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Home My WebLink About01-29-08 TSHA Agenda Packet s. AGENDA T , �XA`11* -E z5r]FUDENtHousING BOARD OF DIRECTORS OF THE TEXAS STUDENT HOUSING AUTHORITY (AN INSTRUMENTALITY OF THE TOWN OF STLA ) January 29,2008 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 TEXAS STUDENT HOUSING AUTHORITY AUDIT FOR FY 2006-2007 PRESENTED BY PATILLO DROWN & HILL, L.L.P. 3. DISCUSS AND CONSIDER APPROVAL OF BALLPARK PROPERTY ANNUAL AUDIT FOR FY 2006-2007 PRESENTED BY PATILLO BROWN&HILL,L.L.P. 4. DISCUSS AND CONSIDER APPROVAL OF TOWNLAKE ANNUAL AUDIT FOR FY 2006-2007 PRESENTED BY PATILLO BROWN& HILL., L.L.P. 5. DISCUSS AND CONSIDER APPROVAL OF CAMBRIDGE ANNUAL AUDIT FOR FY 2006-2007 PRESENTED BY PATILLO BROWN& HILL,L.L.P. 6. HEAR REPORT ON STRATEGIC PLAN UPDATE. 7. PRESIDENTS REPORT. 8. CONSIDERATION OF RENEWAL SCHOLARSHIPS FOR 2008-2009. 9. FINANCE MANAGERS REPORT. 10. REVIEW AND APPROVE MINUTES OF NOVEMBER 20,2007. 11. ADJOURN. CERTIFICATION I certify that the above notice was posted at the Town Hall of the Town of Westlake,3 Village Circle,and Westlake Civic Campus,2600 J.T.Ottinger Road,Westlake,Texas,on or before Friday,January 25,2008,by 5 p.m.under the Open Meetings Act,Chapter 551 of the Texas Government Code. Kim Sutter,TRMC,Town Secretary If 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. Summary of 2007 Property Audits Ballpark Cambridge Denton San Marcos----- -------_-- -_ I Assets $31,269,635 $34,410,500 i $26,539,609 1 $15,220,293 wnl_a�ke Total 1 $20,072,704 $ 127,512,741 Liabilities $--4-1,206,-5-1--l---!-$-3-7,-774,305 1 $34,760,477 i $22,941,951 $22,484,268 $ 159,167,512 Net Assets ------- 876 363,805)1 $ (8,220,868), (7,721,658), $ (2,411,564), $ ----------------- _...... ---------- ---------- (31,654,771) Operating- _ Revenue _i $ 3_-,-4-_6 4_ ,_-2 4__3 2,073,140 1 $ 2,854,055 1 $ 17,772,888 Budgeted Revenue --------------- -- 297,903 $ 617 $ 4 190 334 1 $ ------ - ---- --- 2,782,246 17,765,588 Variance . l 1_1-0,8 9_-9_--)-1---_$ - 196,340 8,39.,8 8- -,-_3-4--8-) ------ 7---1,80 9 $ 0 __ - - b p e r a f n g Ee x pn _ $ - $ 1272961 $ 2 768,31Oi 86 , 22 _ _ .- _ $ 970,535 7120,607 p BdageOnce _---------(-,15_ $ 2,744,754 $ 1,403,235 $ 1009,296 _, I _ $ 1,035,287 , 7-,30- - ------___ 7579,979 $ 114,446 $ (23,556): $ 159,456 144274 $ 64,75 2 459,372 - ----_----- Actual NOI: 2,221,282 $ 2,503,705 $ 2,835,656 $ 1,208,118 ------ ........ $ 1,883,520 $ 10,652,281 Budgeted NOI Variance $ 1,910,496 $ 2,518,863 $ 2,787,099 $ i-,-2--2-2-,l--9-2--,l-$----1,746,959 $ 310,786 $ (15,158)� $ 48,557 - $ 10,185,609 -2 --------- $ (14,0__7_4) $___ 136,561 4-66,67- Bonds Payable -issue ----------- $35,772,924 $32,345,000 $30,385,251 $19,509,402 1 $21,828,818 $ 139,841,395 Original nal-Bond ------------ ......--------------- ------- ----------- -!!--$- $39,645,000 $32,600,000 - ----- -000 ---------- ---2_5,_1_50___,__O__00 -------- $ 151,650,000 nd Principal Paid ----------- $ 570,000 $ 255,000 $ 485,000 71,467 1 $ 189,703 1,571,170 2,902, 99 $ 1,590,580 $ 1,782,361 1 0,61 4,24 9 Revised January 2008 TSHA STRATEGIC PLAN—STATUS REVIEW BY BOARD COMMITTEE There are twenty five Strategic Initiatives under seven headings in the TSHA Strategic Plan as approved by the TSHA Board of Directors in November 2006. These are listed below with the actions taken to date. PROGRAMS AND SCHOLARSHIPS Expansion of scholarships for needy......Increased from 43% in 2006 to more than 50% in 2007 Expansion of scholarship values........... Budget dependent, Recommend Incremental Scholarship value remain at current$2500 per year, a$10,000 total 4 year value. Over flow facility secured in College Station doubled slots available in College Station in 2007. 2008 availability TBD due sale of facility. Full Scholarships increased by 20%to 30 total. Expansion of scholarship institutions..... Formation of a 501(c) 3 nonprofit Texas Student Housing Organization as a separate entity of the Town of Westlake through which added properties might be acquired and managed. The process requires a cash input other than from TSHA to continue and may need Board of Alderman consideration. Westlake Academy scholarship issue..... Direct TSHA scholarship awards is -probably not in keeping with TSHA policy of state wide scholarship equality. Town of Westlake scholarships managed by TSHA might be considered as future alternative. Expansion strategy...........................Covered above in Expansion of scholarship institutions Documentation of scholarship admin.....Accomplished and used in evaluation of 2007/2008 scholarship awards. Policy is now to raise the lowest of the three academic parameters to mid point of its numerical range aiding both low SAT achievers and those not in top percentages of class ranking. Develop automated tools for evaluation-Revised approach implemented with evaluation process using 15 parameter, 250 total point format. Automated entry not to be implemented at this time. Scholarship acceptance ratio................Improvement in 2007 cycle with revised selection process and by getting verbal acceptances prior to firm offers of new full scholarships. High renewal for Fulls already experienced in 2008. UNT freshman on campus policy..........TSHA letter to UNT President addressed scholarship equality. Will continue effort in 2008. Page 2. TSU freshman/sophomore on campus policy.......TBD later after resolution of UNT issue Cambridge tax issue..........................No resolution by Brazos County Court. Project would be libel for any judgment/charges imposed. Property Manager potential misconduct...Asset Management oversight by TSHA of finances and properties is in a thorough and consistent manner. Also Board Treasurer performs active oversight of financials. Student injury potential......................Property Management resident policies and actions to monitor and enforce are consistent with student housing industry standards. Continued purchase and oversight of proper insurance coverage for properties and Authority. FINANCIAL AND ASSET MANAGEMENT Property debt restructure.................. San Marcos and Town Lake possible restructure actions are underway. Cash reserve and investment policies.....TBD by Board and staff. Threat of potential theft/mismanagement.. Staff and Board oversight ongoing. Inept actions by Trustee has resulted in replacement with new one Inept actions by bank has resulted in replacement. CHIEF EXECUTIVE Compensation strategy for president......TBD by Board Succession Plan........................... ....TBD by Board and staff BOARD Board size/recruitment......................TBD by Board Board Job Description.......................Draft for Board consideration Board orientation/training..................TBD by staff Board engagement strategy.................Two board/staff committees activated INTERNAL COMMUNICATION Staff communications to Board............Provided and ongoing. Two new TSHA Power Point presentations provided in Nov. 2007. One is for TSHA Board &Town of Westlake Board of Aldermen. Page 3. EXTERNAL COMMUNICATIONS... Publicity Impact ..........................One new TSH Power Point presentation is for outside interests and is included on new TSHA website. TSHA status on website updated in late 2007. Expanded contacts and solicitations with Texas high schools and community colleges and now with all Texas private, parochial and charter schools. On going contacts with Trustee, bond holders and rating agencies. GOVERNANCE DOCUMENTS Board governance issues............... TBD by Board UPDATE: Directors McKean and Shultz and President Smyth met in December to review the plan status. The Strategic Plan Status was reviewed in detail and the President was requested to update the status. That is reflected in the above document. In addition high risk items for TSHA were discussed as follows: 1. Size and makeup of the Board 2. The Cambridge tax issue 3. Authority Investments 4. Scholarship acceptances 5. TSHA Management tenure and future Respectively submitted: Hank Smyth, TSHA President January 25, 2008 TEXAS STUDENT HOUSING PRESIDENTS REPORT SCHOLARSHIPS Renewal scholarship considerations have been the focus for the last several weeks. We recommend that the Board consider 94 renewals which are 77% of the current recipients who are requesting another year of TSHA scholarship support. That list of names is provided to the Board with the recommendation to approve. We have 19 graduating this year, 8 in their fourth and final year on scholarship, 20 not requesting a continued scholarship and about 28 that have not net TSHA standards. Some of these kids have GPA's below our required level and some have refused to take 15 credit hours. We are corresponding with all of them advising that they are eligible to reapply when they meet the standards that they acknowledged when accepting our scholarships. A number of letters of appreciation from graduating recipients are being forwarded to the Board. Some of these are pretty inspiring. Twenty five of the thirty full scholarship recipients, 83% are qualified to be renewed. Several others may be qualified but are delinquent in their correspondence. The decision on each of them will be set by the end of this month. Evaluating our recipients requesting renewal of their TSHA scholarships is one of the highlights of the job. We do have some great kids on scholarship many of whom would not be in college without our support. New scholarship applicants are being received daily. The rate appears to be slower than last year; however, the schedule change to extend the fall semester to mid January could be a factor. The greatest percentages of early applicants are Hispanic females, most of whom are well qualified. The interest from the male population continues to decrease. OCCUPANCY Current overall occupancy is 96.4%. Cambridge is 100% and the low is Denton at 88.5%. Overall pre-lease for fall 2008 is 13%, the same as this time last year. Ballpark is up, San Marcos is down. Physically, San Marcos continues to deteriorate and will be an issue from here on. Adequate funds are not available for repair and replacement. The solution could be to refinance or stop all bond payments for a period of time in order to renovate the property. TSHA has little to gain by keeping the property and the university policy of only permitting third year and above students to live off campus greatly restricts scholarships. Currently we gain little financially or in providing scholarships with this property. The San Marcos Project is unusual even for TSHA. The City of Cameron is the Issuer of the bonds and TSHA is the borrower of the money. CAMBRIDGE The tax decision remains in the hands of the Brazos County Court. PROJECT FINANCES For the first quarter of the FY, September—November, the project finances are as follows: - Revenue is $4.8M, 5% positive to budget. Cambridge is well ahead and Denton and San Marcos are behind. - Expenses are $2.7M, on budget. Town Lake and Denton are below budget. San Marcos and Ball Park are above. - NOI is $2.1M, 11% positive to budget. All projects are positive to budget except for San Marcos which is 17% negative. AUTHORITY FINANCES The Authority Balance Sheet through December shows $415K after paying the Town $300K earmarked for the Academy. The revenue is still somewhat front loaded as a number of the Incremental Scholarship recipients have paid ahead. This will continue through January but then will even out over the FY. Net Income is $28K positive with revenue positive and expenses slightly negative. AUDITS The FY 2007 audit drafts for the projects and the Authority have been completed and will be presented to the Board for consideration. They were not done in a timely manner due to issues with the current auditor and misrepresentations by the trustee. The current auditor while being very reasonable cost wise appears to be a training ground. The Town uses the same firm; however, the offices doing the work are in different locations with different people. The trustee for Town Lake and San Marcos is being replaced this month and similar action on the other properties is under way. FULL SCHOLARSHIP DONATIONS Full scholarship donations are $4100 to date. The Board stands at 57% donors. With the recent Academy Foundation publicity and the TSHA earmarked donations becoming public knowledge, external solicitations will be interesting. STREGIC PLAN The Board Strategic Plan Committee met in December. Recommendations