HomeMy WebLinkAboutTownLake Audit 08-31-10 TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
FINANCIAL REPORT
AUGUST 31, 2010
i
TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
TABLE OF CONTENTS
AUGUST 31,2010
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
Statementof Cash Flows ................................................................................................. 8
Notes to Financial Statements.......................................................................................... 9- 17
SUPPLEMENTAL SCHEDULES -
Schedule I—Schedule of Revenues and Expenses............................................................. 18
i
rff4zK1
PATTILLO, BROWN & HILL, r._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, 2010, 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,
2010, 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, 2010, 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.pbhepa.com
AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460■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 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.
PO" 4RAN04",
January 7, 2011
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, 2010. 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 2010.
FINANCIAL HIGHLIGHTS
• The liabilities of the Project exceeded its assets at the close of the fiscal year by
$5,372,345, an increase of$1,080,655 over the prior year.
• Operating revenue of$2,811,265 is $98,302 less than budget; and operating expenses
were $20,786 more than budget.
• At the end of the current fiscal year, the total cash balances were $285,397 in
unrestricted cash and $359,716 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
2010 2009
Current and other assets $ 1,448,362 $ 1,999,838
Capital assets 15,483,507 16,116,089
Total assets 16,931,869 18,115,927
Current liabilities 1,158,969 1,181,508
Noncurrent liabilities 21,145,245 21,384,493
Total liabilities 22,304,214 22,566,001
Net assets:
Invested in capital assets,
net of related debt ( 5,661,738) ( 5,268,404)
Restricted ( 447,694) 265,266
Unrestricted 737,087 553,064
Total net assets $( 5,372,345) $( 4,450,074)
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
2010 2009
Total operating revenue $ 2,810,752 $ 2,887,751
Total operating expenses 2,240,752 2,309,003
Total operating income 570,000 578,748
Interest income 513 1,489
Interest expense ( 1,651,168) ( 1,668,647)
Total nonoperating loss ( 1,650,655) ( 1,667,158)
CHANGE IN NET ASSETS ( 1,080,655) ( 1,088,410)
NET ASSETS,BEGINNING ( 4,450,074) ( 3,361,664)
PRIOR PERIOD ADJUSTMENT 158,384 -
NET ASSETS,ENDING $( 5,372,345) $( 4,450,074)
The statement of cash flows recaps how cash changed from year to year.
4
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, 2010, these balances were
as follows:
Bond Proceeds Interest Fund, Series 2002 A-2 $ 5,240
Debt Service Reserve Fund 85,791
Repair and Replacement Fund 174,357
Deferred Debt Service 16,426
Tax and Insurance Fund 2,120
Fee and Expense Fund 75,791
Initial Purchase Fund ( 9)
Total $ 359,716
Nonrestricted cash. Nonrestricted cash is available for general use of the Project.
Bonds payable. As of August 31, 2010, the following amounts on the Series 2002 A-1 and 2002 A-2
were payable:
Series 2002 A-1 $ 16,056,004
Series 2002 A-2 5,089,241
Total $ 21,145,245
For the fiscal year ending August 31, 2010, the total principal and interest payment is calculated at
$1,497,038. A total of$239,248 in principal was paid during 2010.
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 31,2010
ASSETS
Current assets:
Cash $ 285,397
Restricted cash 359,716
Accounts receivable 40,411
Prepaid expenses 20,562
Total current assets 706,086
Capital assets:
Land 2,182,816
Other capital assets,net of accumulated depreciation 13,300,691
Total capital assets 15,483,507
Intangible assets:
Debt issue costs,net of amortization 742,276
Total intangible assets 742,276
Total assets 16,931,869
LIABILITIES
Current liabilities:
Accounts payable 164,589
Accrued liabilities 5,414
Deferred revenue and prepaid rent 181,556
Accrued interest 807,410
Total current liabilities 1,158,969
Noncurrent liabilities:
Bonds payable 21,145,245
Total noncurrent liabilities 21,145,245
Total liabilities 22,304,214
NET ASSETS
Invested in capital assets,net of related debt ( 5,661,738)
Restricted for debt service ( 447,694)
Unrestricted 737,087
Total net assets $( 5,372,345)
The accompanying notes are an integral part of these financial statements.
