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HomeMy WebLinkAboutTownLake Audit 08-31-09 TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT FINANCIAL REPORT AUGUST 31, 2009 I I i I E i f TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT TABLE OF CONTENTS AUGUST 31,2009 Page Number FINANCIAL SECTION Independent Auditors' Report............................................................................................. 1 -2 Management's Discussion and Analysis ............................................................................ 3 -5 Financial Statements: Statementof Net Assets................................................................................................... 6 Statement of Revenues, Expenses and Changes in Net Assets........................................ 7 Statement of Cash Flows ................................................................................................. 8 Notes to Financial Statements.......................................................................................... 9- 17 SUPPLEMENTAL SCHEDULES Schedule I—Schedule of Revenues and Expenses............................................................. 18 1voZRI PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS INDEPENDENT AUDITORS' REPORT 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, 2009, 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. i 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, j 2009, 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. j 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, 2009, 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 Authority—Town Lake 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■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pbhcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583 TEMPLE,TX(254)791-3460■WHITNEY,TX(254)694-4600■ALBUQUERQUE,NM(505)266-5904 The management's discussion and analysis on pages 3 through S 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 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. Axl� OMm4kt, 4 T9) (L P January 12, 2010 i I 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 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, 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. FINANCIAL HIGHLIGHTS • The liabilities of the Project exceeded its assets at the close of the fiscal year by $4,450,074, an increase of$1,088,410 over the prior year. • Operating revenue of$2,889,240 is $28,320 less than budget; and operating expenses were $71,425 more than budget. • At the end of the current fiscal year, the total cash balances were $497,321 in unrestricted cash and$679,298 in restricted cash. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Project's basic financial statements. The Project's report consists of three parts, Management's Discussion and Analysis, the basic financial statements, and notes to financial statements. The basic financial statements include a statement of net assets, statement of revenues, expenses and changes in net assets, a statement of cash flows and a supplemental schedule. The Project is being treated as a going concern. The Project is in default on its bonds and is not financially able to make scheduled principal and interest payments on its outstanding debt. They are considered an event of default by the Trustee, which gives the bondholders the right to accelerate and demand payment of the bonds in full. Management and the property manager are in the process of developing plans to increase occupancy and rental rates at the property to improve its financial performance. 3 The statement of net assets presents information on all of the Project's assets and liabilities with the difference between the two reported as net assets. TABLE 1 TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NET ASSETS Business-type Activities 2009 2008 Current and other assets $ 1,999,838 $ 2,502,102 Capital assets 16,116,089 16,748,671 Total assets 18,115,927 19,250,773 Current liabilities 1,181,508 1,211,342 Noncurrent liabilities 21,384,493 21,401,095 Total liabilities 22,566,001 22,612,437 Net assets: Invested in capital assets, net of related debt ( 5,268,404) ( 4,857,382) Restricted 265,266 552,995 Unrestricted 553,064 942,723 Total net assets $( 4,450,074) $( 3,361,664) 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 2009 2008 Total operating revenue $ 2,887,751 $ 2,831,579 Total operating expenses 2,309,003 2,137,550 Total operating income 578,748 694,029 Interest income 1,489 33,592 Interest expense ( 1,668,647) ( 1,677,721) Total nonoperating loss ( 1,667,158) ( 1,644,129) I