are presented under separate cover. Respectfully Submitted, Hank Smyth • „ tI 2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 18 Crooms Jamise Yes Yes 4th year 2004-2005 Town Lake No- Grad Gunasekara Ishani No No 4th year 2007-2008 San Marcos No - Grad Han Son Yes Yes 4th year 2004-2005 Ballpark No - Grad Harper Amy Yes Yes 4th year 2007-2008 Melrose No - Grad Hibbs Amber Yes Yes 4th year 2006-2007 San Marcos No - Grad Lain Kyle Yes 1 4th year 2005-2006 F Denton No- Grad McLain Jessica Yes Yes 4th year 2005-2006 Denton No- Grad Meyers Tira Yes Yes 4th year 2004-2005 Ballpark No - Grad Nazir Reena No Yes 2005-2006 Ballpark No - Grad Nguyen Jennyfer Yes Yes 2004-2005 Town Lake No- Grad Padgett Zachary Yes No 2004-2005 Town Lake No- Grad Law School Ramirez Julie Yes Yes 2005-2006 Denton No - Grad Ramirez Liz Yes Yes 2005-2006 Town Lake No - Grad Schwartz L ndsey Yes IYes 2004-2005 Denton No - Grad Tanguma Alana Yes Yes 2004-2005 Denton No - Grad Trawick Shane Yes Yes 2005-2006 Ballpark No - Grad Willis iMeagan Yes Yes 2004-2005 1 Cambrid e I No - Grad r 1 2 3 4 5 6 7 8 Anderson Trent Yes Yes 4th year 2004-2005 Cambridge No -4 yr Chappell Chani No No 4th year 2004-2005 Town Lake No -4 yr Church Amanda Yes Yes 4th year 2004-2005 Denton No-4 yr Lawson Lindsey Yes Yes 4th year 2004-2005 Town Lake No-4 yr Reinecke Steven Yes Yes 4th year 2004-2005 Town Lake No -4 yr Smallwood Rachel No Yes 4th year 2004-2005 Ballpark No -4 yr Sweat Trajea No No 4th year 2004-2005 Denton No-4 yr Wilson Brandon Yes Yes 4th year 2004-2005 Town Lake No-4 yr 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 • • i 1' Bass Samantha Yes Yes 2007-2008 Melrose No - not rqst Benton Daniel No No 2006-2007 Denton No - not rqst Burckhard Michael No No 2007-2008 Town Lake No - not rqst Durham Leslie Yes Yes 2007-2008 Denton No - not rqst Ferrell Ashley No Yes 2006-2007 Denton No - not rqst Gordon Rhye No INo 2006-2007 Denton No- not rqst Harward Brandon Left Fall 2007 2006-2007 San Marcos No - not rqst Hernandez Rachel No No 2007-2008 F Ballpark No - not rqst Johnson Melissa No No 2005-2006 Denton No - not rqst Keck Kevin Yes Yes 2006-2007 Denton No - not rqst Kuester Stephanie Yes Yes 2007-2008 Denton No - not rqst Mahan Colt No No 2006-2007 Denton No - not rqst Minturn Sandra Yes Yes 2006-2007 Denton No - not rqst Okafor Kosieme No No 2007-2008 Melrose No - not rqst Ramsey Billy No No 2007-2008 Denton No - not rqst Shaw Nathan No No 2007-2008 Melrose No - not rqst Spradlin Pauline No No 2007-2008 F Denton No - not rqst Wachsmann Lesley No No 2006.-2007 Ballpark No - not rqst Williams Karolyn Yes No 2007-2008 Ballpark No - not r st '10 MI . 1 Anderson Brian vac Yes ,)nn -2006-2007 p Town Lake Vne 160 1E 2( 21 22 2' 24 2E 2( 21 2E 2� 3C 31 32 32 Anderson Armenta Yuliana Yes Yes 2005-2006 Ballpark Yes 215 Beltran Jodie Yes Yes 2007-2008 F Cambridqe Yes 145 Bland Quincy Yes Yes 2007-2008 F Ballpark Yes 215 Bleker Anna Yes Yes 2007-2008 Ballpark Yes 130 Bludau Christine Yes Yes 2007-2008 Melrose Yes 1651 Blue Erica Yes Yes 2005-2006 Town Lake Yes 170 Bradshaw Brett Yes Yes 2007-2008 Cambridge Yes 185 Bredon Kelley Yes Yes 2005-2006 Denton Yes 230 Brown Michelle Yes Yes 2007-2008 F Denton Yes 235 Bruce Keelie Yes Yes 2006-2007 Denton Yes 213 Bullock Andrea Yes Yes 2005-2006 Ballpark Yes 205 Cason Piper Yes Yes 2007-2008 Denton Yes 202 Castro Caroline Yes Yes 2007-2008 F Yes 215 Cerny Sarah Yes Yes 2007-2008 _Cambridge Melrose Yes 210 Chan Mery Yes Yes 2006-2007 Ballpark Yes 158 Clanton Amy Yes Yes 2007-2008 Melrose Yes 135 Clark Patience Yes Yes 2006-2007 Melrose Yes 208 Dang Huong Yes Yes 2007-2008 Town Lake Yes Prov. 130 Davisson Nicole Yes Yes 2005-2006 Denton Yes 194 Deblanc Jennifer Yes Yes 2007-2008 F Cambridge Yes 175 Debner Sterling Yes Yes 2007-2008 F Cambridge Yes 227 De an Jason Yes Yes 2007-2008 Ballpark Yes 175 Dempsey Lisa Yes Yes 2006-2007 Ballpark Yes 185 Elgie Ashley Yes Yes 2005-2006 Ballpark Yes 190 Escobedo Kimberly Yes 2006-2007 San Marcos Yes 1551 Estes Benjamin Yes Yes 2006-2007 Town Lake Yes 165 Flores Melissa Yes Yes 2007-2008 Ballpark Yes 195 Gardner Christi Yes Yes 2005-2006 Denton Yes 245 Gill Parampreet Yes Yes 2007-2008 F_ Ballpark Yes Prov. 130 Gill Angela Yes Yes 2007-2008 Denton Yes 167 Giraldo Karen Yes Yes 2007-2008 F ITown Lake Yes 230 Gomez Rosa Yes Yes 2007-2008 F IBallpark Yes 165 3, 3 31 3' 3; 3' 41 4' 4: 4: 4, 4; 4( 4 42 4S 5( 5' 5: 5, 51 5f 5E 5i 5E 5< 6( 6^ 6 6' 6'e 6° BE M 6E r 1 f f. Guenther Renee Yes Yes 2005-2006 Ballpark Yes 215 Harris Victoria Yes Yes 2006-2007 F Denton Yes 198 i Hartman Adam Yes Yes 2006-2007 Town Lake Yes 165 Harton Erica Yes Yes 2007-2008 F Ballpark Yes 175 Hill Jared Yes Yes 2006-2007 F Town Lake Yes 240 Howard Lawrence Yes Yes 2007-2008 Town Lake Yes Prov. 135 Johnson Tyler Yes Yes 2007-2008 Cambridge Yes 167 Jones Amanda Yes Yes 2007-2008 Town Lake Yes Prov. 125 Juneau Joshua Yes Yes 2006-2007 Ballpark Yes 150 Kaliszewski Adam Yes Yes 2007-2008 Melrose Yes 135 Khan Faraz Yes Yes 2006-2007 Melrose Yes 185 La Scott Yes Yes 2006-2007 Town Lake Yes 175 Lain Kevin Yes Yes 2005-2006 Denton Yes 6 mo. 215 LaMarr Kristen Yes Yes 2007-2008 Denton Yes 155 Lewallen Ashley Yes Yes 2006-2007 Melrose Yes 182 Link Lauren Yes Yes 2006-2007 F Yes 237 Long AI ssa Yes Yes 2007-2008 _Cambridge Cambrid e Yes Prov. 60 Lu Lu Yes 2005-2006 Ballpark Yes - Luong Linh Yes Yes 2007-2008 F Ballpark Yes 180 Madha Moosa Yes Yes 2006-2007 Town Lake Yes 140 Martinez Aldo Yes Yes 2006-2007 F Cambridge Yes 230 Martinez Andreas Yes Yes 2006-2007 F Cambridge Yes 182 Martinez Vanessa Yes Yes 2006-2007 Town Lake Yes 207 Medellin Berenice Yes Yes 2006-2007 F Ballpark Yes 190 Mehlhaff Rachel Yes Yes 2006-2007 F Denton Yes 6 mo. 240 Meyer Laura Yes Yes 2007-2008 Cambridge Yes 125 Mueller Brennen Yes Yes 2005-2006 Town Lake Yes 147 Murphy Kelli Yes Yes 2006-2007 Denton Yes 202 Ne ri Andrea Yes Yes 2005-2006 Ballpark Yes 200 Nguyen Jennifer Yes Yes 2006-2007 Town Lake Yes 170 Orte on Jennifer Yes Yes 2006-2007 San Marcos Yes 6 mo. 175 Osoria Andrea Yes Yes 2007-2008 F Cambridge Yes 197 Padgett Kelsey Yes Yes 2006-2007 Ballpark Yes 175 Pechal Colby Yes Yes 2007-2008 Melrose Yes 185 Pham Tu Yes Yes 2007-2008 F Ballpark Yes 210 6E 7E 71 72 7' 7L 7.' 7E T 7E 7f 8E 81 K 8� 82 8F 8E 81 8E K 9E 91 92 9� 94 Phan Lanh Yes Yes 2007-2008 Town Lake Yes Prov. 125 Pope Katie Yes Yes 2007-2008 Ballpark Yes 145 Pruitt Jessica Yes Yes 2007-2008 Town Lake Yes Prov. 115 Rice Trey Yes Yes 2007-2008 Melrose Yes 210 Rivers Jacqueline Yes Yes 2005-2006 Ballpark Yes 160 Rock Janna Yes Yes 2007-2008 Town Lake Yes 190 Rodriguez Joaquin Yes Yes 2007-2008 F Town Lake Yes 185 Sales Jillian Yes Yes 2007-2008 Town Lake Yes 6 mo. 180 Shaw Amy Yes Yes 2005-2006 F San Marcos Yes 222 Sherek Amanda Yes Yes 2005-2006 Denton Yes 225 Shuster Joshua Yes Yes 2007-2008 Cambridge Yes 170 Smith Kara Yes Yes 2006-2007 Denton Yes 171 Streckfus Jacob 2007-2008 Ballpark Yes* Sweet Robin Yes 2006-2007 Melrose Yes 0 Tapia Christian Yes Yes 2005-2006 Town Lake Yes 160 Thomas Samantha Yes Yes 2006-2007 Denton Yes 192 Torres Monica Yes Yes 2005-2006 Ballpark Yes 170 Trask Aaron Yes Yes 2007-2008 Melrose Yes 208 Tyson Leigh Yes Yes 2007-2008 Denton Yes 217 Vela Alfredo Yes Yes 2005-2006 Ballpark Yes 150 Venable Lindsey Yes Yes 2006-2007 Ballpark Yes 175 Volkmer Anna Yes Yes 2007-2008 Melrose Yes 160 Warner Kezia Yes Yes 2007-2008 Town Lake Yes Prov. 170 Washington Amber Yes Yes 2007-2008 F Town Lake Yes 205 Weatherford Matthew Yes Yes 2005-2006 Denton Yes 210 Welch Ashley Yes Yes 2007-2008 1 Denton Yes 205 IE I 1 2( 21 22 22 24 2E 2E 27 28 IIII ff�11.5121 CNN 111711 111 1 a • I - No : Alcala Phillip Yes Yes 2007-2008 F Town Lake No 30 Anderson Eric Yes No 2007-2008 Ballpark No Angelle Alvan Yes Yes 2005-2006 Town Lake No 80 Atkins Renika Yes No 2007-2008 Melrose No 0 Beck Sharee Yes Yes 2007-2008 Town Lake No 60 Brackett Jordon Yes Yes 2006-2007 Ballpark No 145 Colson Simone Yes Yes 2005-2006 Town Lake No Davis Lauren Yes Yes 2007-2008 Town Lake No 30 Floyd Mallory Yes Yes 2007-2008 Cambridge No Fox Whitney Yes Yes 2007-2008 Denton No 145 Grant Scott Yes No 2006-2007 Ballpark No Koven Constance Yes Yes 2006-2007 Ballpark No 40 Llamas Gabriela Yes Yes 2006-2007 Melrose No 90 Maguddayao Anna Yes Yes 2007-2008 Town Lake No 170 Miller Trent Yes Yes 2005-2006 Ballpark No 60 Mitchell Destiny Yes Yes 2007-2008 F_ Ballpark No 60 Patel Purvi Yes Yes 2006-2007 Cambridge No 0 Rejeck Carly Yes Yes 2007-2008 Melrose No 60 Richardson Brittany No Yes 2005-2006 Ballpark No 0 Sanchez Jessica Yes Yes 2005-2006 Town Lake No 85 Schuff Justin Yes 2007-2008 Denton No 85 Terry Craig Yes Yes 2007-2008 Denton No 60 Thomas Sarah Yes Yes 2007-2008 Melrose No 60 Villescaz Corbin Yes Yes 2007-2008 F Town Lake No 30 Waters Jessica No Yes 2007-2008 San Marcos No 20 Wise Kathyn Yes Yes 2007-2008 Town Lake No 195 Yazhari Mona Yes No 2005-2006 Town Lake No Zimmerman Amanda Yes Yes 2007-2008 Denton No 1151 TEXAS STUDENT HOUSING AUTHORITY Letters from Graduating Students January 29, 2008 CHAD ANDREWS 1592 N. US Hwy. 281 Hamilton,TX 76531 Home Phone 254-386-8488 January 10, 2008 Texas Student Housing 2650 J. T. Ottinger Road Westlake, Texas 76262 Gentlemen: For the past three years, I have been genuinely honored to be selected as a recipient of the Texas Student Housing Authority Scholarship. I would like to thank you again very much because it has impacted my life in a very positive way. Completing my degree this coming August would not have been possible without your assistance . During my college career at TAMU, I was inducted into Phi Eta Sigma, the honor Society for first-year students, and Lambda Sigma, the sophomore honor society. Since only 50 TAMU sophomores were accepted into Lambda Sigma, I felt honored when they asked me to join and act as their fundraiser chairperson. Little did I know how much time and dedication that position would require, but I really did benefit from the experience. I honed valuable leadership and managerial skills as I was on the Executive Board. I greatly appreciate the occurrence. I was also chosen to be one of the two mentors of 22 Aggie Gateway students . Those students looked to me and my co-mentor as leaders who could help them adjust to college life. My duties included contacting them weekly, offering guidance, and counseling them so that the transition from high school to college was smoother. Once they successfully completed 24 hours of TAMU college coursework, they were granted full admission to the university. It was my job to see that they were successful. I took pride in seeing their results as I knew I had somehow contributed to their tenure at Texas A&M. I have completed 92 hours . Those hours include most of the CBK courses and management courses needed for my degree plan. At the end of the August semester, I will graduate with a BBA in Management (Pre- w I have lived in the Melrose Apartments for the past two years . I settled in comfortably and I really enjoyed living here. Not only were the accommodations very nice, but I also liked the proximity to campus . This allows me easy access to the library, student center and even those. fun Texas Aggie Football games . I have worked at Student Business Services (tuition department) about 20 hours per week for the past three years . In addition, I also worked 10 hours through the Aggie Access Gateway program. Both have sharpened my work ethic and appreciation of a job well done. To "The Scholarship Committee: I, Son Ilan, would like to thank you again for this scholarship. I am in my last year at UT and this will be the fourth time I will be granted this scholarship. I have a job set up with Ernst and Young for a full time position. I will be graduating in May 2008 with Illy Master's of Science in Accounting, along with my Bachelor's of Science in Accounting. None of this could have been possible without this scholarship,for this,I thank you again. This semester I have completed 16 hours of coursework with a GPA of 3.26. Also, I will be sitting for the CPA exam in the spring. Also, I will be studying hard and working as a Guest Teacher with Austin ISD to earn more income. Other than that, I will be studying arduously and finish my college tenure with flying colors. As for a renewal, this is my final year in college and will no longer need this scholarship. Thank you for a great 4 years. "Thank you again. Sincerely, j I f r Son hall December 29, 2007 ✓ Dear xas Student Housing