HomeMy WebLinkAboutSan Marcos Audit 08-31-09 TEXAS STUDENT HOUSING AUTHORITY
THE RIDGE AT SAN MARCOS PROJECT
FINANCIAL REPORT
AUGUST 31, 2009
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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
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FINANCIAL SECTION
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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.
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401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pbhcpa.com
AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460■WHITNEY,TX(254)694-4600■ALBUQUERQUE,NM(505)266-5904
The management's discussion and analysis on 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.
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January 12, 2010
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MANAGEMENT'S
DISCUSSION AND ANALYSIS
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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.
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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
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The accompanying notes are an integral part of these financial statements.
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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
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REALIZED GAIN ON LIQUIDATION 7,677,775
INCREASE IN NET ASSETS 7,721,658
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NET ASSETS IN LIQUIDATION,BEGINNING ( 7,721,658)
NET ASSETS IN LIQUIDATION, ENDING $ -
The accompanying notes are an integral part of these financial statements.
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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."
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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
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liabilities pertaining to the facility are no longer under the control of Texas Student Housing
Authority.
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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
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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.
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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.
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(continued)
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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
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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)
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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)
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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)
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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) $ - $ - $ -
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Total $ 19,580,869 $( 19,580,869) $ -
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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.
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