CHANGE IN NET ASSETS ( 1,088,410) ( 950,100) NET ASSETS,BEGINNING ( 3,361,664) ( 2,411,564) NET ASSETS,ENDING $( 4,450,074) $( 3,361,664) The statement of cash flows recaps how cash changed from year to year. 4 f FINANCIAL ANALYSIS OF THE PROJECT'S FUNDS Notes to financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Restricted cash. Restricted cash represents monies held in escrow by the trustee and are restricted for the payment of expenses as outlined in the Trust Indenture. As of August 31, 2009, these balances were as follows: Bond Proceeds Interest Fund,Series 2002 A-2 $ 5,239 Debt Service Reserve Fund 251,116 Repair and Replacement Fund 374,564 Deferred Debt Service 16,426 Tax and Insurance Fund 2,120 Fee and Expense Fund 29,833 Total $ 679,298 Nonrestricted cash. Nonrestricted cash is available for general use of the Project. Bonds payable. As of August 31, 2009, the following amounts on the Series 2002 A-1 and 2002 A-2 were payable: Series 2002 A-1 $ 16,295,252 Series 2002 A-2 5,089,241 Total $ 21,384,493 For the fiscal year ending August 31, 2009, the total principal and interest payment is calculated at $1,759,996. A total of$221,560 in principal was paid during 2009. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET Leases at the Project are primarily 12-month leases, however, due to competitive and market conditions, a relatively minor number of 10-month leases exist. These leases do bring a monthly premium over the 12-month leases. Occupancy for the fiscal year ending August 31, 2010, forecasts at 100%. However, rental rates, again due to competitive pressures will not see a large increase. 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. 5 TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT STATEMENT OF NET ASSETS AUGUST 31,2009 ASSETS Current assets: Cash $ 497,321 Restricted cash 679,298 Accounts receivable 19,043 Prepaid expenses 15,000 Total current assets 1,210,662 Capital assets: Land 2,182,816 Other capital assets,net of accumulated depreciation 13,933,273 Total capital assets 16,116,089 Intangible assets: Debt issue costs,net of amortization 789,176 Total intangible assets 789,176 Total assets 18,115,927 LIABILITIES Current liabilities: Accounts payable 58,869 Accrued liabilities 203,946 Management and development fees payable 79,200 Deferred revenue and prepaid rent 425,461 Accrued interest 414,032 Total current liabilities 1,181,508 Noncurrent liabilities: Bonds payable 21,384,493 Total noncurrent liabilities 21,384,493 Total liabilities 22,566,001 NET ASSETS Invested in capital assets,net of related debt ( 5,268,404) Restricted for debt service 265,266 Unrestricted 553,064 Total net assets $( 4,450,074) The accompanying notes are an integral part of these financial statements. 6 I i TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED AUGUST 31,2009 OPERATING REVENUES Rental $ 2,774,729 Other 113,022 Total operating revenues 2,887,751 OPERATING EXPENSES Personnel 292,459 Contract services 57,901 Utilities 568,506 Repairs and maintenance 87,466 Turnover 187,469 Advertising and promotion 50,558 Administration 134,873 Management fees 150,288 Replacements 100,000 Depreciation and amortization 679,483 Total operating expenses 2,309,003 OPERATING INCOME 578,748 NONOPERATING REVENUES (EXPENSES) Interest income 1,489 Interest expense ( 1,668,647) Total nonoperating revenues(expenses) ( 1,667,158) CHANGE IN NET ASSETS ( 1,088,410) NET ASSETS,BEGINNING ( 3,361,664) NET ASSETS,ENDING $( 4,450,074 The accompanying notes are an integral part of these financial statements. 7 TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31,2009 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tenants $ 2,844,839 Cash paid to employees ( 195,618) Cash paid to suppliers ( 1,343,251) Net cash provided by operating activities 1,305,970 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Payments on bonds payable ( 221,560) Interest paid ( 1,538,436) Net cash used in capital and related financing activities ( 1,759,996) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 1,489 Net cash provided by investing activities 1,489 NET CHANGE IN CASH AND CASH EQUIVALENTS ( 452,537) CASH AND CASH EQUIVALENTS,BEGINNING 1,629,156 CASH AND CASH EQUIVALENTS,ENDING $ 1,176,619 Restricted cash 679,298 Total cash and cash equivalents $ 1,176,619 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 578,748 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 679,483 Changes in operating assets and liabilities: Accounts receivable 2,826 Trade accounts payable ( 6,190) Deferred revenue ( 45,738) Other current liabilities 96,841 Net cash provided by operating activities $ 1,305,970 i The accompanying notes are an integral part of these financial statements. 