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HomeMy WebLinkAboutSan Marcos Audit 08-31-09 TEXAS STUDENT HOUSING AUTHORITY THE RIDGE AT SAN MARCOS PROJECT FINANCIAL REPORT AUGUST 31, 2009 i i TEXAS STUDENT HOUSING AUTHORITY THE RIDGE AT SAN MARCOS PROJECT TABLE OF CONTENTS AUGUST 31,2009 Page Number FINANCIAL SECTION Independent Auditors' Report............................................................................................. 1 -2 Management's Discussion and Analysis ............................................................................ 3 Financial Statements: Statementof Net Assets................................................................................................... 4 Statement of Revenues, Expenses and Changes in Net Assets........................................ S Notes to Financial Statements.......................................................................................... 6- 11 I i FINANCIAL SECTION i P]IR&I PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors Texas Student Housing Authority— The Ridge at San Marcos Project Westlake, Texas We have audited the statement of net assets in liquidation of Texas Student Housing Authority— The Ridge at San Marcos Project (the "Project"), as of August 31, 2009, and the related statement of changes in net assets in liquidation for the period from September 1, 2008 to August 31, 2009. The 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, 2009, and the 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. As described in Note II to the financial statements, the Project was given a deed-in-lieu by the bondholder, Muni Mae, on November 14, 2008, and the Project commenced liquidation shortly thereafter. As a result, the Project has changed its basis of accounting for periods subsequent to August 31, 2008, from going-concern basis to a liquidation basis. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of the Texas Student Housing Authority— The Ridge at San Marcos Project as of August 31, 2009, and the changes in its net assets in liquidation for the period from September 1, j 2008 to August 31, 2009, in conformity with accounting principles generally accepted in the United States of America applied on the basis described in the preceding paragraph. f 1 401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pbhcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583 TEMPLE,TX(254)791-3460■WHITNEY,TX(254)694-4600■ALBUQUERQUE,NM(505)266-5904 The management's discussion and analysis on page 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. a6 � r January 12, 2010 I I 2 { C MANAGEMENT'S DISCUSSION AND ANALYSIS i i pp€ E EE E I SS r4f I 1 MANAGEMENT'S DISCUSSION AND ANALYSIS As staff of the Texas Student Housing Authority (the "Authority") – The Ridge at San Marcos 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, 2009. 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 2009. PLAN OF LIQUIDATION The 2009 financial statements were prepared using the liquidation method of accounting. The Project's bonds payable were considered to be in default due to the discontinuance of principal and interest payments. This was considered an event of default by the Trustee, which the bondholders the right to accelerate and demand payment of the bonds in full. On November 14, 2008, the Ridge at San Marcos was given a deed-in-lieu by the bondholders, Muni Mae, and these assets and liabilities pertaining to the facility are no longer under the control of Texas Student Housing Authority. Due to the fact that the Project was given a deed-in-lieu by the bondholder, the management's discussion and analysis will be omitted as there are less than three months of activity. As the assets and liabilities of the Project are no longer under control of management, this will be the last financial statement issued for this entity. CONTACTING THE PROJECT'S FINANCIAL MANAGEMENT This financial report is designed to provide the reader with a general overview of the Project's finances and to demonstrate the Project's accountability for the money it receives. If you have any questions about this report, or need additional information,please contact Pete Ehrenberg at(817)490-5723. 3 TEXAS STUDENT HOUSING AUTHORITY THE RIDGE AT SAN MARCOS PROJECT STATEMENT OF NET ASSETS AVAILABLE FOR LIQUIDATION AUGUST 31,2009 ASSETS Cash $ 16,229 Total assets 16,229 LIABILITIES Accounts payable 16,229 Total liabilities 16,229 NET ASSETS IN LIQUIDATION - Unrestricted I I i The accompanying notes are an integral part of these financial statements. 4 I TEXAS STUDENT HOUSING AUTHORITY THE RIDGE AT SAN MARCOS PROJECT STATEMENT OF LIQUIDATING ACTIVITIES FOR THE YEAR ENDED AUGUST 31,2009 SOURCES OF ADDITIONAL CASH Rental $ 628,075 Interest income 321 Other 20,228 Total sources of additional cash 648,624 ADDITIONAL USES OF CASH Personnel 87,300 Utilities 92,722 Contract services 7,418 Repairs and maintenance 14,491 Turnover 134,491 Advertising and promotion 31,653 Administration 29,244 Management fees 51,721 Replacements 9,075 Interest expense 146,626 Total additional uses of cash 604,741 DECREASE IN NET ASSETS IN LIQUIDATION BEFORE ADJUSTMENTS 43,883 I REALIZED GAIN ON LIQUIDATION 7,677,775 INCREASE IN NET ASSETS 7,721,658 I NET ASSETS IN LIQUIDATION,BEGINNING ( 7,721,658) NET ASSETS IN LIQUIDATION, ENDING $ - The accompanying notes are an integral part of these financial statements. 5 TEXAS STUDENT HOUSING AUTHORITY— THE RIDGE AT SAN MARCOS PROJECT NOTES TO FINANCIAL STATEMENTS AUGUST 31,2009 I. GENERAL STATEMENT Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake, 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 Ridge at San Marcos Project (the "Project"). The Project was purchased from Jefferson Commons — Austin, L.P., a Delaware limited partnership on December 28, 2000. The Project obtained its financing through the issuance of the City of Cameron Education Corporation Student Housing Revenue Bonds Series 2000. The bonds were issued through a Trust Indenture (the "Trust Indenture") by and between the City of Cameron Education Corporation and The Bank of New York(the"Trustee"). The Series 2000 Bonds were issued in the face amount of$19,900,000. 