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Home My WebLink AboutRes 11-07 Approving the Comprehensive Annual Financial Report Year Ending September 30, 2010 TOWN OF WESTLAKE RESOLUTION NO. 11-07 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS, ACCEPTING THE ANNUAL COMPREHENSIVE ANNUAL FINANCIAL REPORT PRESENTED BY PATTILLO, BROWN &c HILL, L.L.P., CERTIFIED PUBLIC ACCOUNTANTS, FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010. WHEREAS, Section 103.001 of the Local Government Code requires that a municipality shall have its records and accounts audited annually and shall have an annual financial statement prepared based on the audit; and WHEREAS, Section 103.002 of the Local Government Code requires that a municipality shall employ at its own expense a certified public accountant who is licensed in this state or a public accountant who holds a permit to practice from the Texas State Board of Public Accountancy to conduct the audit and to prepare the annual financial statements; and WHEREAS, the firm of Pattillo, Brown & Hill, L.L.P., Certified Public Accountants, was selected and approved by the Town Council on July 12, 2006 for a five year engagement to include the performance of the Town of Westlake's financial audit for the year ended September 30, 2010. NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE: SECTION 1: That, all matters stated in the Recitals hereinabove are found to be true and correct and are incorporated herein by reference as if copied in their entirety. SECTION 2: That the Town Council does hereby accept the fiscal year 2009-2010 Comprehensive Annual Financial Report from Pattillo, Brown & Hill, L.L.P., Certified Public Accountants. SECTION 3: If any portion of this Resolution shall, for any reason, be declared invalid by any court of competent jurisdiction, such invalidity shall not affect the remaining provisions hereof and the Council hereby determines that it would have adopted this Resolution without the invalid provision. Resolution It-07 Page 1 of 2 SECTION 4: That this resolution shall become effective from and after its date of passage. PASSED AND APPROVED ON THIS 28t°' DAY OF DECEMBER 2011. O W, ., �. La6a Wheat, Mayor ATTEST: TeX ' t Kelly tdwards,bwn Secretary *homas�E. rymer, ?�wnMalager�� APPROVE S TO L. anton o ow ttomcy Resolution 11-07 Page 2 of 2 �'��h ri 1Y?•4� �r � - i � !� 1.•`y it A-it1 ..�� ne-. ;°'� i'� � .. ♦_g*� � tap 7Z-�ti'1,, h TOWN OF WESTLAKE COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010 Prepared by Town of Westlake Finance Department 3 Village Circle, Suite 202 Westlake, TX 76262 TOWN OF WESTLAKE, TEXAS TABLE OF CONTENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Page Number INTRODUCTORY SECTION Letter of Transmittal ........................................................................... i—vii Certificate of Achievement ........................................................................... viii Organizational Chart ........................................................................... ix Principal Town Officials ....................................................................... x FINANCIAL SECTION Independent Auditor's Report........................................................................................ 1 -2 Management's Discussion and Analysis ....................................................................... 3 - 15 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets .................................................................................. 16 Statement of Activities.................................................................................... 17 -18 Fund Financial Statements Balance Sheet—Governmental Funds............................................................. 19 -20 Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds...................................................... 21 -23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ......................................................... 24 Statement of Net Assets—Proprietary Funds.................................................. 25 Statement of Revenues, Expenses and Changes in Fund Net Assets—Proprietary Funds........................................................ 26 (continued) TOWN OF WESTLAKE,TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Page Number FINANCIAL SECTION (Continued) Fund Financial Statements (Continued) Statement of Cash Flows—Proprietary Funds........................................................ 27 Discretely Presented Component Units Financial Statements: Discretely Presented Component Units - Combining Statement of Net Assets......................................................... 28 -29 Discretely Presented Component Units - Combining Statement of Activities......................................................... .. 30 - 31 Notes to Financial Statements................................................................................. 32 - 66 Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— GeneralFund............................................................................................. 67 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Visitors Association Fund......................................................................... 68 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— WestlakeAcademy.................................................................................... 69 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— FM1938 Fund ............................................................................... 70 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Property Tax Reduction Fund ................................... .................... 71 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Vehicle/Equipment Replacement Fund ......................................... 