6
TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
STATEMENT OF REVENUES,EXPENSES
AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31,2010
OPERATING REVENUES
Rental $ 2,703,931
Other 106,821
Total operating revenues 2,810,752
OPERATING EXPENSES
Personnel 296,405
Contract services 54,168
Utilities 520,775
Travel 418
Repairs and maintenance 86,257
Turnover 89,622
Advertising and promotion 62,327
Administration 129,173
Management fees 128,641
Replacements 193,483
Depreciation and amortization 679,483
Total operating expenses 2,240,752
OPERATING INCOME 570,000
NONOPERATING REVENUES(EXPENSES)
Interest income 513
Interest expense ( 1,651,168)
Total nonoperating revenues(expenses) ( 1,650,655)
CHANGE IN NET ASSETS ( 1,080,655)
NET ASSETS,BEGINNING ( 4,450,074)
PRIOR PERIOD ADJUSTMENT 158,384
NET ASSETS,ENDING $( 5,372,345)
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 31,2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from tenants $ 2,545,479
Cash paid to employees ( 494,937)
Cash paid to suppliers ( 1,085,523)
Net cash provided by operating activities 965,019
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments on bonds payable ( 239,248)
Interest paid ( 1,257,790)
Net cash used in capital and related financing activities ( 1,497,038)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 513
Net cash provided by investing activities 513
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 531,506)
CASH AND CASH EQUIVALENTS,BEGINNING 1,176,619
CASH AND CASH EQUIVALENTS,ENDING $ 645,113
Cash $ 285,397
Restricted cash 359,716
Total cash and cash equivalents $ 645,113
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income $ 570,000
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation and amortization 679,482
Changes in operating assets and liabilities:
Accounts receivable ( 21,368)
Prepaids ( 5,562)
Trade accounts payable 105,720
Management fees payable ( 79,200)
Deferred revenue ( 243,905)
Other current liabilities ( 40,148)
Net cash provided by operating activities $ 965,019
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 31,2010
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 2010 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.
II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Project's significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
A. Reporting Entity
For financial reporting purposes, management has considered all potential component units.
The decision to include a potential component unit in the reporting entity was made by
applying the criteria set forth in GASB Statement No. 14 as amended by GASB Statement
No. 39. The criteria used is as follows:
(continued)
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.
Private-sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in both the government-wide and proprietary fund financial
statements to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. Governments also have the option of following
subsequent private-sector guidance for their business-type activities and Enterprise Funds,
subject to this same limitation. The government has elected not to follow subsequent private-
sector guidance.
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, 2010, the Project had no such
investments included in cash and cash equivalents.
In addition, the Project has restricted cash of $359,716 that is held by the Trustee for the
Bonds payable under provisions of the Trust Indenture. During the year ended August 31,
2010, the investment income received from cash was $513. 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, 2010,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, 2010, were $62,327.
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, 2010, 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 $645,113 of which $359,716 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, 2010,restricted cash consists of the following funds and accounts:
Fund/Account Description
Bond Proceeds Interest Fund, Series 2002 A-2 $ 5,240
Debt Service Reserve Fund 85,791
Repair and Replacement Fund 174,357
Deferred Debt Service 16,426
Tax and Insurance Fund 2,120
Fee and Expense Fund 75,791
Initial Purchase Fund ( 9)
Total $ 359,716
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.
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.
(continued)
12
III. DETAILED NOTES ON ALL FUNDS (Continued)
A. Cash and Investments (Continued)
Restricted Cash (Continued)
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, 2010.
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.
Deferred Debt Service Fund— The amounts on deposit in this account are to be
used to pay the next interest payment on the Series A-2 Bonds.
