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HomeMy WebLinkAboutTownLake Audit 08-31-05TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT FINANCIAL REPORT AUGUST 31, 2005 CONTENTS Page INDEPENDENT AUDITOR'S REPORT ................................................................................... 1 MANAGEMENT'S DISCUSSION AND ANALYSIS (unaudited) ................................................ 2 FINANCIAL STATEMENTS Statement of Net Assets .................................................................................................. 6 Statement of Revenues, Expenses, and Changes in Net Assets ..................................... 7 Statement of Cash Flows ................................................................................................. 8 Notes to Financial Statements ....................................................................................... 10 SUPPLEMENTAL SCHEDULES Schedule I-Schedule of Revenues and Expenses ....................................................... 18 I I WEAVER CERTIFiED PUBLIC ACCOUNT_i\NTS liND CONSULTANTS ''ii-_'.}8(! INDEPENDENT AUDITOR'S REPORT To the Board of Directors Texas Student Housing Authority -Town Lake Austin Project We have audited the accompanying financial statements of the business type activities of Texas Student Housing Authority -Town Lake Austin Project (the "Project"), as of and for the year ended August 31, 2005, 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 1, 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, 2005, 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 business type activities of the Texas Student Housing Authority -Town Lake Austin Project at August 31, 2005 and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Management's discussion and analysis on pages 2 through 5 are not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the business type activities of Texas Student Housing Authority- Town Lake Austin Project's basic financial statements. The supplementary information on page 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. WEAVER AND TIDWELL, L.L.P. Fort Worth, Texas January 17, 2006 MANAGEMENT'S DISCUSSION AND ANALYSIS (unaudited) TEXAS STUDENT HOUSING AUTHORITY-TOWN LAKE AUSTIN PROJECT MANAGEMENT'S DISCUSSION AND ANAYLSIS YEAR ENDED AUGUST 31, 2005 (unaudited) Page 2 As Staff of the Texas Student Housing Authority-Town Lake-Austin Project ("Town Lake") we offer the readers of the Town Lake's Financial Statements this narrative overview and analysis of the financial activities of Town Lake for the fiscal year ended August 31,2005. We encourage readers to consider the information presented herein in conjunction with Town Lake's financial statements which follow this section. As the Authority is an instrumentality of the Town of Westlake and is thus considered a governmental entity, Governmental Accounting Standards Board Statement 34, Basic Financial Statements-and Management Discussion and Analysis-for State and Local Governments (Statement 34) were implemented. The reader should note that this financial report addresses only the financial condition of Town Lake itself for 2005. The prior period covered the activities of the project from inception and will not provide meaningful comparison to current year activities. Comparative information will be provided when available. FINANCIAL HIGHLIGHTS The Liabilities of the Town Lake Austin Project exceeded its Assets at the close of the fiscal year by $1,398,394 a decrease of$1,286,466 over the prior year, the major component being an increase of $508,444 in interest payments. Operating Revenue of$2,646,768 is $120,084 better than budget; however Operating Expense is $280,026 worse than budget thus effectively negating the revenue overage. Major components of the expense overage were $66,117 worse than budget in Turnover Expense (painting, recarpeting, etc. rooms during student turnover expense; and $97,194 worse in General Administration expenses. Utilities were also worse by $32,985. At the end of the current fiscal year, the total cash balances were $501,809 in unrestricted cash and $1,353,438 in restricted cash. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to Town Lake's basic financial statements. Town Lake's report consists of three parts-Management Discussion and Analysis, the basic financial statements, and notes to the financial statements. The basic financial statements include a statement of net assets, statement of revenues, expenses, and changes in net assets, a statement of cash flows, and supplemental schedules. TEXAS STUDENT HOUSING AUTHORITY-TOWN LAKE AUSTIN PROJECT MANAGEMENT'S DISCUSSION AND ANAYLSIS YEAR ENDED AUGUST 31, 2005 (unaudited) Page 3 The statement of net assets presents information on all of the Authority's assets and liabilities with the difference between the two reported as net assets. Total current and other assets $ 2,947,534 Total capital assets 18,881,408 TOTAL ASSETS 21,828,942 Total current liabilities 909,931 Noncurrent liabilities 22,317,405 TOTAL LIABILITIES 23,227,336 NET ASSETS Invested in capital