8 TEXAS STUDENT HOUSING AUTHORITY— TOWN LAKE AUSTIN 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 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 $5,670,000, 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." The 2009 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 not making full 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. H. 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. Renortiniz Entity I For financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 14 as amended by GASB Statement No. 39. The criteria used is as follows: (continued) j 9 II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reporting Entity(Continued) Financial Accountability — The primary government is deemed to be financially accountable if it appoints a voting majority of the organization's governing body and 1) is able to impose its will on that organization; or 2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on,the primary government. Additionally, the primary government may be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board appointed by a higher level of government or a jointly appointed board. B. Measurement Focus and Basis of Accounting The Project uses the economic resources measurement focus. This means that all assets, liabilities, equity, revenues, and expenses are accounted for using the accrual basis of accounting. Revenue is recognized when earned and expenses are recognized when they are incurred. In applying the requirements of GASB Statement No. 20, the Project has chosen to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. C. Assets,Liabilities and Net Assets or Equity Income Taxes The Project is an instrumentality of the Town and, therefore, its income is not subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code. Cash and Cash Equivalents The Project considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. At August 31, 2009, the Project had no such investments included in cash and cash equivalents. In addition, the Project has restricted cash of $679,298 that is held by the Trustee for the Bonds payable under provisions of the Trust Indenture. During the year ended August 31, 2009, the investment income received from cash was $1,489. See Note III for risk disclosures and breakdown of restricted cash accounts. (continued) 10 II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Assets,Liabilities and Net Assets or Equity(Continued) Accounts Receivable Accounts receivable are stated at amounts management expects to collect from outstanding balances. Management writes off uncollectible amounts through a reduction to revenue and a credit to accounts receivable based on its assessment of the outstanding receivables. At year- end, management assesses the accounts receivable balance and establishes a valuation allowance based on historical experience and an evaluation of the outstanding balances. As of August 31, 2009,management has determined that all accounts doubtful of collection have been charged to operations and an allowance is not required. Deferred Financing Costs Costs associated with the issuance of bonds are deferred and amortized over the term of the Bonds. Advertising Costs All adverting costs are expensed as they are incurred. Advertising costs for the year ended August 31, 2009, were $50,558. 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 30 Furniture,fixtures and equipment 3 -20 I 11 III. DETAILED NOTES ON ALL FUNDS A. Cash and Investments At August 31, 2009, 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 $1,176,619 of which $679,298 represented restricted cash. Restricted Cash Restricted cash represents amounts placed on deposit in accounts and held by the Trustee, which are restricted for the payment of expenses as required by the Trust Indenture. At August 31, 2009, restricted cash consists of the following funds and accounts: Fund/Account Description Bond Proceeds Interest Fund, Series 2002 A-2 $ 5,239 Debt Service Reserve Fund 251,116 Repair and Replacement Fund 374,564 Deferred Debt Service 16,426 Tax and Insurance Fund 2,120 Fee and Expense Fund 29,833 Total $ 679,298 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. (continued) 12 III. DETAILED NOTES ON ALL FUNDS (Continued) 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. Proiect 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. Temporary 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, 2009. 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 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. (continued) 13 III. 