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 (a) the 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 March 31, 2004. The Project is now managed and operated by Asset Campus Housing under the terms of a Property Management and Leasing Agreement dated April 1, 2004. The Property Management Agreements are collectively referred to as the "Agreements." f II. PLAN OF LIQUIDATION The 2009 financial statements were prepared using the liquidation method of accounting. The Project's bonds payable were considered to be in default due to the discontinuance of principal and interest payments. This was considered an event of default by the Trustee, which the bondholders the right to accelerate and demand payment of the bonds in full. On November 14, 2008, the Ridge at San Marcos was given a deed-in-lieu by the bondholders, Muni Mae, and these assets and S liabilities pertaining to the facility are no longer under the control of Texas Student Housing Authority. i 6 i t� t f III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Project's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: A. Reporting Entity For financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 14 as amended by GASB Statement No. 39. The criteria used is as follows: 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. The Project does not have any component units. B. Measurement Focus and Basis of Accounting 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. I Revenue is recognized when earned and expenses are recognized when they are incurred. In applying the requirements of GASB Statement No. 20, the Project has chosen to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. C. Assets,Liabilities and Net Assets or Equity Income Taxes The Project is an instrumentality of the Town and, therefore, its income is not subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code. l (continued) 7 III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Assets, Liabilities and Net Assets or Equity(Continued) Cash and Cash Equivalents The Project considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. At August 31, 2009, the Project had no such investments included in cash and cash equivalents. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions. Advertising Costs All adverting costs are expensed as they are incurred. Advertising costs for the year ended August 31, 2009, were approximately $31,653. IV. DETAILED NOTES ON ALL FUNDS A. Cash and Investments At August 31, 2009,the carrying amount of Texas Student Housing Authority—The Ridge at San Marcos Project deposits (cash with interest bearing accounts)was in total $16,229. Restricted Cash i The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies relating to a governmental entity's cash and investments. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an instrument. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. Texas Student Housing Authority—The Ridge at San Marcos Project is not significantly exposed to interest rate risk as all investments earn a variable rate. (continued) i 8 IV. DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The Public Funds Investment Act has a minimum rating that is required for investments. Texas Student Housing Authority— The Ridge at San Marcos Project holds all of its cash and investments with the bond Trustee and commercial banks. Concentration of Credit Risk The investment policy of Texas Student Housing Authority — The Ridge at San Marcos Project is subject to the indenture agreement of the bonds. 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, 2009, the Project has cash of$16,229 (bank balance $16,229). Of the bank balances, $16,229 was covered by federal depository insurance. (continued) 9 IV. DETAILED NOTES ON ALL FUNDS (Continued) B. Capital Assets Capital asset activity for the Project for the year ended August 31, 2009,was as follows: Beginning Ending Balance Additions Retirements Adjustments Balance Capital assets,not being depreciated: Land $ 1,552,207 $ - $ - $( 1,552,207) $ - Total capital assets, not being depreciated 1,552,207 - - ( 1,552,207) - Capital assets,being depreciated: Building 15,875,143 - - ( 15,875,143) - Furniture and fixtures 818,332 - - ( 818,332) - Total capital assets, being depreciated 16,693,475 - - ( 16,693,475) - Less accumulated depreciation ( 4,841,486) - - ( 4,841,480 - Total capital assets, being depreciated,net 11,851,989 - - ( 11,851,989) - Capital assets,net $ 13,404,196 $ - $ - $L11,404,196) $ - On November 14, 2008, the Ridge at San Marcos was given a deed-in-lieu by the bondholders, Muni Mae and these assets and liabilities pertaining to the facility are no longer under the control of Texas Student Housing Authority. Therefore, the Project has no title or ability to use the capital asset. 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, 2000. 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 Town of Westlake and Texas Student Housing Authority. The annual interest rate is 8.2% and interest is due on the first of each month. In the case of default under the terms of the Indenture, the interest rate increases by 2%. During 2005, the Project defaulted on the bonds and the interest rate increased to 10.2%. (continued) 10 I IV. DETAILED NOTES ON ALL FUNDS (Continued) C. Bonds Payable(Continued) During 2005, the Project ceased making the required principal and interest payments required by the Loan and Financing Agreement. This constitutes an event of default under provisions of the Indenture and permits the Trustee at the direction of the Servicing Agent to declare the principal and all interest then due to be immediately due and payable. Accounting principles generally accepted in the United States of America require that if an event of default occurs, the liability should be disclosed as a current liability. As a result, the outstanding principal at August 31, 2009, has been shown as a current liability in the accompanying financial statements. The following is a summary of long-term debt transactions of the Project for the 12-month period ended August 31, 2009: Amounts Beginning Ending Due Within Balance Adjustments Decreases Balance One Year Revenue Bonds: 2000 Bonds $ 19,580,869 $( 19,580,869) $ - $ - $ - I Total $ 19,580,869 $( 19,580,869) $ - I On November 14, 2008, the Ridge at San Marcos was given a deed-in-lieu by the bondholders, Muni Mae, and these assets and liabilities pertaining the facility are no longer under the control of Texas Student Housing Authority. Therefore, the Project is no longer responsible for the repayment of this debt issue. I 8 11 f