72 (continued) TOWN OF WESTLAKE,TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Page Number FINANCIAL SECTION (Continued) Required Supplementary Information(Continued) Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Economic Development Fund ....................................................... 73 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Lone Star Public Facility Corporation ........................................... 74 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— 4B Economic Development Corporation ................................... ... 75 Notes to Required Supplementary Information .......................................... 76 Individual Fund Schedule: Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Debt Service Fund ......................................................................... 77 STATISTICAL SECTION (Unaudited) Net Assets by Component .................................................................. 78 Changes in Net Assets ........................................................................ 79 - 80 Fund Balances—Governmental Funds ..................................................... 81 Changes in Fund Balance—Governmental Funds ......................................... 82 - 83 Taxable Sales by Industry Type ............................................................. 84 Ratios of General Bonded Debt Outstanding ............................................... 85 Ratios of Outstanding Debt by Type ......................................................... 86 (continued) TOWN OF WESTLAKE,TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Page Number STATISTICAL SECTION (Unaudited) (Continued) Direct and Overlapping Governmental Activities Debt...................................... 87 Demographic and Economic Statistics ........................................................ 88 Principal Employers ............................................................................. 89 Full-time Equivalent Town Government Employees by Function/Program ............................................................................. 90 Operating Indicators by Function/Program ................................................... 91 Capital Asset Statistics by Function/Program ................................................ 92 COMPLIANCE SECTION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards............................................................................. 93 - 94 INTRODUCTORY SECTION f � Town of Westlake February 22, 2011 Honorable Mayor, Council Members and the Citizens of the Town of Westlake, The Town of Westlake (the "Town") Fiscal and Budgetary Policies require that the Town's Finance Department prepare a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Accordingly, the Comprehensive Annual Financial Report (CAFR) for the Town of Westlake, Texas for the fiscal year ended September 30, 2010, is hereby issued. This report consists of management's representations concerning the finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making representations, the Town established a comprehensive internal control framework that was designed both to protect the Town's assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the Town's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town's comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatements. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Town's financial statements have been audited by Pattillo, Brown and Hill LLP, Independent Certified Public Accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended September 30, 2010, were free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the Town's financial statements for the fiscal year ended September 30, 2010, were fairly presented in conformity with GAAP. The independent auditors'report is presented as the first component of the financial section of this report. The Governmental Accounting Standards Board (GASB) requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of management's discussion and analysis (MD&A). This letter of transmittal is designed to 3 Village Circle 4202 •Westlake,Texas 76262 Metro: 817-430-0941 •Fax: 817-430-1812 •www.westlake-tx.org i compliment, and should be read in conjunction with the MD&A. The Town of Westlake's MD&A can be found immediately following the independent auditor's report. Profile of the Town Minutes from downtown Fort Worth, Texas and DFW International Airport, the Town of Westlake is home to Town of several upscale residential communities and Fortune 500 Westlake *'114 635 companies, all of which share a unique character and 35 377 VFWcharm, along with a commitment to excellence. The 820 ss Town is located in northeast Tarrant County and may be SBO conveniently accessed by several major thoroughfares, Fort Worth Dallas ¢� including SH 114 and US 377. The Town occupies , approximately 7 square miles and serves a population of approximately 850 with the average appraised home value at $1.2 million. The Town, incorporated in 1956, is considered a Type A general-law municipality and has the power by state statute to extend its corporate town limits by annexation, which is done periodically when deemed appropriate by the Council. The Town operates under the Council-Manager form of government. The Council is comprised of a mayor and five (5) council members and is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring the Town Manager. The Town Manager is responsible for carrying out the policies and ordinances of the Council, for overseeing the day-to-day operations of the Town and appointing and supervising heads of various departments. The Mayor and Town Council members serve two (2) year terms. All elected officials are elected at-large. The financial reporting entity (the government) includes all funds of the primary government (i.e. the Town of Westlake), as well as all of its component units. Component units are legally separate entities for which the primary government is financially accountable. The following entities are considered blended component units: Lone Star Public