assets, net of related debt 3,611 ,580) Restricted for debt service 1,067,540 Unrestricted 1,145,646 TOTAL NET ASSETS ($ 1,398,394) The statement of revenues, expenses, and changes in net assets account for all of the Authority's revenues and expenses regardless of when cash is paid or received. Total operating revenue $ 2,646,768 Total operating expenses 2,120,710 OPERATING INCOME 526,058 Interest income 23,019 Interest expense 1 ,835,543) TOTAL NON-OPERATING LOSS 1 ,812,524) CHANGE IN NET ASSETS ( 1,286,466) NET ASSETS, AUGUST 31, 2004 ( 111 ,928) NET ASSETS, AUSUST 31, 2005 ($ 1,398,394) The statement of cash flows recaps how cash changed year over year. TEXAS STUDENT HOUSING AUTHORITY-TOWN LAKE AUSTIN PROJECT MANAGEMENT'S DISCUSSION AND ANAYLSIS YEAR ENDED AUGUST 31, 2005 (unaudited) NOTES TO THE FINANCIAL STATEMENTS Page4 The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Restricted Cash Restricted cash represents monies held in escrow by the Trustee and are restricted for the payment of expenses as outlined in the Installment Sale Agreement. As of August 31, 2005 these balances were as follows: Bond Proceeds Principal Fund-Series 2002 A-1 Bond Proceeds Interest Fund-Series 2002 A-1 Bond Proceeds Principal Fund-Series 2002 A-2 Bond Proceeds Interest Fund-Series 2002 A-2 Debt Service Reserve Fund Repair and Replacement Fund Project Fund Deferred Debt Service Tax and Insurance Fund Fee and Expense Fund Initial Purchase Fund Total Non-Restricted Cash Non-restricted cash is available for general use of the project. Bonds Payable $ 14,251 111,867 15 35,190 1,037,352 126,713 222 14,895 11 10,242 2 680 $1,353,438 As of August 31,2005, the following amounts on the Series 2002 A-1 and 2002 A-2 were payable: Series 2002 A-1 Series 2002 A-2 Total $ 17,104,863 5,388,125 $ 22,492,988 For the Fiscal Year ending on August 31, 2006, the total principal and interest payment is calculated at $1,914,830. A total of$1,101,312 in principal was paid during 2005. TEXAS STUDENT HOUSING AUTHORITY-TOWN LAKE AUSTIN PROJECT MANAGEMENT'S DISCUSSION AND ANAYLSIS YEAR ENDED AUGUST 31, 2005 (unaudited) ECONOMIC FACTORS AND NEXT YEAR'S BUDGET PageS Leases at Town Lake are primarily 12 month leases, however due to competitive and market conditions, a relatively minor number of I 0 month leases exist. These leases do bring a monthly premium over the 12 month leases. Occupancy for the fiscal year ending August 31, 2006 is forecast at 92 %. However rental rates, again due to competitive pressures, will not see a large mcrease. Net Operating Revenue for this next year is projected at $1,543,634. Debt Service decreases from $2,956,719 to $1,914,830 thus substantially decreasing the need for funds from the Debt Service Reserve. CONTACTING THE AUTHORITY'S FINANCIAL MANAGEMENT This financial report is designed to provide the reader with a general overview of the Ballpark's finances and to demonstrate the Ballpark's accountability for the money it receives. If you have any questions about this report or need additional information, please contact Pete Ehrenberg at 817-490-5723 or Hank Smyth at 817-281-5053. FINANCIAL STATEMENTS TEXAS STUDENT HOUSING AUTHORITY - TOWN LAKE AUSTIN PROJECT STATEMENT OF NET ASSETS AUGUST 31, 2005 Current Assets Cash Restricted cash Accounts receivable Prepaids Total current assets Capital Assets Land ASSETS Other capital assets, net of accumulated depreciation Total capital assets Intangible Assets Debt issue costs, net of amortization Total intangible assets Total Assets Current liabilities: Bonds payable -current maturities Trade accounts payable Management fees payable Accrued interest Other current liabilities Deferred revenue Total current liabilities Non-current liabilities Bonds payable Total liabilities LIABILITIES NET ASSETS Invested in capital assets, net of related debt Restricted for debt service Unrestricted Total net assets The Notes to Financial Statements are an integral part of this statement. $ $ Page6 501,809 1,353,438 9,246 2,737 1,867,230 2,182,816 16,698,592 18,881,408 1,080,304 1,080,304 21,828,942 175,583 68,448 79,200 133,815 96,001 356,884 909,931 22,317,405 23,227,336 3,611 ,580) 1,067,540 1,145,646 ($ 1 ,398,394) TEXAS STUDENT HOUSING AUTHORITY - TOWN LAKE AUSTIN PROJECT Page 7 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEAR ENDED AUGUST 31, 2005 OPERATING REVENUES Rental income Other income Total operating revenue OPERATING EXPENSES Personnel expenses Contract services Utilities Travel Repairs and maintenance Turnover expenses Advertising and promotion Administration expenses Management fees Replacements Depreciation expense Amortization expense Total operating expenses OPERATING INCOME NON-OPERATING REVENUES (EXPENSES) Interest income Interest expense TOTAL NON-OPERATING LOSS CHANGE IN NET ASSETS NET ASSETS, AUGUST 31,2004 NET ASSETS, AUGUST 31,2005 The Notes to Financial Statements are an integral part of this statement $ 2,632,802 ( ( ($ 13,966 2,646,768 314,485 37,200 336,755 252 19,853 87,717 93,248 284,293 124,110 45,104 708,600 69,093 2,120,710 526,058 23,019 1 ,835,543) 1 ,812,524) 1 ,286,466) 