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—Town Lake Austin Project holds all of its cash and investments with the Bond Trustee and commercial banks. Concentration of Credit Risk The investment policy of Texas Student Housing Authority — Town Lake Austin Project is subject to the indenture agreement of the Bonds. As of August 31, 2009, the Project held all of its restricted cash balances with the Trustee, which represents 49% of the total cash and investments held at August 31, 2009. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside parry. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another parry. 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 unrestricted cash of $704,470 (bank balance $267,710). Of the bank balance, $250,000 was covered by federal depository insurance while the remaining $17,710 was uncollateralized. The Project has a Bank Deposit Guarantee Bond from the Project's depository in the amount of$2,700,000. (continued) 14 III. 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 Balance Capital assets,not being depreciated: Land $ 2,182,816 $ - $ - $ 2,182,816 Total capital assets, not being depreciated 2,182,816 - - 2,182,816 Capital assets,being depreciated: Building and improvements 13,270,150 - - 13,270,150 Capitalized purchase costs 887,095 - - 887,095 Land improvements 2,806,596 - - 2,806,596 Unit appliances 295,134 - - 295,134 Furniture and fixtures 915,951 - - 915,951 Total capital assets, being depreciated 18,174,926 - - 18,174,926 Less accumulated depreciation for: Capitalized purchase costs 146,764 28,484 - 175,248 Building and equipment 3,462,307 604,098 - 4,066,405 Total accumulated depreciation 3,609,071 632,582 - 4,241,653 Total capital assets, being depreciated,net 14,565,855 ( 632,582) - 13,933,273 Capital assets,net $ 16,748,671 $( 632,582) $ - $ 16,116,089 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 November 1, 2002. 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 1 of each year j thereafter. I I (continued) f 15 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, 2009: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Bonds: 2002 A-1 Bonds $ 16,516,812 $ - $( 221,560) $ 16,295,252 $ - 2002 A-2 Bonds 5,089,241 - - 5,089,241 - Total $ 21,606,053 $ - $( 221,560) $ 21,384,493 $ - 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, 2009, are as follows: Year Ending Governmental Activities August 31, Principal Interest Total 2010 $ 240,795 $ 1,650,842 $ 1,891,637 2011 260,159 1,631,478 1,891,637 2012 281,080 1,610,557 1,891,637 2013 303,683 1,587,954 1,891,637 2014 328,105 1,563,532 1,891,637 2015-2019 2,081,386 7,376,799 9,458,185 2020-2024 3,064,148 6,394,037 9,458,185 2025-2029 4,510,942 4,947,243 9,458,185 2030-2033 10,314,195 2,467,629 12,781,824 Totals $ 21,384,493 $ 29,230,071 $ 50,614,564 D. Net Assets Net assets represent the residual assets after liabilities are deducted. These assets are reported in the following categories: Invested in Capital Assets, Net of Related Debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. (continued) 16 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 2009, the Project recorded management fees of$150,288 to ACH. At August 31, 2009, 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 performed for its outstanding debt. After that analysis, the Project may incur a liability for interest earned in accordance with Internal Revenue Service regulations. 17 SUPPLEMENTAL SCHEDULE III TEXAS STUDENT HOUSING AUTHORITY TOWN LAKE AUSTIN PROJECT SCHEDULE I-SCHEDULE OF REVENUES AND EXPENSES BUDGET AND ACTUAL FOR THE YEAR ENDED AUGUST 31,2009 Budget Actual Variance REVENUES AND OTHER SUPPORT Rental $ 2,829,000 $ 2,774,729 $( 54,271) Other 88,560 113,022 24,462 Interest - 1,489 1,489 Total revenues and other support 2,917,560 2,889,240 28,320 OPERATING EXPENSES Personnel 301,352 292,459 8,893 Contract services 60,390 57,901 2,489 Utilities 535,650 568,506 ( 32,856) Repairs and maintenance 42,570 87,466 ( 44,896) Turnover 146,100 187,469 ( 41,369) Advertising and promotion 69,525 50,558 18,967 Insurance 152,220 134,873 17,347 Total operating expenses 1,307,807 1,379,232 71,425 REVENUES AVAILABLE FOR FIXED CHARGES 1,609,753 1,510,008 99,745 OTHER EXPENSES Management fees 116,702 150,288 ( 33,586) Replacements 100,000 100,000 - Legal and professional 12,400 - 12,400 Depreciation and amortization - 679,483 ( 679,483) Other expenses 5,000 1,668,647 1,663,647 Total other expenses 234,102 2,598,418 2,364,316 EXCESS OF EXPENSES OVER(UNDER)REVENUES $ 1,375,651 $ 1,088,410 $ 2,464,061 II' 18 i