Facilities Corporation is a Texas nonprofit corporation that acts on behalf of the Town to further the public purposes under the Public Facilities Corporation Act, as it's duly constituted authority and instrumentality. The board of directors, appointed by the Town's governing body, is comprised of seven members, of whom five must be members of the Town's governing body. 4B Economic Development Corporation is a Texas nonprofit industrial corporation under the Development Corporation Act of 1979 formed to promote economic development within the Town and the State of Texas in order to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by developing, implementing, financing, and providing one or more projects defined and permitted under Section 4B of the Act. The board of directors is composed of seven persons appointed by the members of the Town's governing board. Four of the members of the board of directors are members of the Town's governing board. Westlake Academy (Academy) is an open-enrollment charter school, as provided by Subchapter D, Chapter 12, of the Texas Education Code. The Town of Westlake ("Charter Holder") applied for and became the first municipality in Texas to ever receive this special charter designation. The Academy ii currently has 520 students and serves Kindergarten thru 12th grade. The Academy graduated their first class in FY 2009-2010. The Board consists of six (6) trustees and is appointed by the Town's governing body. Currently, all members of the board of trustees are members of the Town's governing body. The Academy's year-end is August 31. Discretely presented component units are legally separate entities and not part of the primary government's operations. These component units are as follows: Texas Student Housing Authority- Ballpark Austin Project, Texas Student Housing Corporation-The Ridge at North Texas Project, Texas Student Housing Authority-Town Lake Austin Project, Texas Student Housing Authority- College Station Project, and Texas Student Housing Authority. Services Provided The Town provides to its citizens those services that have proven to be necessary and meaningful and which the Town can provide for the least amount of cost. Major services provided under the general government and enterprise functions are: Fire and emergency medical services, police, water and sewer utility services, park and recreational facilities, street improvements, education and administrative services. Economic Conditions and Outlook The information presented in the financial statements is perhaps best understood when it is considered from the broader of the specific environment within which the Town operates. Local Economy There is no question that Texas, and especially the Fort Worth-Dallas Metroplex, has fared better than most of the country in the current recession. Nonetheless, the Town of Westlake has been affected by the current economic downturn, as have other municipalities across our area, state, and nation. This current economic downturn has negatively affected our Town's budget due to its heavy reliance on sales tax revenue to fund Town services and our debt obligations. Sales tax can be a very viable revenue source during stable economic times. However, since it is a volitional tax, i.e. - paid when someone decides to buy a service or product, during times of economic down turn it often declines. During FY 2009-2010 the following milestones and strategic priorities were achieved: • Construction on the $15 Million Phase 1 FM 1938 (Precinct Line Rd) Improvements Project commenced. This will be a major north/south arterial roadway which will greatly enhance mobility for this region, our residents, and employees of Westlake businesses. It will have a major impact on future business attraction and economic development in Westlake. • Occupancy of Fidelity Regional Headquarters Phase II began. • The Town's Five (5) Year Strategic Plan was reviewed for progress with the Town Council during the fiscal year with significant time spent by the Council and staff on addressing the Town's long term financial sustainability, a key part of the Strategic Plan. • The Town received a Scenic Cities designation as a Gold level Scenic City, a marked distinction given only to cities with codes, ordinances, and plans that encourage, create, and maintain a high standard of pleasing community appearance, aesthetics, and community livability. iii • The Stagecoach Hills Subdivision Drainage Improvements Project was completed and Phase 1 water distribution system improvements for the Stagecoach Hills Subdivision began. • A Five (5) Year Comprehensive Capital Improvement Plan was adopted by the Town Council. • The Town continued to receive recognition for the transparency and high quality of its financial reporting, receiving the Certificate of Achievement for Excellence in Financial Reporting as well as the Distinguished Budget Presentation Award from the Governmental Finance Officers Association (GFOA) for both its FY 2008-2009 Comprehensive Annual Financial Report (CAFR), also known as the annual audit and its FY 2009-2010 Budget. • The new $5.1 Million Sam and Margaret Lee Arts & Sciences Center at Westlake Academy was opened and operated for the 2009-2010 school year. • Ground was broken and construction began on the $300 million Deloitte University project which is on schedule and set to open in Fall 2011. • The Terra Bella and Solana trail systems were linked with a connection on Sam School Road. • Westlake's first gas well was successfully drilled in Solana under the standards and requirements of the Town's Oil and Gas Drilling/Production Ordinance adopted in 2009. • The Town's second Direction Finders (Citizens') Survey was conducted and the results were compared to the 2009 results as well as used to help guide the FY 2010-2011 budget preparation process. • New Westlake e-Tube Videos were launched on the Town web site. • New home construction began in the Town's newest