111 ,928) 1 ,398,394) TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tenants Cash paid to employees Cash paid to suppliers Net cash provided by operating activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Payments on bonds payable Interest paid Net cash used in capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of land and building and improvements Interest on investments Net cash provided by investing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash Restricted cash Total cash and cash equivalents The Notes to Financial Statements are an integral part of this statement. PageS $ 2,983,258 ( 301,168) ( 952,951) 1,729,139 ( 1,101,312) ( 1 ,855,407) 2,956,719) 9, 170) 23,019 13,849 1,213,731) 3,068,978 $ 1,855,247 $ 501,809 1,353,438 $ 1,855,247 TEXAS STUDENT HOUSING AUTHORITY - TOWN LAKE AUSTIN PROJECT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2005 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization Changes in operating assets and liabilities: Accounts receivable Prepaids Trade accounts payable Management fees payable Deferred revenue Tenant security deposits Development fee payable Other current liabilities Net cash provided by operating activities The Notes to Financial Statements are an integral part of this statement. Page 9 $ 526,058 777,693 97,753 8,135 9,589 54,200 239,960 ( 1 ,225) ( 1 0,450) 27,426 $ 1,729,139 TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS NOTE1. GENERALSTATEMENT Page 10 Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake (the Town), Texas, pursuant to Section 53.11 of Chapter 53 of the Texas Education Code, as amended. The Authority's purpose among other things is to acquire, finance, and operate student housing facilities. 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". NOTE 2. 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: 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 are 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) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Additionally, the primary government may be financially accountable if an organization is fiscally dependent 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. TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED Measurement Focus and Basis of Accounting Page 11 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. 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, 2005, the Project had no such investments included in cash and cash equivalents. In addition, the Project has restricted cash of $1,353,438 that is held by the Trustee for the Bonds payable under provisions of the Indenture. During the year ended August 31, 2005 the investment income received from cash was $23,019. See Note 3 for risk disclosures and breakdown of restricted cash accounts. 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, 2005, 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 terms of the bonds. TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS Page 12 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Advertising Costs All advertising costs are expensed as they are incurred. Advertising costs for the year ending August 31, 2005 was approximately $93,000. Capital Assets Property and equipment have been recorded at the date of acquisition at cost. Routine maintenance and repair costs to ready the units for the nex1 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: Building Furniture, fixtures and equipment NOTE 3. CASH AND INVESTMENTS 30 years 3 to 20 years At August 31, 2005, 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 $1,855,247 of which $1,353,438 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, 2005, restricted cash consists of the following funds and accounts: Fund/Account Description Bond Proceeds Principal Fund-Series 2002 A-1 Bond Proceeds Interest Fund-Series 2002 A-1 Bond Proceeds Principal Fund -Series 2002 A-2 Bond Proceeds Interest Fund-Series 2002 A-2 Debt Service Reserve Fund Repair and Replacement Fund Project Fund $ 14,251 111,867 15 35,190 1,037,352 126,713 222 TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS NOTE 3. CASH AND INVESTMENTS-CONTINUED Deferred Debt Service Tax and Insurance Fund Fee and Expense Fund Initial Purchase Fund Total $ Page 13 14,895 11 10,242 2 680 $ 1,353.438 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 fund pursuant to the Trust Indenture. Amounts in the Bond Fund shall be used solely to fund the payment of principal and interest on the Bonds, for the redemption of the Bonds at or prior to maturity, and to purchase Bonds on the open market. 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. Project Fund -Amounts in the project fund are held and disbursed for costs of the project. Repair and Replacement Fund-Amounts in the 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, 2005. 