Committee: My name is Kyle Lain, and I was awarded a Student Housing Scholarship to attend the U iversity of North Texas. The fail semester has speedily swept by, and I just wanted to le you ow that your generous scholarship was well and gratefully spent. This letter will accomp y y grades for the fall semester. I hope my grade sheet will also show my thanks for the Tex s tudent Housing Committee's generosity. I am also writing to inform your committee that I raduated on December 15, 2007 with a masters degree in accounting. The generous he your o ganization helped me fulfill my dream of a college degree. I will no longer need the ho sing sc larship. Thanks again from my family and me. Sincer , Kyle Lain 7704 Amy Lane,North Richland Hills, TX 76180 (817) 713-4072 cell (817) 281-2572 home e-mail:,kdIO041@unt.edu 1109 South Pleasant Valley Rd APT 323 Austin, TX 78741 January 14, 2007 Texas Student Housing Authority 2650 J. T. Ottinger Road Westlake, Texas 76262 To Whom It May Concern: I am a fourth year recipient of the Texas Student Housing Authority scholarship and am wishing to give an update regarding my Fall 2007 semester as well as a brief discussion on my future plans. My cumulative GPA to date is a 3.11. I finished the semester with University Honors and a semester GPA of 3.5. The Public Health Internship that I spoke to you about in my previous letter was a wonderful experience and I learned so much about public health and how the state of Texas is preparing for an outbreak of pandemic influenza. During this past semester, I have also become a research assistant in the lab where I was previously a dishwasher. I have worked on projects involving compensatory mutations in T3 and T7 bacteriophages as well as a gene swap in the gene ten region in T7, K11, and SP6 bacteriophages. In the spring, I will be participating in a mutagenesis study where mutations are introduced into a specified region in DNA molecules from various phages. Also, I have been hired as a Freshman Research Initiative Mentor for Research Methods. In this course, I will be helping to mentor freshman in molecular equipment and techniques important to a career in research. I am very excited for the semester and am looking forward to getting a taste of what teaching is all about. I have also been accepted into a Clinical Laboratory Science Certification Program at Methodist Hospital in Houston.This component, which is a year long certification process, is necessary prior to graduating with my B.S. in Clinical Laboratory Science. I am ecstatic about their program and just loved the tour of their facilities during my interview and I am just so happy to be a part of the Methodist system of hospitals. I will be one of four students starting their program in the Fall of 2008. Thank you so much for the opportunity that the Texas Student Housing Authority has given to me these past four years. I am extremely grateful for the work that you do in supporting us in order to receive an education. I am proud to have began and ended my college career as a recipient of such a prestigious scholarship. As this will be my last year with TSHA, I hope that you will continue this tradition for many more great years! I will be mailing my official transcript shortly. Sincerely Yours, Jennyfer Nguyen January 10, 2008 Texas Student Housing: I am writing this letter in regards to my recent graduation and reporting on my fall semester at the University of North Texas. To begin, I recently graduated this Fall 2007 from the University of North Texas with my Bachelor of Business Administration and concentration in Human Resource Management. I had spoken to Pete Ehrenberg about this change in my status at the end of my spring semester, so we could discuss the prorated amount of the scholarship. So just for the record I have already graduated and I have sincerely appreciated the assistance of the Texas Student Housing Scholarship over the three and a half years I spent at the University of North Texas. In regards to my fall semester, I really enjoyed it and tried my best to take in all of the experiences, friendships, training, and scholarship I have witnessed over the years. The entire semester was honestly just like the others only with increased difficulty in the required curriculum, responsibilities, cooperation, and patience needed to survive a challenging semester. The amount of time required to be dedicated to these courses was significant which caused me to have to place some of my extracurricular activities on the back-burner this time around. I won't fie, it was depressing for me not to be able to do my normal pattern of activities and socializing, however, my last semester was calling my name. i Plus there was no way I was going to allow my cumulative GPA to drop at all. I have worked so hard through my.college career and one of my last goals was to graduate with honors as Cumlaude (3.5 GPA). At the beginning of'the semester I was right at 3.568 which made me really nervous but I know what I'm capable of doing so I worked hard in all my classes and remained conscience if all my grades. In the end I finished with a 3.4 GPA which is awesome considering this semester's difficulty! I've never felt so relieved and proud!Aside from keeping my grades up, I remained active in my sorority as Fundraising Chair, Chapter Secretary, and continued mentoring the new President; continued mentoring in my sorority's HS program FUTURO; Order of Omega National Greek Honor i Society; Society for Human Resource Management; along with partic pating in community services correlating with my Multicultural Scholastic Award Scholarship. Even thought that sounds pretty hectic for a graduating senior with a full load, I felt like I wasn't able to attend anything but that is just my opinion. Despite my opinion, I am very proud of the education I received at UNT and am thankful for the opportunities I've been given. I am a perfect example of the "Busy Bee" student who reached success and feels completely prepared to take on the world's,next obstacle. So in conclusion, I would like to thank you for all of the support and assistance you have provided for me throughout my years and the University of North Texas., I wish I would find a better way to express my gratitude butfor now I hope this scholarship continues to help other hopefuls such as myself to succeed and strive for a,higher education. Thank you Alana M. Tanguma s Dear TSHA Members and Staff, I am writing you not only to inform you of my progress this past fall, but also to remind you of the very important work you do for so many students. I have had the good fortune to be one of those students for the past three years, and your gift to my education has allowed me to pursue so many other things I otherwise would not have been able to pursue. This past semester was a very successful one for me. I found myself making A's in my courses for the fall semester, and one of those A's aided me in securing a job for the ensuing spring. This past fall, I took a Sex-Based Discrimination course with Dr. Sarah Weddington. Dr. Weddington successfully argued before the Supreme Court in Roe v. Wade (1973), was elected as a Texas Representative for three terms, and served as a special advisor to the President in Jimmy Carter's administration. Upon concluding the course, Dr. Weddington extended to me a job offer to work with her at The Weddington Center, helping her in her current endeavors as a public speaker on reproductive rights, breast cancer awareness, public leadership, and women's issues. Your scholarship undoubtedly gave me the opportunity to achieve academically in ways I would not have otherwise, and certainly allowed me to make a significant impression on a national leader and a remarkable woman. I also was able to play a very important role at my internship with NARAL Pro-Choice Texas this past fall. In September, I was the coordinator of a project that surveyed 850 pharmacies, hospitals, and clinics in the entire Houston-area. I was responsible for coordinating 40 volunteers in the collection of data concerning emergency contraception availability in Houston. The data collected from that survey revealed some very startling statistics that were compiled into a five-page report on the status of emergency contraception. This coming spring, I will be in charge of organizing press releases, a press conference, and the publication of the report that I created, in hopes of raising public awareness concerning reproductive rights. As I have mentioned in a previous letter, I am scheduled to graduate a year earlier than I had originally planned. May will mark the conclusion of my last semester here at the University of Texas at Austin, and thus the end of my TSHA scholarship. As of now, I have maintained a 4.0 and am currently practicing for the LSAT in anticipation of law school. Since my first day at UT, I have noticed my own personal growth coupled with the fulfilling of my prospective goals, which has been nothing short of a miracle. Your scholarship not only guaranteed my personal capacity to achieve those goals, but also inspired them. A little faith in a person can go a long way, and TSHA's faith in me instilled a personal ambition and virtuous confidence in my own abilities that drove me to accomplish a lot in a few years. As I quickly learned, if others believed in me, I could unquestionably believe in myself. Thank you again for your kind contribution, but even more importantly I want to thank you for having faith in me. Sincerely, Shane M. Trawick January 6, 2008 Texas Student Housing Authority 3 Village Circle Suite 207 Westlake, TX 76262 To Whom It May Concern: With the coming and passing of the New Year also comes the completion of my fall semester at Texas A&M University. It was an incredible semester with some impressive outcomes. I finished the semester with a 3.55 GPR which puts me at around a 3.0 for my cumulative GPR. Through my participation and leadership involvement in the National Association of Environmental Professionals (NAEP) I have meet valuable contacts that will be helpful with my graduation just a semester away. The fall is always one of my favorite times of the semester due to the excitement that football brings. The Aggies are continuing to improve their playing and beating t.u. during my last home game at Texas A&M was the perfect way to finish. Through my hard work in summer school and advanced placement courses I will complete my graduation in four years. Something I am very proud of I believe my final semester will Drove to be the most difficult. While maintaining and improving my grades will be my most important task, fin mg a job will prove to be a tedious and difficult task. I plan to utilize the terrific Career Center provided to students by the University as well as through the NAEP. This past summer I interned at an enviromnental consulting firm that I also resumed during the holiday break. I found this field to be challenging and plan to join this field full time after graduation. One of my most important goals for this spring semester is to enjoy and relish all of the experiences. Being a student has allowed freedoms and experiences that are one of a kind, and I will surely miss this time in my life. I have thoroughly enjoyed living at the Cambridge for the past three and a half year It has allowed me to meet and make friends with new people each year. Some of my closest friends I still remember meeting my first day at the Cambridge. I can not express how grateful I am for the generosity of your organization.. My time at Texas A&M has been incredible and I thank you for selecting me as a recipient of your scholarship. I plan to make the most of my last semester as a college student while preparing for my future. I appreciate all your help and wish everyone at the Texas Student Housing Authority a Happy New Year! Thank you { Meagan Willis r. A transcript is being sent directly from Texas A&M University and should arrive shortly. i TEXAS STUDENT � HOUSING�'`;:: MINUTES OF THE BOARD OF DIRECTORS OF THE TEXAS STUDENT HOUSING AUTHORITY (AN INSTRUMENTALITY OF THE TONN N OF ESTLA ) November 24,2447 PRESENT: Chairman Jim Carter and Directors Larry Darlage (dismissed from the meeting at 6:35 p.m.), George Ledak, Jac Irvine, Melanie Lekkos, Jill McKean, and Chuck Schultz. ABSENT: General Counsel Scott Bradley. OTHERS PRESENT: President Hank Smyth, Finance Fria Town Manager Pete e Rennin