residential neighborhood, Terra Bella. • For the second consecutive year, the Town continued its "Westlake Windows" initiative for transparent government with citizen outreach meetings held in every Westlake Neighborhood. • Westlake was the recipient of a Municipal Excellence Award for Management Innovation from the Texas Municipal League for the cities of 25,000 populations or less, recognizing the Town's multi-faceted, low cost citizen engagement program entitled Westlake Windows: TGIF (transparent government in focus). Sales tax collections increased by 3.4% for fiscal year 2010. Approximately 17% of the total revenues received were due to collections based on an economic development agreement, 2% from audit collections and approximately 21% was received from presumed one-time payments. Sales tax revenues were .5% ($12K) more when comparing "actual" sales tax revenues with fiscal year 2009. iv S3.7s Local Sales and Use Tax $3-50 ! $3.25 $3-00 S2-7s 52.50 $2.25 _52.00 x$1.75 $1.50 _$1.25 '—51.00 2$0.75 $0.50 $0.25 $0.00 FY 2000 FY 2041 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 M Base Sales Tax Economic Development Agreements ■Audit Payments ■Presumed One-time Payments Long-Term Financial Outlook The Town of Westlake has developed a comprehensive capital improvements document as well as a multi-year strategic plan. Such strategic planning assists both the Council and staff in establishing priorities and allocating resources appropriately. One of the outcome strategies set out in the Town's Strategic Plan is to "Establish a strategy for achieving long-term financial sustainability for the Town government, including Westlake Academy." As a part of the systemic framework of governing and managing for outcomes, we knew from the regularly updated and Town Council reviewed Five (5) year Financial Forecast that if nothing changed, beginning in FY 2012-2013, the Town's present revenue sources and fund balances would not be able to keep pace with projected expenditures. In turn, the projected fund balance in the General Fund would fall below the 90 day minimum requirement set by Town Council financial policy. Financial forecasts are used by the Town to identify important warning "sign posts" that should not be ignored. The FY 2009-2010 and original 2010-2011 forecasts indicated we were heading into severe financial distress. Our Strategic Plan established financial sustainability as a priority for the Town and Westlake Academy. However, as the Town's financial condition worsened, the need to make hard decisions regarding key services and potential revenue sources including an ad valorem tax became more apparent. The decision to "wait out the storm" in FY 2009-2010 meant we had even less time to make critical decisions to deal with this issue. Waiting would have prolonged the continued decline by spending our reserves and not being able to meet our short or long-term financial obligations. Thus, in FY 2010-2011, we found ourselves at a juncture where we could still continue to face critical challenges and critical choices financially. However, we had an opportunity to deal with them in a proactive, thoughtful manner that placed Westlake's future as a premier knowledge based community on a firm financial foundation. The FY 2010-2011 budget established an additional revenue source with the imposition of a property tax and in so doing, helps to secure our long-term financial stability. Continuing factors that remain a challenge as we enter FY 2010-2011 include: • The Town's heavy reliance on sales tax and one-time permits/fees to fund its operation and debt service costs. v • As noted above, during this current recession, Texas, and especially the Fort Worth-Dallas metroplex, has fared better than many other parts of the country. However, this economic downturn continues to impact local governments' revenue streams throughout this area and Westlake is no exception. • Retail development that could help increase sales tax revenue has not occurred to date and based on retail industry conditions, is unlikely to occur at any significant level in the near to medium term. • A significant source of sales tax is "situs agreements" that generate sales tax revenue from construction materials purchased for major economic development projects such as Deloitte and Fidelity. Again, these sales tax revenues are one-time revenues. • Hotel/motel occupancy tax revenue has not grown at an appreciable rate due primarily to decreased business travel, even though the Marriott Solana expanded their room count two years ago. • Residential building permits have decreased due to the current economic climate • Large building permits from major economic development projects such as Fidelity and Deloitte have helped fund Town services; however, these economic development projects take years to develop. Currently, there are no such projects even in the preliminary planning stages. Again, these are one-time revenue sources. • In FY 2005-2006, Westlake voters approved dissolving the Town's 4A half cent economic development sales tax and replacing it with a half cent sales tax for "property tax reduction". This provided for a $2.2 million transfer to the General Fund and significantly increased the fund balance. This funding infusion, while increasing the General Fund's fund balance, had perhaps masked the volatility and lack of diversity of the Town's on-going revenue structure. • Fixed debt service costs are a significant part of the Town's costs and were increased in FY 2007-2008 with the issuance of$2.5 million of general obligation bonds for the new Sam and Margaret Lee Arts & Sciences Center at Westlake Academy. • Operating costs have increased to fund Town services, including Westlake Academy. As the Town's population has grown, the Academy's campus and enrollment growth has increased correspondingly. Another influencing factor related to operating cost adjustments is due to natural inflationary increases. • The Town's