Tax and Insurance Fund — The amounts on deposit in this account represent
1/12 th of the ad valorem property taxes, if any, and 1/12th of the annual premiums
for insurance due, determined in accordance with the annual budget.
Initial Purchase Fund—The amounts on deposit in this account represent monies
that were withheld from the seller at closing and were to be paid once certain
operating criteria were met. These conditions have not been met yet.
Fee and Expense Fund — The amounts on deposit in this account represent
money set aside for future payments to the Program Administrator.
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, 2010, the Project held all
of its restricted cash balances with the Trustee, which represents 56% of the total cash and
investments held at August 31, 2010.
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 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, 2010,the Project has unrestricted cash of$285,397 (bank balance $295,366).
Of the bank balance, $250,000 was covered by federal depository insurance while the
remaining $45,366 was collateralized by 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, 2010,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 175,248 28,484 - 203,732
Building and equipment 4,066,405 604,098 - 4,670,503
Total accumulated depreciation 4,241,653 632,582 - 4,874,235
Total capital assets,
being depreciated,net 13,933,273 ( 632,582) - 13,300,691
Capital assets,net $ 16,116,089 $( 632,582) $ - $ 15,483,507
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
thereafter.
(continued)
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, 2010:
Amounts
Beginning Ending Due Within
Balance Increases Decreases Balance One Year
Revenue Bonds:
2002 A-1 Bonds $ 16,295,252 $ - $ 239,248 $ 16,056,004 $ 260,159
2002 A-2 Bonds 5,089,241 - - 5,089,241 5,089,241
Total $ 21,384,493 $ - $ 239,248 $ 21,145,245 $ 5,349,400
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, 2010, are as follows:
Year Ending Governmental Activities
August 31, Principal Interest Total
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 354,491 1,537,146 1,891,637
2016-2020 2,248,765 7,209,420 9,458,185
2021-2025 3,310,558 6,147,627 9,458,185
2026-2030 4,873,699 4,584,486 9,458,185
2031-2035 9,184,705 1,707,029 10,891,734
Totals $ 21,145,245 $ 27,579,229 $ 48,724,474
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 2010, the Project
recorded management fees of$128,641 to ACH.
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.
H. Prior Period Adjustment
The Project recorded a prior period adjustment to remove liabilities left over from the prior
management company. These liabilities were no longer enforceable against the current
management and therefore no longer considered a liability. The adjustment resulted in an
increase to beginning net assets of$158,384.
17
SUPPLEMENTAL SCHEDULE
I
TEXAS STUDENT HOUSING AUTHORITY
TOWN LAKE AUSTIN PROJECT
SCHEDULE I-SCHEDULE OF REVENUES AND EXPENSES
BUDGET AND ACTUAL
FOR THE YEAR ENDED AUGUST 31,2010
Budget Actual Variance
REVENUES AND OTHER SUPPORT
Rental $ 2,829,167 $ 2,703,931 $( 125,236)
Other 80,400 106,821 26,421
Interest - 513 513
Total revenues and other support 2,909,567 2,811,265 ( 98,302)
OPERATING EXPENSES
Personnel 303,074 296,405 6,669
Contract services 57,060 54,168 2,892
Utilities 490,950 520,775 ( 29,825)
Repairs and maintenance 42,725 86,257 ( 43,532)
Turnover 103,350 89,622 13,728
Advertising and promotion 70,175 62,327 7,848
Travel - 418 ( 418)
Administration 151,025 129,173 21,852
Total operating expenses 1,218,359 1,239,145 ( 20,786)
REVENUES AVAILABLE FOR FIXED CHARGES 1,691,208 1,572,120 ( 119,088)
OTHER EXPENSES
Management fees 116,383 128,641 ( 12,258)
Replacements 188,550 193,483 ( 4,933)
Depreciation and amortization - 679,483 ( 679,483)
Interest - 1,651,168 ( 1,651,168)
Total other expenses 304,933 2,652,775 2,347,842
EXCESS OF EXPENSES OVER(UNDER)REVENUES $ 1,386,275 $L1,080,655) $( 2,466,930)
18