berg, Secretary Kim Sutter, and In I. CALL TO ORDER. Chairman Carter called the meeting to order at 6:00 p.m. 2. DISCUSS AND CONSIDER BUDGET CONTINGENCY 4FD AUTHORITY BUDGET TO ADD $244,44 4 TO EARMARKED FOR THE CONSTRUCTION OF THE ALTS AND SCIENCES BUILDING AND PAYABLE TO THE TOWN. Chairman Carter introduced the item and opened the discussion. Discussion ensued with regard to the purpose of the scholarship program, the possibility of enhancing scholarship offers, and the fund balance at the end of the year should the contribution be approved by the Board. Director Schultz expressed his concern with violating the bylaws of the Authority by making a.donation. Director Irvine expressed his concern with the perception that tax money is being taken away from other entities through the exemption of ad valorem taxes and funneled to the Town of Westlake and Westlake Academy, and expressed his desire to be fair and careful when considering donating to the Academy. TSHA Board of Directors Page 2 of 4 November 20,2007 Director Irvine expressed his desire to lower the amount we are currently collecting from incremental scholarship recipients as a way to enhance the scholarship offers. Director Irvine expressed his support of a one time donation for this purpose. Following further discussion by the Board, Chairman Carter asked for a motion. MOTION: Director Ledak made a motion to approve the budget amendment as presented. Director McKean seconded the motion. . The motion carried by a vote of 6-0, with Director Schultz abstaining from the vote. 3. CONSIDER DESIGNATING U.S. BAND AS THE TRUSTEE FOR THE TEXAS STUDENT HOUSING AUTHORITY. Finance Manager Ehrenberg advised the Board of the need to change bank trustees. Mr. Ehrenberg stated that he is recommending the change due to a lack of confidence with the level of competency at the Bank of New York. Mr. Ehrenberg advised that U.S. Bank has an office in Dallas, and that the Trustees annual rate will remain unchanged. MOTION: Director Darlage made a motion to approve designating U.S. Bank as the Trustee for the Texas Student Housing Corporation. Director Schultz seconded the motion. The motion carried by a vote of 7-0. . PRESIDENTS REPORT. President Smyth presented the report to the Board. There were no questions from the Board regarding the report. President Smyth updated the Board on the status of the solicitation of contributions from businesses and board members for the purpose of issuing scholarships. Mr. Smyth presented the Board with a copy of the letter used to solicit contributions. Finance Director Ehrenberg advised the Board of the status of establishing a non-profit to accept contributions to be used for scholarships. Mr. Ehrenberg stated that the process could be completed in approximately six (6) months. 5. CONSIDER APPROVAL OF A HIRING A SCHOLARSHIP CONSULTANT AN SETTING COMPENSATION. President Smyth addressed the Board regarding the item and discussed the need to hire a scholarship consultant to assist with the grading of the scholarship applications for the upcoming cycle. Mr. Smyth advised the Board that he has an individual in mind for the position (Tommy Williams) and is proposing to bring Mr. Williams on for a maximum of 100 hours, with the total compensation not to exceed $5,000. Mr. Smyth advised that the total amount has been included in the budget approved by the Board. TSHA Board of Directors Page 3 of 4 November 20,2007 Discussion ensued with regard to the number of applications received in past years and the anticipated number for the next scholarship cycle. MTIN: Director Schultz made a motion to approve the item as presented. Director McKean seconded the motion. The motion carried by a vote of 6-0. 6. FINANCE MANAGERS REPORT. Finance Manager Ehrenberg advised the Board that he has toured the Town Lake, Ballpark, and San Marcos properties to evaluate and identify any potential capital expenditures over the next several years. Mr. Ehrenberg reported that the Town Lake facility is the only property that has funds remaining in the repair and replacement account. Through an agreement with MuniMae, a minimum of$120,000 will be needed for capital expenses at the San Marcos facility. The Ballpark facility in Austin will require new paint at an estimated cost of$160,000. Discussion ensued with regard to the status and need of a repair and replacement account for the properties. Finance Manager Ehrenberg reviewed the operating expenses at Cambridge. Mr. Ehrenberg stated that it would be necessary to take $350,000 out of current receipts to set aside for the summer time frame to cover the operating expenses. Audit Finance Manager Ehrenberg advised that the annual audits for the projects have commenced, and the audits will be presented to the Board at the January 2008 meeting. Tax Issue Finance Director Ehrenberg updated the Board on the ad valorem tax issue as it relates to the Cambridge property in Brazos County. 7. REVIEW AND APPROVE MINUTES OF OCTOBER 16, 2007. Chairman Carter introduced the item and asked for a motion. MOTION: Director Irvine made a motion to approve the minutes as presented. Director McKean seconded the motion. The motion carried by a vote of 4-0, with Directors Lekkos and Schultz abstaining from the vote due to their absence from the meeting. 8. ADJOURN. There being no further business before the board, Chair Carter declared the meeting adjourned at 7:23 p.m. TSHA Board of Directors Page 4 of 4 November 20,2007 APPROVED BY THE TEXAS STUDENT HOUSING AUTHORITY BOARD E DIRECTORS JANUARY 29,2008. Jim Carter, Chairman ATTEST Kim Sutter, Secretary . IMMO RVARIMMhyl TEXAS STUDENT HOUSING AUTHORITY TABLE OF CONTENTS AUGUST 31,2007 Page Dumber FINANCIAL SECTION Independent Auditors' Report............................................................................................. I Management's Discussion and Analysis ............................................................................ 2-3 Financial Statements: Statementof Net Assets................................................................................................... 4 Statement of Revenues, Expenses and Changes in Net Assets........................................ 5 Statementof Cash Flows ................................................................................................. 6 Notes to Financial Statements.......................................................................................... 7 - 10 SUPPLEMENTAL INFORMATION Budgetary Comparison Schedule........................................................................................ 11 �, i �. PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS E BUSINESS CONSULTANTS To the Board of Directors Texas Student Housing Authority Westlake, Texas We have audited the accompanying financial statements of Texas Student Housing Authority (the "Authority") (a component unit of the Town of Westlake), as of and for the year ended August 31, 2007, which collectively comprise the Authority's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the Authority'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. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Texas Student Housing Authority as of 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 management's discussion and analysis on pages 2 through 3 is not a required part of the basic financial statements but is 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 financial statements that collectively comprise the Authority's basic financial statements. The accompanying supplemental information on page 11 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. Twtb.�o , D + liiCQ , L1. F January 22, 2008 1 401 WEST HIGHWAY 6 1111 P.O.BOX 20725 8 WACO,TX 76702-0725 M(254)772-4901 M FAX:(254)772-4920 M www.pbhepa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778 11 HILLSBORO,TX(254)582-2583 TEMPLE,TX(254)791-3460®WHITNEY,TX(254)694-4600 M ALBUQUERQUE,NM(505)266-5904 As staff of the Texas Student Housing Authority (the "Authority"), we offer the readers of the Authority's financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended August 31, 2007. We encourage readers to consider the information presented herein in conjunction with the Authority's financial statements. The Authority is a component unit of the Town of Westlake and is considered a governmental entity; accordingly, the Authority has adopted 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 Authority itself. Properties managed by the Authority are reported individually by property under separate cover. i The assets of the Authority exceeded its liabilities at the close of the fiscal year by $548,780, an increase of $94,046 over the prior fiscal year. All of the assets and liabilities of the Authority are classified as current. ® At the end of the current fiscal year, the total cash balances were $622,470, an increase of$105,189 over the prior fiscal year. ® All revenues are generated from management of the properties and scholarship activity of the authority and totaled $1,070,536. Total expenses incurred were $1,027,894. This discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements. The Authority'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 statement of net assets presents information on the Authority's assets and liabilities with the difference between the two reported as net assets. The statement of revenues, expenses and changes in net assets accounts for all of the Authority's revenues and expenses regardless of when cash is paid or received. The statement of cash flows reflects cash inflows and outflows by operating, noncapital financing and capital related financing activities during the year. 0 The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET We anticipate that fiscal year 2007/2008 will end with less income to the Authority as we have increased scholarships at our overflow facility in College Station. This financial report is designed to provide the reader with a general overview of the Authority's finances and to demonstrate the Authority's accountability for the money it receives. If you have any questions about this report, or need additional information, please contact Pete Ehrenberg at (8 17) 490- 5723, or Hank Smyth at(817) 281-5053. N3 TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF NET ASSETS AUGUST 31, 2007 ASSE'T'S Current assets: Cash Accounts receivable Prepaid expenses Total current assets Total assets LIABILITIES Deferred revenue Total liabilities NET ASSETS Unrestricted Total net assets $ 622,470 34,292 5,236 661,998 661,998 113,218 113,218 548,780 $ 548,780 The accompanying notes are an integral part of these financial statements. n W STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FOR THE YEAR ENDED AUGUST 31, 2007 Basic property administration S 278,446 Scholarship value 480,924 Scholarship administration 311,166 Total operating revenues 1,070,536 OPERATING EXPENSES Scholarship 480,924 Scholarship expense 204,949 Labor 190,395 hlsurance 7,400 Oversight fee 100,000 Office and other 44,226 Total operating expenses 1,027,894 OPERATING INCOME 42,642 . . Interest income 36,800 Other income 14,604 Total nonoperating revenues (expenses) 51,404 CHANGE IN NET ASSETS 94,046 NET ASSETS, BEGINNING 454,734 NET ASSETS, ENDING 548,780 r . � . k TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2007 9 a M110 KI)a Cash received from scholarships and scholarship properties S 1,079,378 Cash paid to contract services 190,395) Cash paid to others 835,198) Net cash provided for operating activities 53,785 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 36,800 Miscellaneous other income 14,604 Net cash provided by investing activities 51,404 NET CHANGE IN CASH AND CASH EQUIVALENTS 105,189 CASH AND CASH EQUIVALENTS, BEGINNING 517,281 CASH AND CASH EQUIVALENTS, ENDING S 622,470 RECONCILIATION OF OPERATING GAIN TO NET CASH USED FOR OPERATING ACTIVITIES Operating gain S 42,642 Adjustments to reconcile operating income to net cash provided(used)by operating activities: Accounts receivable 9,858) Prepaid assets 2,301 Deferred revenue 18,700 Net cash provided for operating activities S 53,785 The accompanying notes are an integral part of these financial statements. of 11211110M"IMICEROMMILM AUGUST 31,2007 Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake (the "Town"), Texas, pursuant to Section 53.11 of Chapter 53 of the Texas Education Code, as amended. The Authority's purpose among other things is to acquire, finance, and operate student housing facilities and to provide scholarships to students from high schools and community colleges in Texas. The Authority operates several student housing projects in Texas. The accompanying financial statements do not present the projects,but the scholarship administration of the Authority. A summary of the Authority's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 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 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. 