land use plan, and the zoning that implements it, features corporate office campuses and large lot single family residential as the primary land use pattern that is desired for Westlake. Both of these land uses, particularly the office land use, lend themselves more to creating a strong ad valorem tax base, not necessarily a strong sales tax base. As stated earlier, FY 2010-2011 became the first year the Town has proposed and implemented a property tax. Westlake's certified 2010 taxable assessed valuation is approximately $654M net of abatements; a large ad valorem tax base for a community 6.2 square miles in land area and a population of approximately 850. • Establishment of a property tax, lowest of the area municipalities, will allow the Town to begin to address its 5 Year CIP, with a strong focus on maintaining its street infrastructure. The Adopted FY 2010-2011 Budget approves transfer of $3.2 million from the Property Tax Reduction Fund and the General Fund to the Capital Projects fund to be combined with $2.0 million of debt planned to be issued in FY 2010-2011 to fund the first three years' projects in the CIP. vi Users of this document, as well as others interested in the programs and services offered by the Town of Westlake, are encouraged to read the Town's Fiscal Year 2010-2011 Budget. The budget details the Town's long-term goals and financial policies, and describes program accomplishments and initiatives. Other Information Certificate of Achievement The Government Finance Officers Association of the United States of America and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Westlake for its comprehensive annual financial report (CAFR) for the fiscal year ended September 30, 2009. This was the third year the Town has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report (CAFR) continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. In addition, the government also received their second GFOA Distinguished Budget Presentation Award for its annual budget document for the fiscal year beginning October 1, 2009. In order to qualify for the Distinguished Budget Presentation Award, the Town's budget document had to be judged proficient as a policy document, a financial plan, an operations guide, and a communications device. Acknowledgements The preparation of this report could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. Appreciation is expressed to Town employees throughout the organization, especially those employees who were instrumental in the successful completion of this report. The staff would also like to thank the Mayor and Town Council for their conservative leadership and their support in planning and conducting the financial operations of the Town in a responsible and progressive manner. Respectfully Submitted, Tom Brymer Debbie Piper, CPA Town Manager Finance Director vii Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Westlake Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30,2009 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports(CAFRs)achieve the highest standards in government accounting and financial reporting, M a President Ym Executive Director Viii Citizens of Westlake Mayor and Council Members Texas Student Town Town Town Housing Attorney Manager Secretary Executive Administrative Director Coordinator Assistant to the Administrative Town Manager Services/HR --------------------- i Admin.Asst. Board .......................................... Parks and Sr.Admin.Asst. Admin.Asst. -------------------------------------- .........................ff-------- Secretary --------------------------------------- Recreation ......................................... I.T.Sta - --------------- -- -- ---• Admin.Asst. = ..........................: -------------------------------------- Dining Hall Facilities and Planning and --------------------------------------- ----------------------------------------- Maintenance Development Nurse .... ..................... ------------------- Sr.Admin.Asst. : Sr.Admin.Asst. Headof --------------------------------------- ----------------....................... Primary Public Interim Fire Town of PYP Coordinator; Works Chief -------------------------------------- W @St a�C@ PYP Teachers ..... .. ......- ------------------- _.. - - ----------------------------------------------------- ' Utility and Fire and ------------ ----------------------------------------- PYP Counselors Building Tech EMS Staff Organizational ---------------------------------------- ...... .................... PYP Special Ed. Chart '---------------------------------------- Municipal Finance Librarian Court Department Head of Town Finance Secondary Marshal Assistant ---------------------------------------- --------------------------------------- MYP/DP --------------.................. Deputy Finance Coordinator Clerks Clerk -------------------------------------- ........................................ MYP/DP Teachers ............---------------------------- MYP/DP Counselors -------------------------------------- -------------------------------------- MYP/DP Special Ed. ix TOWN OF WESTLAKE ELECTED AND APPOINTED OFFICIALS September 30, 2010 ELECTED OFFICIALS Mayor LAURA WHEAT Mayor Pro-Tem CAROL LANGDON Council Member TIM BRITTAN Council Member CLIF COX Council Member RICK RENNHACK Council Member VACANT APPOINTED OFFICIALS TOM BRYMER Town Manager STAN LOWRY KELLY EDWARDS, TRMC Town Attorney Town Secretary DEBBIE PIPER, CPA GINGER AWTRY Finance Director Assistant to the Town Manager TROY MEYER EDDIE EDWARDS Facilities/Parks&Recreation Director Director of Planning and Development JARROD GREENWOOD RICHARD WHITTEN Director of Public Works Interim Fire Chief AMANDA DEGAN TODD WOOD, SPHR, IPMA-CP Municipal Court and Director of Human Resources Special Projects Director and Administrative Services x FINANCIAL SECTION FV4 I PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Town Council Town of Westlake, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units