — Ballpark Austin 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 Authority — Ballpark Austin
Project holds all of its cash and investments with the bond trustee and commercial banks.
Concentration of Credit Risk
The investment policy of Texas Student Housing Authority — Ballpark Austin Project is
subject to the indenture agreement of the bonds. As of August 31, 2007, the Project held all
of its restricted cash balances with the trustee, which represents 87% of the total cash and
investments held at August 31, 2007.
(continued)
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III. DETAILED NOTES ON ALL FUNDS (Continued)
A. Cash and Investments (Continued)
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside parry. The custodial
credit risk for investments is the risk that, in the event of the failure of the counterparty to a
transaction, a government will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. The Public Funds Investment Act does
not contain legal or policy requirements that would limit the exposure to custodial credit risk
for deposits or investments, other than the following provision for deposits: The Public
Funds Investment Act requires 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, 2007, $202,072 of the Project's $302,072 bank balance was collateralized
with a Bank Deposit Guarantee Bond from the Project's depository. The remaining balance,
$100,000,was covered by FDIC insurance.
B. Capital Assets
Capital asset activity for the Project for the year ended August 31,2006,was as follows:
Beginning Ending
Balance Additions Retirements Balance
Capital assets,not being depreciated:
Land $ 4,788,265 $ - $ - $ 4,788,265
Total capital assets,
not being depreciated 4,788,265 - - 4,788,265
Capital assets,being depreciated:
Building 21,345,305 - - 21,345,305
Improvements,furniture
and fixtures 6,993,063 - - 6,993,063
Total capital assets,
being depreciated 28,338,368 - - 28,338,368
Less accumulated depreciation for:
Building ( 3,320,380) ( 711,510) - ( 4,031,890)
Improvements,furniture
and fixtures ( 2,618,018) ( 558,900) - ( 3,176,918)
Total accumulated depreciation ( 5,938,398) ( 1,270,410) - ( 7,208,808)
Total capital assets,
being depreciated,net 22,399,970 ( 1,270,410) - 21,129,560
Capital assets,net $ 27,188,235 $( 1,270,410) $ - $ 25,917,825
(continued)
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III. DETAILED NOTES ON ALL FUNDS (Continued)
C. Bonds Payable
The bonds are tax-exempt governmental obligations under the Internal Revenue Code. The
bonds payable represent amounts due to the bondholders, via the trustee, and payable under
the terms of the trust indenture dated December 1, 2001. The bonds are payable solely from
the revenues generated by the Project and are secured by the revenues pledged and assigned
under the terms of the trust indenture. The Town of Westlake does not have any liability for
the payment of the bonds, as the bonds are non-recourse to both the Town of Westlake and
Texas Student Housing Authority. Interest rates on the bonds range from 4.00% to 11.00%
and are payable semi-annually on July 1 and January 1 of each year thereafter.
At August 31, 2006, the Project had not made interest payments on the Subordinate 2001C
Bond Series since July 2003, and the Subordinate 2001C Bond is in default. In addition, the
Project's fixed charges coverage ratio was not in compliance with the covenants of the
indenture. These events do not constitute an event of default that accelerates the bonds. As a
result,the maturities are presented under the original repayment terms.
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The following is a summary of long-term debt transactions of the Project for the 12-month
period ended August 31, 2007:
Amounts
Beginning Ending Due Within
Balance Increases Decreases Balance One Year
Revenue Bonds:
2001A Bonds $ 32,440,000 $ - $( 535,000) $ 31,905,000 $ 560,000
2001B Bonds 2,365,000 - ( 35,000) 2,330,000 35,000
2001C Bonds 3,000,000 - - 3,000,000 -
Less discounts ( 1,522,161) - 60,085 ( 1,462,076) -
Total $ 36,282,839 $ - $( 509,915) $ 35,772,924 $ 595,000
The debt is to be amortized through 2033 with varying payment amounts ranging from
$330,000 to $4,505,000 for interest and principal. The annual requirements to amortize all
debts outstanding as of August 31, 2007, are as follows:
Year Ending Governmental Activities
August 31, Principal Interest Total
2008 $ 595,000 $ 2,367,341 $ 2,962,341
2009 620,000 2,340,339 2,960,339
2010 650,000 2,311,359 2,961,359
2011 680,000 2,280,294 2,960,294
2012 715,000 2,247,194 2,962,194
2013-2017 4,210,000 10,605,181 14,815,181
2018-2022 5,485,000 9,321,463 14,806,463
2023-2027 7,175,000 7,635,888 14,810,888
2028-2032 9,420,000 5,392,488 14,812,488
2033 7,685,000 750,525 8,435,525
Totals $ 37,235,000 $ 45,252,072 $ 82,487,072
(continued)
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III. DETAILED NOTES ON ALL FUNDS (Continued)
D. 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.
Restricted for Debt Service results when constraints placed on net asset use are
either externally imposed by creditors, grantors and the like, or imposed by law
through constitutional provisions or enabling legislation.