0 IIe SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. The Authority uses the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or noncurrent) are included on the statement of net assets and the operating statement present increases (revenues) and decreases (expenses) in net total assets under the accrual basis of accounting, revenues are recognized when earned, and expenses are recognized at the time the liability is incurred. In applying the requirements of GASB Statement No. 20, the Authority 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. The Authority 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. The Authority considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. At August 31, 2007, the Authority had no such investments included in cash and cash equivalents. Accounts receivable are stated at amounts management expects to collect from outstanding balances. 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. Capital Assets Texas Student Housing Authority utilizes space within the Town of Westlake offices and does not have capital assets at this time. E9 MKIMawst 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 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 is not significantly exposed to interest rate risk as all investments earn a variable rate. EGUMMM 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 holds all of its cash and investments with commercial banks. Texas Student Housing Authority holds no investments at August 31, 2007, and is not exposed to concentration of credit risk. Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires 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, the Authority's cash balances totaled $622,470 (bank balance of $583,940). Of the bank balance, $100,000 was covered by federal depository insurance while the remaining amount was collateralized by a Bank Deposit Guarantee Bond from the Authority's depository in the amount of$483,940. III. DETAILED NOTES ON ALL FUNDS (Continued) Net assets represent the residual assets after liabilities are deducted. These assets are reported in the following categories: Unrestricted Net Assets consists of the portion of net assets after invested in capital assets, net of related debt and restricted for net assets has been satisfied. At August 31, 2007, the Authority has no restricted net assets or capital assets. All net assets are unrestricted. C. Concentrations The Authority services scholarships for Texas students attending Texas higher education facilities and is dependent upon the geographic areas and the higher education facilities in Texas. D. Related Party'Transactions The Town of Westlake charges an oversight fee to the Authority. The fee of $100,000 is included in expenses at August 31, 2007. The Authority also received revenues of$278,446 related to its oversight of the various properties. ELI] go BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED AUGUST 31, 2007 M Budget Actual Variance REVENUES Basic property administration $ 250,732 $ 278,446 $ 27,714 Scholarship value 480,924 480,924 - Scholarship administration 292,140 311,166 19,026 Interest income 30,000 36,800 6,800 Other income - 14,604 14,604 Total revenues 1,053,796 1,121,940 68,144 EXPENDITURES Scholarships 480,924 480,924 - Scholarship expense 192,340 204,949 ( 12,609) Labor 205,000 190,395 14,605 Professional fees 19,500 7,400 12,100 Contingency fund 100,000 100,000 - Office and other 40,500 44,226 ( 3,726) Total expenditures 1,038,264 1,027,894 10,370 CHANGE IN NET ASSETS OVER EXPENSES 15,532 94,046 78,514 NET ASSETS, BEGINNING 454,734 454,734 - NET ASSETS, ENDING $ 470,266 $ 548,780 $ 78,514 M TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT FINANCIAL SECTION Independent Auditors' _--..-.-.------.---.---.—...—.---.—.----.—.. 1 -7 Management's Discussion and Analysis .----.-_—..--.---.-.--..---.--.---.. 3 -6 Financial Statements: Statementof Net Assets................................................................................................... 7 Statement ofRevenues, Expenses azu] Changes iu Net Assets........................................ 8 Statement n[Cash Flovv3 ..—.----.—.---...---..—.—...-----..--..—.—.---.. 9 SUPPLEMENTAL SCHEDULES MkMl PA'ITILLO, BROWN & HILL, L_L_P. CERTIFIED PUBLIC ACCOUNTANTS 0 BUSINESS CONSULTANTS 1-1191,1101110113 1 1.. To the Board of Directors Texas Student Housing Authority— Town Lake Austin Project Westlake, Texas We have audited the accompanying financial statements of Texas Student Housing Authority — Town Lake Austin Project (the "Project"), as of and for the year ended August 31, 2007, which collectively comprise the Project's basic financial statements as listed in the table of contents. Texas Student Housing Authority— Town Lake 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. 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 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—Town Lake Austin Project as of 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. 401 WEST HIGHWAY 6 E P.O.BOX 20725 M WACO,TX 76702-0725 E(254)77211901 E FAX:(254)7724920 N www.pbhcpa com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778 IN HILLSBORO,TX(254)582-2583 TEMPLE,TX(254)791-3460 IN WHITNEY,TX(254)69411600 E 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 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 financial statements that collectively comprise the Texas Student Housing Authority — Town Lake Austin Project's basic financial statements. The accompanying supplemental information on page 19 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. fo""d �A44)� + Tid ,LJ-P. January 24, 2008 N As staff of the Texas Student Housing Authority (the "Authority") — Town Lake Austin Project (the "Project"), we offer the readers of the Project's financial statements this narrative overview and analysis of the financial activities of the Project for the fiscal year ended August 31, 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. ' 1 1 The liabilities of the Project exceeded its assets at the close of the fiscal year by $2,411,564, an increase of$895,638 over the prior year. Operating revenue of$2,790,825 is $8,579 more than budget; and operating expense was $64,752 better than budget. m At the end of the current fiscal year, the total cash balances were $150,427 in unrestricted cash and $1,488,977 in restricted cash. l# ; ., 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 a supplemental schedule. K The statement of net assets presents information on all of the Project's assets and liabilities with the 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. Business-type Activities TABLE 2 2007 2006 Current and other assets $ 2,667,636 $ 3,006,659 Capital assets 17,405,068 18,143,238 Total assets 20,072,704 21,149,897 Current liabilities 860,408 837,005 Noncurrent liabilities 21,623,860 21,828,818 Total liabilities 22,484,268 22,665,823 Net assets: Total operating income 823,493 Invested in capital assets, Interest income 63,230 net of related debt ( 4,423,750) { 3,875,283) Restricted 1,214,006 1,187,580 Unrestricted 798,180 1,171,777 Total net assets $( 2,411,564) $( 1,515,926) 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- TOWN LAKE AUSTIN PROJECT CHANGES IN NET ASSETS Business-type Activities 2007 2006 Total operating revenue $ 2,790,825 $ 3,112,119 Total operating expenses 1,967,332 1,848,412 Total operating income 823,493 1,263,707 Interest income 63,230 50,685 Interest expense ( 1,782,361) ( 1,730,808) Total nonoperating loss 1,719,131) ( 1,680,123) CHANGE IN NET ASSETS ( 895,638) ( 416,416) NET ASSETS,BEGINNING ( 1,515,926) ( 1,398,394) PRIOR PERIOD ADJUSTMENT - 298,884 NET ASSETS,ENDING $( 2,411,564) $( 1,515,926) The statement of cash flows recaps how cash changed from year to year. Dotes 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 Proceeds Principal Fund, Series 2002 A-1 $ 16,826 Bond Proceeds Interest Fund, Series 2002 A-1 111,042 Bond Proceeds Principal Fund, Series 2002 A-2 16 Bond Proceeds Interest Fund, Series 2002 A-2 37,876 Reserve Fund 33,007 Debt Service Reserve Fund 983,217 Repair and Replacement Fund 274,986 Project Fund 240 Deferred Debt Service 16,006 Tax and Insurance Fund 2,059 Fee and Expense Fund 10,805 Initial Purchase Fund 2,897 Total $ 1,488,977 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 2002 A-1 and 2002 A-2 were payable: Series 2002 A-1 Series 2002 A-2 Total $ 16,739,577 5,089,241 $ 21,828,818 For the fiscal year ending August 31, 2008, the total principal and interest payment is calculated at $1,914,830. A total of$189,703 in principal was paid during 2007. 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, forecasts at 100%. However, rental rates, again due to competitive pressures will not see a large increase. Net operating revenue for next year is projected at $1,623,356. Debt service decreases from $1,914,830 to $1,891,632. E 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. C ASSETS Current assets: Cash $ 150,427 Restricted cash 1,488,977 Accounts receivable 11,585 Prepaid expenses 15,389 Total current assets 1,666,378 Capital assets: Land 2,182,816 Other capital assets,net of accumulated depreciation 15,222,252 Total capital assets 17,405,068 Intangible assets: Debt issue costs, net of amortization 1,001,258 Total intangible assets 1,001,258 Total assets 20,072,704 LIABILITIES Current liabilities: Accounts payable 24,656 Accrued liabilities 96,001 Bonds payable-current maturities 204,958 Management and development fees payable 79,200 Deferred revenue and prepaid rent 180,622 Accrued interest 274,971 Total current liabilities 860,408 Noncurrent liabilities: Bonds payable 21,623,860 Total noncurrent liabilities 21,623,860 Total liabilities 22,484,268 NET ASSETS Invested in capital assets,net of related debt ( 4,423,750) Restricted for debt service 1,009,048 Unrestricted 1,003,138 Total net assets $( 2,411,564) r � � . 1 ' Rental S 2,706,275 Other 84,550 Total operating revenues 2,790,825 OPERATING EXPENSES Personnel 255,349 Contract services 64,675 Utilities 392,149 Repairs and maintenance 18,373 Turnover 65,684 Advertising and promotion 53,230 Administration 121,075 Management fees 136,525 Replacements 43,056 Depreciation and amortization 817,216 Total operating expenses 1,967,332 OPERA'T'ING INCOME 823,493 NONOPERA'T`ING REVENUES (EXPENSES) Interest income 63,230 Interest expense ( 1,782,361) Total nonoperating revenues(expenses) ( 1,719,131) CHANGE IN NET ASSE'T'S ( 895,638) NET ASSETS, BEGINNING ( 1,515,926) NET ASSETS,ENDING S( 2,411,564) - MWNRRFR �' TOWN LAKE AUSTIN PROJECT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2007 Cash received from tenants S 2,790,592 Cash paid to employees ( 122,110) Cash paid to suppliers ( 949,036) Net cash provided by operating activities 1,719,446 CASH FLOWS FROM CAPITAL AND RELATER FINANCING ACTIVITIES Payments on bonds payable ( 189,703) Interest paid ( 1,782,361) Acquisition and construction of capital assets ( 79,046) Net cash used in capital and related financing activities ( 2,051,110) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 63,230 Net cash provided by investing activities 63,230 NET CHANGE IN CASH AND CASH EQUIVALENTS ( 268,434) CASH AND CASH EQUIVALENTS, BEGINNING 1,907,838 CASH AND CASH EQUIVALENTS, ENDING S 1,639,404 Cash S 150,427 Restricted cash 1,488,977 Total cash and cash equivalents S 1,639,404 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income S 823,493 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 856,739 Changes in operating assets and liabilities: Accounts receivable 33,510 Prepaids ( 2,444) Trade accounts payable ( 91,348) Deferred revenue ( 33,743) Other current liabilities 133,239 Net cash provided by operating activities S 1,719,446 0 . . A AUGUST 31,2007 Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake, Texas, 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 Town Lake Austin Project (the "Project"). The Project was purchased from Jefferson Commons — Austin, L.P., a Delaware limited partnership on December 17, 2002. The Project obtained its financing through the issuance of Texas Student Housing Authority — Student Housing Revenue Bonds (Jefferson Commons at Town Lake Project), Series 2002 A-1 and A-2 (the "Bonds"). The Bonds were issued through a Trust Indenture (the"Trust Indenture") by and between the Authority and The Bank of New York (the "Trustee"). The Series 2002 A-1 and Series 2002 A-2 Bonds were issued in the face amounts of$19,480,000 and $5,570,000, respectively. The accompanying financial statements present the operations of the one Project, whose revenue streams are pledged for the Bonds described herein. The Project was operated and managed under the terms of the (a) Property Management and Leasing Agreement by and between the Authority and JPI Campus Quarters Management, L.P. ("JPI") and (b) the Asset Management Agreement by and between the Authority and JPI Apartment Management, L.P., up until February 2005, The Project is now managed and operated by Asset Campus Housing under the terms of a Property Management and Leasing Agreement dated March 1, 2005. The Property Management Agreements are collectively referred to as the "Agreements." A summary of the Project's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 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: E � • 1; lul II. SUMMARY OF SIGNIFICANT ACCOUN'T'ING POLICIES (Continued) A. Deporting Entity (Continued) Financial Accountabiliiy — 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. y -lI - f 1 ' t ! 