and each major fund of the Town of Westlake, Texas (the "Town"), as of and for the year ended September 30, 2010, which collectively comprise the Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town of Westlake, Texas' management. Our responsibility is to express opinions 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units and each major fund of the Town of Westlake, Texas, as of September 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have issued a report dated February 22, 2011, on our consideration of the Town of Westlake, Texas' internal control over financial reporting and on our tests of compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 115 SOUTH CHURCH STREET■HILLSBORO,TX 76645■(254)582-2583■FAX:(254)582-5731 ■www.pbhcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■TEMPLE,TX(254)791-3460 WACO,TX(254)772-4901 ■ALBUQUERQUE,NM(505)266-5904 Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 through 15 and 67 through 76 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Westlake, Texas' financial statements as a whole. The introductory section, individual fund budgetary analysis schedule, and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The individual fund budgetary analysis schedule is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Pak �, � U � � I P I February 22, 2011 2 MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS The Town of Westlake is pleased to present this overview and analysis of the financial activities of the Town for the fiscal year ended September 30, 2010. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS ■ The Assets of the Town exceeded its liabilities at the close of the most recent fiscal year by $26,094,630 (Net assets). This number must be viewed in the context that the vast majority of the Town's net assets of$20,667,316 (79%) are capital assets and that most capital assets in government do not directly generate revenue nor can they be sold to generate liquid capital. Those net assets restricted for specific purposes totaled $1,564,868 (6%). The remaining $3,862,446 (15%) are unrestricted net assets and may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the Town's fund designation and fiscal policies. ■ As of the close of the current fiscal year, the Town of Westlake's governmental funds reported combined ending fund balances of$7,836,949, an increase of$1,598,110 in comparison with the prior year. Within this total, $1,564,868 is restricted or designated by management or council. ■ At the end of the current fiscal year, fund balance for the general fund was $3,792,985, an increase of $1,067,673 in comparison with the prior year. Of this total fund balance, $3,578,235 is unreserved. This represents 94% of total general fund expenditures and is equivalent to 345 operating days. ■ The Town's capital assets (net of accumulated depreciation) decreased by $536,726. The major portion of this decrease is due to an increase related to the completion of the Arts & Sciences Center and its parking lot, Stagecoach Hills subdivision drainage and waterline infrastructure and two buses for the Westlake Academy. This increase in capital expenditures was reduced by $1,317,096 of depreciation, which gave the Town a net decrease. ■ The Town's bonds payable decreased by $525,000 or 2.5%, due to the scheduled repayment of principal on outstanding bonded debt. The Town did not issue any new bonded debt during the fiscal year. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town's basic financial statements. The Town's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves. 3 Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the Town's finances, in a manner similar to a private-sector business. The government-wide financial statements are prepared utilizing the economic resources measurement focus and the accrual basis of accounting. The statement of net assets presents information on all of the Town's assets and liabilities with the difference between the two reported as net assets. Over time, increases or decreases in the Town's net assets serve as a useful indicator of whether the financial position of the Town is improving or weakening. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All of the revenues and expenses are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cashflows. Thus revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both of the government-wide financial statements distinguish functions of the Town that are principally supported by sales taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, public safety, culture and recreation, economic development, public works, visitor services and education. The business-type activities of the Town include water/sewer and cemetery. The government-wide financial statements include not only the Town (known as the primary government), but also discretely presented component units including all of the Texas Student Housing entities. Financial information for these component units is reported separately from the financial information presented for the primary government itself. See pages 28-31 of the "Financial Section" for detail on these entities. In addition, the Town has the following blended component units: Lone Star Public Facility Corporation, 4B Economic Development Corporation, and Westlake Academy, an open enrollment charter school owned and operated by the Town of Westlake. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Below are the three types of funds. The Town had only "Governmental funds and Proprietary funds" for the year ended September 30, 2010. Governmental funds - Governmental funds are used to account for essentially the same functions reported as government activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. 