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. TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS NOTE 3. CASH AND INVESTMENTS-CONTINUED Page 14 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. Disclosure Relating to 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. Disclosure Relating to 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-Ballpark Austin Project is subject to the indenture agreement of the Bonds. As of August 31, 2005, Texas Student Housing Authority-Town Lake Austin Project held all of its restricted cash balances with the trustee, which represents 73% of the total cash and investments held at August 31, 2005. 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. TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS NOTE 3. CASH AND INVESTMENTS-CONTINUTED Page 15 As of August 31, 2005, the Project has unrestricted cash of $501,809 (bank balance $267,171). Of the bank balances $194,051 was covered by federal depository insurance while the remaining $73,120 was uncollateralized. The Project has a Bank Deposit Guarantee Bond from the Project's depository in the amount of $2,000,000. However, an account at another institution was in excess of the FDIC insured balance. NOTE 4. CAPITAL ASSETS Capital asset activity for the Project for the year ended August 31, 2005 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 13,260,980 9,170 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 18,165.756 9 170 18.174.926 Totals at historical cost 20,348,572 9 170 20.357.742 Less accumulated depreciation: Building and improvements 442,163 442,035 844,198 Capitalized purchase costs 29,570 29,570 59,140 Land improvements 93,553 93,553 187,106 Unit appliances 42,162 42,162 84,324 Furniture and fixtures 130 716 130.850 261,566 Total accumulated depreciation 738 164 738 170 1 476 334 Capital assets, net ~19 61Q 4Q8 (~ 729 QQQ) ~ ~18,881 4Q8 TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS NOTE 5. BONDS PAYABLE Page 16 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. Interest rates on the bonds range from 7.76% to 8.69% at present and principal and interest payments are made monthly. The following is a summary of long-term debt transactions of the Project for the year ended August 31, 2005: Balance Beginning August 31, Due Within Balance Increases Decreases 2005 One Year Revenue Bonds 2002 A-1 Bonds $18,206,175 $ ($ 1,101,312) $17,104,863 $ 175,583 2002 A-2 Bonds 5 388 125 5,388,125 Total ~23 594 3QQ ($ 1 1Q1 312) ~22 492 988 $ 175 583 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 2005 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, 2005 are as follows: Due Fiscal Year Ending August 31 Principal Interest Total 2006 $ 175,583 $ 1,739,247 $ 1,914,830 2007 189,703 1 ,725,127 1,914,830 2008 204,958 1,709,872 1,914,830 2009 221 ,441 1,693,389 1,914,830 2010 239,248 1,675,582 1,914,830 2011-2015 1,517,705 8,056,448 9,574,153 2016-2020 2,234,316 7,339,837 9,574,153 2021-2025 3,289,289 6,284,864 9,574,153 2026-2030 4,842,385 4,727,764 9,570,149 2031-2035 6,165,901 3,586,576 9,752,477 2036-2039 3 412 459 2,959,136 6.371.595 Total Debt Service $ 22,492 988 $41,497 842 $63 99Q 83Q NOTE 6. NET ASSETS TEXAS STUDENT HOUSING AUTHORITY- TOWN LAKE AUSTIN PROJECT NOTES TO THE FINANCIAL STATEMENTS Page 17 Net assets represents 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. 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. NOTE 7. EMPLOYEE BENEFIT PLAN Employees of the Project are eligible to participate in the Asset Campus Management 401 (k) Plan as of August 31, 2005. Employee salary deferrals into the Plan are matched by the Project up to 1% of employee compensation as defined by the Plan. As of August 31, 2005 there were no contributions to the plan for participants. NOTE 8. 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 2005, the Project recorded management fees of $79,200 to JPI and $44,910 to ACH for a total of $124,110. At August 31, 2005, the Project owed JPI and ACH $79,200 and $13,855, respectively, for property management fees. NOTE 9. 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 revenue. NOTE 10. RELATED PARTY TRANSACTIONS The Authority receives funds for administrative services and other transfers based on release tests from the Trustee on behalf of the Project. For the year ended August 31, 2005 the Trustee paid approximately $6,300 to the Authority. TEXAS STUDENT HOUSING AUTHORITY - TOWN LAKE AUSTIN PROJECT SCHEDULE I -SCHEDULE OF REVENUES AND EXPENSES FOR THE YEAR ENDED AUGUST 31, 2005 Actual Bud~et Revenue and other support: Rental income $ 2,632,802 $ 2,468,764 Other income 13,966 57,920 Interest income 23,019 Total revenue and other 2,669,787 2,526,684 Operating expenses Personnel expenses 314,485 297,688 Contract services 37,200 36,765 Utilities 336,755 303,770 Travel 252 Repairs and maintenance 19,853 14,084 Turnover expense 87,717 21,600 Advertising and promotion 93,248 64,829 Administration expenses 284,293 187,099 Management fees 124,110 115,156 Replacements 45,104 22,000 Depreciation and amortization 777,693 777,693 Interest expense 1,835,543 1,558,440 Total expenses 3,956,253 3,399,124 Excess of expenses over revenue ($ 1 ,286,466) ($ 872,440) Page 18 Variance $ 164,038 ( 43,954) 23,019 143,103 ( 16,797) ( 435) ( 32,985) ( 252) ( 5,769) ( 66, 117) ( 28,419) ( 97,194) ( 8,954) ( 23, 104) 277, 103) 557, 129) ($ 414,026)