6a 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. i .I i 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. 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$1,488,977 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 $63,230. See Note III for risk disclosures and breakdown of restricted cash accounts. m II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Assets, Liabilities and Net Assets or Equity (Continued) 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. Costs associated with the issuance of bonds are deferred and amortized over the term of the Bonds. All adverting costs are expensed as they are incurred. Advertising costs for the year ended August 31, 2007, were approximately$53,000. 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 indenture provides for a replacement fund requirement. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Estimated Asset Class Useful Lives Building Furniture, fixtures and equipment IN 30 3 - 20 At August 31, 2007, the carrying amount of Texas Student Housing Authority— Town Lake Austin Project deposits (cash with interest bearing accounts and restricted cash held in interest bearing accounts) was in total $1,639,404 of which $1,488,977 represented 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 Proceeds Principal Fund, Series 2002 A-1 $ 16,826 Bond Proceeds Interest Fund, Series 2002 A-1 111,042 Bond Proceeds Principal Fund, Series 2002 A-2 16 Bond Proceeds Interest Fund, Series 2002 A-2 37,876 Reserve Fund 33,007 Debt Service Reserve Fund 983,217 Repair and Replacement Fund 274,986 Project Fund 240 Deferred Debt Service 16,006 Tax and Insurance Fund 2,059 Fee and Expense Fund 10,805 Initial Purchase Fund 2,897 Total $ 1,488,977 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 Proceeds Fund — The Trustee makes monthly deposits in the Bond Proceeds Fund pursuant to the Trust Indenture. Amounts in the Bond Proceeds 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. I i, i i fff Wil 191 i ... .., �,1 -r A. Cash and Investments (Continued) Restricted Cash (Continued) Debt Service Reserve Fund — The amounts on deposit in this account are to be used for the purpose of paying principal and interest on the Bonds in the event the principal and interest is not paid by issuer in accordance with the terms of the indenture and written notice of the Servicing Agent. Pro ect Fund— Amounts in the Project Fund are held and disbursed for costs of the Project. Repair and Replacement Fund— Amounts in the Repair and Replacement Fund may be used to make mandatory repairs of the Project pursuant to the Trust Indenture. 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. T'e poralT Funds and Accounts—The Trustee may establish and maintain for so long as is necessary one or more Temporary Funds and accounts under this indenture. The Deferred Debt Service Reserve Fund, Tax and Insurance Fund, and Initial Purchase Funds are Temporary Funds at August 31, 2007. Residual 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 Residual Fund. 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 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— Town Lake Austin Project is not significantly exposed to interest rate risk as all investments earn a variable rate. � l III. DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) C ` 11 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— Town Lake Austin Project holds all of its cash and investments with the Bond Trustee and commercial banks. The investment policy of Texas Student Housing Authority — Town Lake 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 91% of the total cash and investments held at August 31, 2007. 191 # Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires 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, the Project has unrestricted cash of $150,427 (bank balance $121,045). Of the bank balances, $100,956 was covered by federal depository insurance while the remaining $20,089 was uncollateralized. The Project has a Bank Deposit Guarantee Bond from the Project's depository in the amount of$2,000,000. IN III. DETAILED NOTES ON ALL FUNDS (Continued) B. Capital Assets Capital asset activity for the Project for the year ended August 31, 2007, was as follows: Beginning Balance Additions Capital assets,not being depreciated: Land $ 2,182,816 $ - $ Total capital assets, not being depreciated 2,182,816 - Capital assets,being depreciated: Building and improvements 13,270,150 - Capitalized purchase costs 887,095 - Land improvements 2,806,596 - Unit appliances 295,134 - Furniture and fixtures 915,951 - Total capital assets, being depreciated 18,174,926 - Less accumulated depreciation for: Building and improvements 1,326,233 442,035 Capitalized purchase costs 88,710 29,570 Land improvements 280,659 93,553 Unit appliances 126,486 42,162 Furniture and fixtures 392,416 130.850 Total accumulated depreciation 2.214,504 738.170 Total capital assets, Ending Retirements Balance $ 2,182,816 2,182,816 13,270,150 887,095 2,806,596 295,134 915,951 18,174,926 - 1,768,268 - 118,280 - 374.212 - 168,648 - 523,266 2,952,674 being depreciated,net 15,960,422 ( 738.170) - 15,222,252 Capital assets,net $ 18,143,238 738,170) 17,405,068 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 7.76% to 8.69% and are payable semi-annually on July 1 and January I of each year thereafter. M III. DETAILED NOTES ON ALL FUNDS (Continued) C. Bonds Payable (Continued) 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: 2002 A-1 Bonds $ 16,929,280 $ - ${ 189,703) $ 16,739,577 $ 204,958 2002 A-2 Bonds 5,089,241 - - 5,089,241 - Total $ 22,018,521 $ - $( 189,703) $ 21,828,818 $ 204,958 The debt is to be amortized on the A-1 Bonds through 2033 with monthly payments of $124,726 and the A-2 Bonds through 2038 with monthly payments of $167,675 starting November 1, 2033. The A-2 Bonds have no regular principal payments until the year 2033. The Bonds also had a clause for an initial purchase release draw. The requirements for that draw were not met and during 2006, the funds held in the initial Purchase Fund were applied to principal on the Bonds. The annual requirements to amortize all debts outstanding as of August 31, 2007, are as follows: Year Ending Governmental Activities August 31 2008 2009 2010 2011 2012-2016 2017-2021 2022-2026 2027-2031 2032-2036 2037-2039 Totals Principal $ 204,958 221,441 239,248 257,979 1,517,705 2,234,316 3,289,289 4,842,385 6,165,901 2,855,596 21,828,818 Interest $ 1,709,872 1,693,389 1,675,582 1,656,851 8,056,448 7,339,837 6,284,864 4,727,764 3,586,576 1,720,403 $ 38,451,586 Total $ 1,914,830 1,914,830 1,914,830 1,914,830 9,574,153 9,574,153 9,574,153 9,570,149 9,752,477 4,575,999 $ 60,280,404 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. 1b III. DETAILED NOTES ON ALL FUNDS (Continued) D. Net Assets (Continued) 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. Unrestricted Net Assets consists of the portion of net assets after invested in capital assets, net of related debt and restricted for debt service has been satisfied. E. Management Fees The Project paid JPI property and asset management fees for the Project through February 28, 2005. Effective March 1, 2005, the Project entered into a management agreement with ACH and began paying management fees to ACH at that date. During 2007, the Project recorded management fees of$136,525 to ACH. At August 31, 2007, the Project owed JPI $79,200 for property management fees. 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 yet to have an arbitrage calculation perforined for its outstanding debt. After that analysis, the Project may incur a liability for interest earned in accordance with Internal Revenue Service regulations. In l ! 11-11rd WIT m Budget Actual Variance REVENUES AND OTHER SUPPORT Rental S 2,677,546 S 2,706,275 S 28,729 Other 104,700 84,550 ( 20,150) Interest - 63,230 63,230 Total revenues and other support 2,782,246 2,854,055 71,809 OPERATING EXPENSES Personnel 285,485 255,349 30,136 Contract services 59,900 64,675 ( 4,775) Utilities 377,896 392,149 ( 14,253) Repairs and maintenance 18,880 18,373 507 Turnover 80,275 65,684 14,591 Advertising and promotion 72,750 53,230 19,520 Administration 140,101 121,075 19,026 Total operating expenses 1,035,287 970,535 64,752 REVENUES AVAH.ABLE FOR F1XED CHARGES 1,746,959 1,883,520 136,561 OTHER EXPENSES Management fees 139,112 136,525 2,587 Replacements 46,850 43,056 3,794 Depreciation and amortization 817,216 817,216 - Interest 1,782,361 1,782,361 - Total other expenses 2,785,539 2,779,158 ( 6,381) EXCESS OF EXPENSES OVER(UNDER)REVENUES S( 1,038,580) S( 895,638) S 142,942 m �, mv; , • �, , . FINANCIAL SECI'I®N Independent Auditors' 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 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 E BUSINESS CONSULTANTS 112 .1 ' ► ! ► t i fT.7. ► � 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. 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 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. 1 401 WEST HIGHWAY 6 E P.O.BOX 20725 M WACO,TX 76702-0725 E(254)772-4901 N FAX:(254)772-4920®www.pbhcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778 E HILLSBORO,TX(254)582-2583 TEMPLE,TX(254)791-346011 WHITNEY,TX(254)694-4600 E ALBUQUERQUE,NM(505)266-5904 The management's discussion and analysis on pages 3 through b 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. fa" D noum. 4-�IX L.L. P. January 24, 2008 N 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. 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. 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. 0 Current and other assets Capital assets Total assets Long-term liabilities Other liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Business-type Activities 2007 2006 $ 5,351,810 $ 5,840,834 25,917,825 27,188,235 31,269,635 33,029,069 36,637,924 37,232,924 4,568,587 4,016,669 41,206,511 41,249,593 ( 9,855,099) { 719,602) 637,825 $( 9,936,876) ( 9,094,604) 50,763 823,317 $( 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. TABLE2 TEXAS STUDENT HOUSING AUTHORITY- BALLPARK AUSTIN PROJECT CHANGES IN NET ASSETS Total operating revenue Total operating expenses Total operating income i '1 M 0 Business-tune Activities 2007 2006 $ 3,359,388 $ 3,206,589 2,964,501 2,884,438 394,887 322,151 134,855 153,574 ( 2,246,094) ( 2,167,464) ( 2,111,239) ( 2,013,890) ( 1,716,352) ( 1,691,739) ( 8,220,524) ( 6,192,401) ( 336,384) $( 9,936,876) $( 8,220,524) The statement of cash flows recaps how cash changed from year to year. Dotes 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 2001 B 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. 