E. Management Fees
Beginning June 1, 2004, the Project retained Asset Campus Management for property
management and recorded property management fees of approximately $133,521 for the year
ended August 31, 2007, with approximately $18,000 due at August 31, 2007, and included in
accounts payable. As of August 31, 2007, the Project has recorded approximately $338,450
in unpaid property and asset management fees to the prior property management company.
The management agreement with the previous management company states that if the
management fees are not paid, the amounts past due will accrue interest at the lesser of 12% or
the highest lawful rate of interest. The Project's financials include accrued interest of
approximately$46,000 for the unpaid management fees for the year ended August 31, 2007.
F. Concentrations
The Project consists of one property in Austin, Texas, and is dependent upon the Austin area
and the higher education facilities in the Austin area for revenues.
G. Commitments and Contingencies
The Project has a deferred purchase commitment for $1,460,000 as part of the original
purchase of the Project. The deferred purchase price accrues interest at a rate of 11% per
annum. The first deferred purchase price installment shall be payable on September 1 of the
first year after the Series C Bonds have been paid in full (scheduled final payment on Series
C Bonds is in 2033), and the remaining installments shall be paid on each anniversary
thereafter until the deferred purchase price and all interest thereon has been paid in full. As
of August 31, 2007, there have been no payments made on the deferred purchase price.
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.
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SUPPLEMENTAL SCHEDULES
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
SCHEDULE I-SCHEDULE OF REVENUES AND EXPENSES
BUDGET AND ACTUAL
FOR THE YEAR ENDED AUGUST 31,2007
Budget Actual Variance
REVENUES AND OTHER SUPPORT
Rental income $ 3,207,843 $ 3,337,504 $ 129,661
Other income 90,060 21,884 ( 68,176)
Interest income - 134,855 134,855
Total revenues and other 3,297,903 3,494,243 196,340
OPERATING EXPENSES
Personnel 318,344 310,303 8,041 j
Contract services 49,980 52,696 ( 2,716)
Utilities 580,945 539,017 41,928
Repairs and maintenance 27,780 29,271 ( 1,491)
Turnover 103,200 103,915 ( 715)
Advertising and promotion 98,850 85,318 13,532
Administration 208,308 152,441 55,867
Total operating expenses 1,387,407 1,272,961 114,446
REVENUES AVAILABLE FOR FIXED CHARGES 1,910,496 2,221,282 3103786
OTHER EXPENSES
Management fees 131,916 166,902 ( 34,986)
Replacements 134,600 133,934 666
Depreciation and amortization 1,390,704 1,390,704 -
Interest 2,246,094 2,246,094 -
Total other expenses 3,903,314 3,937,634 34,320
EXCESS OF EXPENSES OVER REVENUES $( 1,992,818) $( 1,716,352) $ 276,466
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TEXAS STUDENT HOUSING AUTHORITY—
BALLPARK AUSTIN PROJECT
SCHEDULE H-CERTIFICATE OF
THE FIXED CHARGES COVERAGE RATIO
AUGUST 31,2007
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We are providing this letter, as required by the Trust Indenture by and between Texas Student Housing
Authority — Ballpark Austin Project (the "Project") and the Bank of New York (the "Trustee"), dated
December 1, 2001, relating to Texas Student Housing Authority — Ballpark Austin Project Student
Housing Revenue Bonds the "Indenture," to certify the Fixed Charges Coverage Ratio as of August 31,
2007.
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 (i) and (ii) above.
The audited financial statements indicate revenue available for fixed charges for the 12-month period
ended August 31, 2007,to be $2,221,282.
Based on the above revenues and fixed charges utilizing Bond A and Bond B, we calculate that the fixed
charges coverage ratio as of August 31, 2007, to be .8 5, which is based on 12 months of operations.
Based on the above revenues and fixed charges utilizing Bond A, Bond B and Bond C, we calculate that
the fixed charges coverage ratio as of August 31, 2007, to be .78, which is based on 12 months of
operations.
Based on the above budgeted revenues and fixed charges utilizing Bond A and Bond B, we calculate
that the fixed charges coverage ratio as of August 31, 2007, to be .84, which is based on 12 months of
operations.
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