0 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 Series A and Series 13 debt service reserve funds. . . � 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. in 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 fuiancing 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) N I ; r W 2 X V1012193 ► Rental income $ 3,337,504 Other income 21,884 Total operating revenues 3,359,388 OPERAI'ING EXPENSES Personnel 310,303 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 STATEMENT OF .I FLOWS FOR THE YEAR ENDED AUGUST 31, 2007 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) 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 S 2,440,248 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income S 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 S 1,788,630 The accompanying notes are an integral part of these financial statements. E ►��7�i9�►Ci7/�/I(C7i11:�Il�7►1�I►`�If`l AUGUST 31,2007 1!f.�iT_TI II 0101 D1121 I Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake, Texas, 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. 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. A summary of the Project's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 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: lul II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reporting Entity (Continued) Financial AccountahgLt.E — 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. '. i i : r' I , 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. 11111 11�11 14WIM: 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. 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. I II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Assets, Liabilities and Net Assets or Equity (Continued) 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. 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: Asset Class Building Furniture, fixtures and equipment Estimated Useful Lives 30 3 -20 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. IMUMMOKS-71M, 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 200 1 C Sub C 16 Debt Service Reserve 200 1 A 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. M, 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 2001 A, 2001 B and the Series 2001 C 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. III. DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) Restricted Cash (Continued) 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 2001B Bonds as they become due in the event there should be insufficient funds in the Bond Fund. Pro ect Fund— Amounts in the Project Fund are held and disbursed for costs of 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 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. 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. 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. IN 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 party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires 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) 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. 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 Aueust 31. 2008 2009 2010 2011 2012 2013-2017 2018-2022 2023-2027 2028-2032 2033 Totals Governmental Activities Principal $ 595,000 620,000 650,000 680,000 715,000 4,210,000 5,485,000 7,175,000 9,420,000 7,685,000 $ 37,235,000 (continued) IVA Interest $ 2,367,341 2,340,339 2,311,359 2,280,294 2,247,194 10,605,181 9,321,463 7,635,888 5,392,488 750,525 $ 45,252,072 Total $ 2,962,341 2,960,339 2,961,359 2,960,294 2,962,194 14,815,181 14,806,463 14,810,888 14,812,488 8,435,525 $ 82,487,072 III. DETAILED NOTES ON ALL FUNDS (Continued) 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. Restrieted for Debt Se'-vice 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. In �� i ILI 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 OPERA'T'ING EXPENSES Personnel 318,344 310,303 8,041 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 2,221,282 310,786 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) $ 1,7.16,352) $ 276,466 ILI IM � . MU SCHEDULE AUGUST 31,2007 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 .85, 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. R . F � � ��> . WOTM ` SECTION Independent i Auditors' ----.-....—.------.---..----------.—.--..—.-----' 1 -2 � `o [i0000aiouand Analysis .--..-.-...----..--.-.---...—.---_..--.--' 3 - 5 | Financial Statements: | Statementof Net Assets................................................................................................... 6 � Statement of Revenues, Expenses and Changes im Net Assets........................................ 7 [ Statement 0fCash Flows ................................................................................................. Q ' SUPPLEM[ENTAL SCHEDULES SchcduleT— Sc}xedo{eofReveoneoaod Expenses............................................................. 17 ' Schedule 11—Fixed Ratio 18 MMI PA'I TIL, LO, BROWN & HILL, L.L_P. CERTIFIED PUBLIC ACCOUNTANTS N BUSINESS CONSULTANTS To the Board of Directors Texas Student Housing Authority— College Station Project Westlake, Texas We have audited the accompanying financial statements of Texas Student Housing Authority— College Station Project(the"Project"), as of and for the year ended August 31, 2007, which collectively comprise the Project's basic financial statements as listed in the table of contents. Texas Student Housing Authority — College Station 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 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— College Station Project as of August 31, 2007, and the respective 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— College Station Project will continue as a going concern. As discussed in Note H, H to the financial statements, the Project is in default on its certificates and certificate holders may choose to continue as a going concern. Management's plans in regard to these matters are discussed in Note II, H. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 401 WEST HIGHWAY 6 E P.O.BOX 20725 E WACO,TX 76702-0725 E(254)7721901 M FAX:(254)772-4920 E www.pbhcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778 0 HILLSBORO,TX(254)582-2583 TEMPLE,TX(254)791-3460 N WHITNEY,TX(254)6944600 IN ALBUQUERQUE,NM(505)266-5904 The management's discussion and analysis on pages 3 through 5 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 business-type activities of Texas Student Housing Authority– College Station Project's basic financial statements. The accompanying supplementary information on pages 17 and 18 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. pa"1 6 A&J-',— 'L �i U. ,I L.1, P. January 24, 2008 19, As staff of the Texas Student Housing Corporation (the "Corporation") – College Station 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 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 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. Mai er.10i7./_1A Is,iInso t X-MITI The liabilities of the Project exceeded its assets at the close of the fiscal year by $3,363,805, due primarily to a decrease in net assets of$1,230,285. Major components of the expense overage were $75,430 in utilities and $13,386 in repairs and maintenance expenses. a At the end of the current fiscal year, the total cash balances were $3,369,881 in unrestricted cash and$1,383,586 in restricted cash. 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 certificates 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 certificate holders the right to accelerate and demand payment of the certificates 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. 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. 11 The statement of revenues, expenses and changes in net assets accounts for all of the Authority's revenues and expenses regardless of when cash is paid or received. The statement of cash flows recaps how cash increased year over year. 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: Replacement Fund $ 194,117 Series A Debt Service Reserve Fund 338,752 Series B Debt Service Reserve Fund 475,445 Transaction Cost Payment Fund 31,766 Series D Interest Fund 40,187 Current receipts 303,319 Total $ 1,383,586 Nonrestricted cash. Nonrestricted cash is available for general use of the Project. Installment note payable. The Project's developer refinanced the original Installment Sale Agreement effective September 1, 2004, by issuing debt certificates in the following classes: Series A $ 17,500,000 Series B 4,900,000 Series C 4,820,000 Series D 5,380,000 Total $ 32,600,000 The note is payable at the rate of$231,545 monthly. Fixed Charge Coverage Ratio The Installment Sale Agreement provides for a fixed charges coverage ratio of l.1. At this time, the Project has only realized a ratio of.84 and is thus technically in default of the Agreement. Upon default, the lender may accelerate maturity of the unpaid portion of the principal, however, it is not anticipated that this event will incur since foreclosure by the certificate holders would result in the loss of the Project's tax-exempt status. 11 Leases at the Project have a duration that encompasses the school year, primarily the months of September through May. The June to August revenue is dependent on the ability to attract various camps/meetings. As the Project is tax-exempt through the Texas Higher Education Act, only those functions sponsored by the University are eligible for acceptance. The occupancy for this school year is 100%, thus the focus for this year will be on increasing this "summer" revenue. Although the fixed charges coverage ratio was only .84, all of the A and B certificate holders received all proceeds due them. The 2007/2008 budget clearly indicates that operating income will be sufficient to again service the A and B certificates. 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. ASSE'T'S Current assets: Cash $ 3,369,881 Restricted cash 1,383,586 Accounts receivable,net of$64,045 allowance 434,856 Prepaid expenses 18,227 Total current assets 5,206,550 Capital assets: Land 2,899,597 Other capital assets,net of accumulated depreciation 26,304,353 29,203,950 Total capital assets 29,203,950 Total assets 34,410,500 LIABILITIES Current liabilities: Accounts payable 308,602 Accrued expenses 304,023 Deferred revenue and prepaid rent 3,035,354 Accrued interest 1,781,326 Installment loan payable 32,345,000 Total current liabilities 37,774,305 NET ASSE'T'S Invested in capital assets,net of related debt ( 3,141,050) Unrestricted ( 222,755) Total net assets $( 3,363,805) C . c.S STUDENT HOUSING+ , A. i 33 w OWN 1011""1 akyj 010111 5kq Rental $ 5,109,233 Other 48,388 Total operating revenues 5,157,621 OPERATING EXPENSES Management fees 276,000 Administration and marketing 800,206 Cafeteria 8 04,000 Utilities 662,785 Repairs and maintenance 439,342 Insurance 61,977 Depreciation and amortization 1,382,975 Total operating expenses 4,427,285 OPERATING INCOME 730,336 STATEMENT OF CASH FLOWS L&,1'? TVFVFSV I t Ong I'll, Cash received from tenants $ 5,131,428 Other operating revenues 48,388 Cash paid to employees ( 857,130) Cash paid to suppliers ( 1,659,968) Net cash provided by operating activities 2,662,718 CASH FLOWS FROM CAPITAL AND RELATER FINANCING ACTIVITIES Principal repayments on bonds ( 255,000) Interest paid ( 2,075,015) Net cash used in capital and related financing activities ( 2,330,015) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 114,394 Acquisition and construction of capital assets ( 3,377) Net cash provided by investing activities 111,017 NET CHANGE IN CASH AND CASH EQUIVALENTS 443,720 CASH AND CASH EQUIVALENTS,BEGINNING 4,309,747 CASH AND CASH EQUIVALENTS, ENDING $ 4,753,467 Cash $ 3,369,881 Restricted cash 1,383,586 Total cash and cash equivalents $ 4,753,467 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 730,336 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,382,975 Changes in operating assets and liabilities: Accounts receivable ( 113,835) Other assets ( 13,227) Accounts payable 64,307 Accrued interest 467,540 Accrued liabilities 122,427 Deferred revenue and prepaid rent 22,195 Net cash provided by operating activities $ 2,662,718 The accompanying notes are an integral part of these financial statements. I owl VAN R WOKE K . . � AUGUST 31,2007 :1 n = Texas Student Housing Authority — College Station Project (the "Project"), a duly constituted authority of the Town of Westlake, Texas (the "Town") pursuant to Section 53.35(b) of the Texas Education Code, as amended (the "Act"). The Authority was established to acquire educational facilities and housing facilities to be used by the students, faculty and staff of institutions of higher education within the State of Texas. The Project's purpose is to own and operate a student housing facility known as Cambridge at College Station (the "College Station Project") in College Station, Texas. The College Station Project was purchased from Cambridge Student Housing Development, L.P. (the "Developer") effective September 1, 2004. The Project obtained its financing through a seller-financed installment sale agreement. The accompanying financial statements present the operations of the Project, whose revenues are pledged for the installment note described herein. The College Station Project is operated and managed under the terms of the First Amended and Restated Property Project Management and Leasing Agreement by and between the Authority and Asset Campus Housing, Inc. for the period audited. The Project's significant accounting policies are as follows: 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. G1 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reporting Entity (Continued) The criteria set forth require governmental reporting entities to determine their primary government for the purposes of annual reporting. The primary government is deemed to be financially accountable if it appoints a voting majority of the organization's governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Additionally, the primary government may be financially accountable if an organization is fiscally dependent regardless of whether the organization has a separately elected governing board appointed by a higher level of government or a jointly appointed board. I: i The Project uses the "net income and capital maintenance" measurement focus. This means that all assets, liabilities, equity, revenues, and expenses are accounted for using the accrual basis of accounting. Such standards are generally in accordance with the reporting standards of income producing real estate projects owned in the private sector. 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. Property and equipment are recorded at cost. Such costs include carpet and appliance replacements. Expenditures for routine maintenance and repairs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the following useful lives: Buildings 30 years Improvements 15 years Equipment,furniture and fixtures 5 - 20 years Hul I. SUMMARY OF SIGNIFICANT ACC®IJNTING POLICIES (Continued) Cash and Cash Equivalents For the purpose of the statement of cash flows, the Project considers unrestricted cash and highly liquid investments with maturities of three months or less at the date of purchase to be cash and cash equivalents. As of and during the year ended August 31, 2007, the Project had cash deposits with financial institutions in excess of the $100,000 amount insured by the Federal Deposit Insurance Corporation. Any amounts over the FDIC limit are insured with pledged securities by the Project's depository. The Project is an instrumentality of the Town of Westlake, therefore, its income is not subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code. Additionally, the Project is exempt from local property taxes. 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. CHMEMMIM All advertising costs are expensed as they are incurred. Advertising costs for the year ended August 31, 2007, were approximately$63,000. 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 the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. M ! Restricted cash represents amounts held in escrow, which are restricted for the payment of expenses as required by the installment sale agreement. As of August 31, 2007, restricted cash consists of the following: Fund/Account Description Replacement Fund $ 194,117 Series A Reserve Fund 338,752 Series B Reserve Fund 475,445 Transaction Costs Payment Fund 31,766 Series D Interest Fund 40,187 Current Receipts Fund 303,319 Total $ 1,383,586 The following is a brief description of the funds and accounts comprising the restricted cash balance at year-end, as defined by the installment sale agreement and the trust agreement: Replacement Fund— Amounts in the Replacement Fund may be used to pay the maintenance and repair costs related to the College Station Property, which the Project is obligated to pay pursuant to the installment sale agreement. Series A Reserve Fund—The amounts on deposit in this account were required to be contributed by the Developer and are to be used for the purpose of paying principal and interest on the Series A certificates as they become due in the event there should be insufficient funds in the Debt Service Fund. Series R Reserve Fund—The amounts on deposit in this account were required to be contributed by the Developer and are to be used for the purpose of paying principal and interest on the Series B certificates as they become due in the event there should be insufficient funds in the Debt Service Fund. Series A Principal Fund — Amounts in the Series A Principal Fund represent payments set aside for the repayment of the principal balance on the Series A certificates. Transaction Costs Payment Fund— Amounts in the Transaction Costs Payment Fund are to be used to pay for debt issuance costs. W II. DETAILED DOTES ON ALL FUNDS (Continued) A. Restricted Cash (Continued) Debt Service Fund — Amounts in the Debt Service Fund are to be used to accumulate funds that are used to pay debt service costs. Series D Interest Fund — Amounts in the Series D Interest Fund are used to accumulate funds to pay interest on the Series D certificates. Current Receipts Fund—Amounts in the Current Receipts Fund are to be used to accumulate funds from the collections of rent payments and other income from the College Station Project. P. Installment Note Payable The Project's installment note payable is summarized as follows: Interest Lender/Security/Due Date Rate Balance Cambridge Student Housing Financing Company, L.P.; substantially all assets and assignment of rents; due November 1,2039 8.00% $ 32,345,000 The Project's installment note is payable monthly with principal and interest payments of $231,545 until November 1, 2039. The following is a summary of long-term debt transactions of the Project for the year ended August 31, 2007: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Installment note $ 32,600,000 $ - $ 255,000 $ 32,345,000 $ 32,345,000 The Project's original Developer refinanced the installment note through a secondary offering with Cambridge Student Housing Financing Company, L.P. The debt certificates were sold to private investors in the following classes: Class(Series) Offering Total A $ 17,245,000 B 4,900,000 C 4,820,000 D 5,380,000 Total $ 32,345,000 i II. DETAILED NOTES ON ALL FUNDS (Continued) B. Installment Note Payable (Continued) Each class has certain rights and privileges, as contained in the private placement memorandum. As a part of the offering, the Project entered into a trust agreement with J. P. Morgan Trust Company, N.A. (the "Trustee") for the purpose of determining that each class is paid in accordance with the private placement memorandum. At August 31, 2007, the Project was not in compliance with the fixed charge coverage ratio. Should the project default, the lender may accelerate the maturity of the unpaid portion of the principal payable under the installment sale agreement. However, the Authority does not anticipate this event will occur, since foreclosure by private interests would result in the loss of tax-exempt status for the Project. C. Capital Assets Capital asset activity for the Project for the year ended August 31, 2007, was as follows: Beginning Prior Period Ending Balance Increase Decrease Adjustment Balance Capital assets,not being depreciated: Land $ 2,899,597 $ $ $ $ 2,899,597 Total capital assets, not being depreciated 2,899,597 - 2,899,597 Capital assets,being depreciated: Building Furniture and fixtures Total capital assets, being depreciated Less accumulated depreciation for: Building Furniture and fixtures Total accumulated depreciation Total capital assets, being depreciated,net Capital assets,net 27,727,646 - 2,591,427 3,377 30,319,073 3,377 ( 1,783,245) ( 955,553) ( 851,877) ( 427,422) 2,635,122) ( 1,382,975} 27,683,951 ( 1,379,598) $ 30,583,548 $( 1,379,598) $ 1 1 /;.� FE 27,727,646 - 2,594,804 30,322,450 ( 2,738,798) ( 1,279,299) 4,018,097) 26,304,353 $ - $ 29,203,950 II. DETAILED NOTES ON ALL FUNDS (Continued) Resident leases generally have a duration that encompasses the school year. This enables the Project to pass on inflationary increases in operating expenses on a timely basis; however, this exposes the Project to rental rate decreases during economic downturns. Additionally, competition from nearby university housing properties in College Station, Texas influences the housing rates charged to students. Despite these risks, the Project believes there will be a continued strong demand for its dwelling units. E. Net Assets Net assets represent the residual assets after liabilities are deducted. Net 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 certificates, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted for Debt Service— consists of net assets for which conditions are either externally imposed by creditors, grantors and the like, or imposed by law through constitutional provisions or enabling legislation. At August 31, 2007, the total funds available for debt service were less than the accrued interest due at August 31, 2007. As a result,net assets restricted for debt service is shown at zero. Unrestricted—available for general use of the Project without restriction. The Project pays Asset Campus Housing asset management fees for the management of the College Station Property. The Project recorded property management fees of approximately $276,000 for the period ended August 31, 2007. Administration and marketing expenses include approximately $102,000 for administrative fees earned by Texas Student Housing Authority. Administrative fees totaling approximately $20,000 are included in accounts payable at August 31, 2007. G. Commitments and Contingencies During fiscal year 2006, the Brazos County Tax — Assessor's office filed suit against the Project in order to eliminate the Project's tax-exempt status. This would force the Project to begin paying property taxes on the property owed by the Project. The County is also seeking back property taxes previously not paid as the Project was under tax-exempt status. The status of this suit is unknown at this time and a liability has not been booked. Should the county prevail, the Project would owe the county a material amount of property taxes, from both current and prior periods. IN IIm DETAILED NOTES ON ALL FUNDS (Continued) G. Commitments and Contingencies (Continued) The Project has not 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. H. Going Concern 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 partial non- payment 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. This condition raises substantial doubt about the Project's ability to continue as a going concern. 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. != ��, 1. Administrative and marketing Budget Actual Variance VENUES AND O'T'HER SUPPORT 807,482 804,000 3,482 Rental $ 4,714,811 $ 5,109,233 $ 394,422 Other 548,806 48,388 ( 500,418) Interest - 114,394 114,394 Total revenues and other support 5,263,617 5,272,015 8,398 Administrative and marketing 829,161 800,206 28,955 Cafeteria 807,482 804,000 3,482 Utilities 587,355 662,785 ( 75,430) Repairs and maintenance 425,956 439,342 ( 13,386) Insurance 94,800 61,977 32,823 Total operating expenses 2,744,754 2,768,310 ( 23,556) REVENUE AVAILABLE FOR FIXED CHARGES 2,518,863 2,503,705 ( 15,158) OTHER EXPENSES Management fees 276,000 276,000 - Depreciation and amortization 1,382,975 1,382,975 - Interest 2,075,015 2,075,015 - Total other expenses 3,733,990 3,733,990 - EXCESS OF EXPENSES OVER REVENUES $( 1,215,127) $( 1,230,285) $L 15,158) IM CALCULATION OF FIXER CHARGES COVERAGE RATIO Total gross revenues Total expenses Add: Interest Depreciation and amortization Property management fees in excess of base property management fee Adjusted expenses Adjusted net operating income available to pay fixed charges Fixed charges/maximurnprincipal and interest for fiscal year-end Fixed charges coverage ratio Required ratio Pass or fail $( 6,502,300) 2,075,015 1,382,975 118,352 $ 5,272,015 ( 2,925,958) $ 2,346,057 $ 2,778,540 0.84 1.10 Fail