4 Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, the reader may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town maintains eleven individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General, Visitors Association, Westlake Academy, Debt Service, Capital Projects, FM 1938, Property Tax Reduction, Vehicle/Equipment Replacement, Economic Development, Lone Star Public Facility Corporation and Westlake 4B Economic Development Corporation funds, all of which are presented as major funds. The Town adopts an annual appropriated budget for all funds, except the Capital Projects fund which is a project-length based budget. A budgetary comparison statement has been provided for all appropriate funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 19-24 of this report. Proprietary funds - There are two types of proprietary funds, Enterprise Funds and Internal Service Funds. An Enterprise Fund is the only proprietary fund currently maintained by the Town. Enterprise funds are used to report the same functions presented as business-type activities in the government- wide financial statements. The Town uses enterprise funds to account for its water and sewer activities and its cemetery activities. All activities associated with providing such services are accounted for in this fund, including administration, operation, maintenance, debt service, capital improvements, billing and collection. The Town's intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. The Town has no Internal Service Funds (fund to report activities that provide supplies and services for the Town's other programs and activities, i.e. self insurance and fleet management.) The basic proprietary fund financial statements can be found on pages 25 - 27 on this report. Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town's own programs. The accounting used for fiduciary funds is similar to the accounting used for proprietary funds. The Town of Westlake does not currently have any fiduciary funds. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 32 - 66 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents schedules that further support the information in the financial statements. The schedules are presented immediately following the notes to the financial statements and can be found on pages 67 - 77. 5 GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of the government's financial position. In the case of the Town, assets exceeded liabilities by $26,094,630 at the close of the most recent fiscal year. The largest portion of the Town's net assets, $20,667,316 (79%), reflects its investment in capital assets (e.g. land, buildings, equipment, improvements, construction in progress, and infrastructure), less any debt used to acquire capital assets still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town's net assets, $1,564,868 (6%), represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $3,862,446 (15%), may be used to meet the government's ongoing obligations to citizens and creditors. Condensed Statement of Net Assets Governmental Activities Business-type Activities Totals 2010 2009 2010 2009 2010 2009 Current and other assets $ 9,253,595 $ 7,594,613 $ 2,166,994 $ 1,726,542 $ 11,420,589 $ 9,321,155 Capital assets 33,051,736 33,197,958 12,692,719 13,083,223 45,744,455 46,281,181 Total Assets 42,305,331 40,792,571 14,859,713 14,809,765 57,165,044 55,602,336 Long-term liabilities outstanding 19,241,788 19,721,208 5,589,204 5,658,888 24,830,992 25,380,096 Other liabilities 1,999,144 1,943,421 4,240,278 3,747,423 6,239,422 5,690,844 Total Liabilities 21,240,932 21,664,629 9,829,482 9,406,311 31,070,414 31,070,940 Net Assets: Invested in capital assets, net of related debt 13,633,485 13,244,689 7,033,831 7,349,032 20,667,316 20,593,721 Restricted 1,564,868 1,773,068 - - 1,564,868 1,773,068 Unrestricted 5,866,046 4,110,185 (2,003,600) (1,945,578) 3,862,446 2,164,607 Total Net Assets $ 21,064,399 $ 19,127,942 $ 5,030,231 $ 5,403,454 $ 26,094,630 $ 24,531,396 Governmental activities: Governmental activities increased the Town's net assets by $1,936,457. This increase was primarily due to a one-time building permit of$1.2M. Net assets invested in capital assets, net of related debt increased by $388,796. The major portion of this increase is related to the Arts & Sciences Center parking lot, Stagecoach Hills subdivision drainage infrastructure and two buses for the Westlake Academy. 6 Changes in Net Assets Governmental Activities Business-type Activities Totals 2010 2009 2010 2009 2010 2009 Revenues: Program revenues: Fees,fines and charges for services $ 2,497,350 $ 1,478,234 $ 2,107,060 $ 2,345,236 $ 4,604,410 $ 3,823,470 Operating grants& contributions 853,151 1,522,935 46,810 - 899,961 1,5225935 Capital grants& contributions 83,250 2,059,624 - - 83,250 2,059,624 General revenues: Taxes Sales taxes 3,7905533 3,664,409 - - 3,790,533 3,664,409 Hotel occupancy taxes 457,693 497,769 - - 457,693 497,769 Mixed beverage taxes 17,902 17,869 - - 17,902 17,869 Franchise taxes 603,233 624,401 - - 603,233 624,401 Unrestricted grants 3,484,141 2,960,590 - - 3,484,141 2,960,590 Interest on investments 38,383 61,224 8,334 7,858 46,717 69,082 Miscellaneous 676,638 568,782 60,070 77,266 736,708 646,048 Total revenues 12,502,274 13,455,837 2,2225274 2,430,360 14,724,548 15,886,197 Expenses: General government 2,272,127 2,203,882 - - 2,272,127 2,203,882 Public safety 1,698,164 1,939,441 - - 1,698,164 1,939,441 Culture and recreation 105,997 115,770 - - 105,997 115,770 Economic development 309,653 207,044 - - 309,653 207,044 Public works 594,705 1,028,934 - - 594,705 1,028,934 Visitor services 420,270 341,270 - - 420,270 341,270 Education 4,138,875 3,722,705 - - 4,138,875 3,722,705 Interest on long-term debt 1,026,026 1,068,935 - - 1,026,026 1,068,935 Water and sewer - - 2,567,675 2,694,407 2,567,675 2,694,407 Cemetery - - 27,822 473 27,822 473 Total expenses 10,565,817 10,627,981 2,595,497 2,694,880 13,161,314 13,322,861 Excess(deficiency) before transfers 1,936,457 2,827,856 (373,223) (264,520) 1,563,234 2,563,336 Transfers - 61,321 - (61,321) - - Change in net assets 1,936,457 2,889,177 (373,223) (325,841) 1,563,234 2,563,336 Prior period adjustment - 84,508 - - - 84,508 Net assets,beg.of year 19,127,942 16,154,257 5,403,454 5,729,295 24,531,396 21,883,552 Net assets,end of year $ 21,064,399 $ 19,127,942 $ 5,030,231 $ 5,403,454 $ 26,094,630 $ 24,531,396 7 Total revenues (including transfers) for governmental activities decreased when compared to the prior year by $1,014,884. General revenue had an increase of$673,479 while program revenues had a decrease of$1,627,042. These increases were primarily due to the following factors: Program revenues— • Charges for services increased by$1,019,116; o One time building permit and inspection/plan review fees related to Deloitte construction for FY09/10 that total $1,016,846 will not re-occur in FY10/11 Operating • Operating Grants and Contributions decreased by $669,784 mostly due to a contribution made by Westlake Academy Foundation to the Arts & Sciences Center during FY 09/10 • Capital Grants and Contributions decreased by$1,976,374 o Due to the conveyance of Terra Bella open space and FM1938 right of way in the prior year. General revenues— • Sales tax increased by $126,124. This increase was made up of the following components: o Increase in"base" sales taxes of$12,016 o Increase of$244,818 in economic development revenue o Decrease of$814,628 in audit collections o Increase in presumed one-time payments of$683,918 • Hotel occupancy taxes decreased by $40,076 • Franchise tax decreased by $21,168 • Unrestricted grants increased $523,551 due to the state revenue received for the additional students at Westlake Academy • Interest income decreased by$22,841 • Miscellaneous increased by $107,856 with the majority of the increase being attributed to gifts/bequests and other revenues related to the Westlake Academy Expenses— • Total expenses for governmental activities decreased by $62,164 or approximately .6%. o General Government increase of$68,245 o Public safety decrease of$241,277 • Fully staffed at 10 with a Fire Chief in FY 08/09; only 6 full time (including Interim Fire Chief) in FY 09/10 o Economic development increase of$102,609 • Based on a contractual obligation reimbursement. The project was just beginning in the prior year; therefore, payments were more during the current year. o Public works decrease of$434,229 • Engineering fees were paid and that part of the project was completed during FY 08/09 o Visitor services increase of$79,000 • Additional transportation payment to the Marriott per agreement o Education increase of$416,170 • Additional students attending the Academy o Interest on long-term debt decrease of$42,909 8 Business-type activities: • Business-type activities decreased the Town's net assets by $373,223. This change in net assets was $47,382 more than the prior year's of($325,841) based on the following variances: o Decrease in revenues of $208,086 • FY 2009-2010 was a wetter than normal year resulting in decreased water billing revenues and other associated fees. o Decrease in expenses of$99,383 • $220,507 decrease in bad debt expense for the current fiscal year • $44,633 increase for payroll and related expenses due to additional allocation percentages of the Finance department to the Utility Fund as well as a portion of the administrative assistant in the Human Resources department who was not here for a full year in the prior year. • $75K increase in Peak Payment o Decrease in transfers out of$61,321 to various funds FINANCIAL ANALYSIS OF THE TOWN'S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the Town's governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a town's net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the Town's governmental funds reported combined ending fund balances of$7,836,949 an increase of$1,598,110 in comparison with the prior year. See below for the major reasons for this increase: General Fund - Fund balance increased by $1,067,673. Revenues increased by $827,343 mostly due to the Deloitte building permit and inspection/plan review fees and expenditures were reduced by $410,397. A large portion ($271,012) of the reduction in expenditures is attributed to the creation of a new "Economic Development Fund" in which payments to various entities are recorded based on economic development agreements. Transfers in decreased by $265,599 primarily due to the transfer of$250,000 from the Property Tax Reduction Fund in the prior year that wasn't necessary in the current fiscal year. See page 60 of the "Notes to the Financial Statements" for detailed information related to the transfers. Visitors Association Fund - The net decrease in fund balance of$144,005 was due primarily to the budgeted transfer out to the Debt Service Fund for the bond payment for the Arts and Sciences Center as well as the additional transportation payment made to the Marriott. Capital Projects Fund — The net decrease in fund balance is $85,832. The major portion of the decrease was due to the completion of the Arts & Sciences Center. Property Tax Reduction Fund — Fund balance increased by $501,717. This fund represents '/2 cent in sales tax revenues and is used to supplement various funds. Funds were transferred from 9 this account to Debt Service Fund to supplement payments made from the 4B Economic Development Corporation Fund, Capital Projects Fund, General Major Maintenance Fund and the Vehicle and Equipment Replacement Fund. 413 Economic Development Corporation Fund — Fund balance did not change during the current fiscal year. All funds received were transferred to the Debt Service Fund for the annual bond payments. Proprietary funds. The Town's proprietary fund statements provide the same type of information found in the government-wide financial statements but in more detail. Total net assets of the Utility Fund amounted to $4,889,082, a decrease of $351,016. Operating income totaled$215,575 but was offset by a net non-operating revenues (expenses)total of$566,591. o Revenues were $211,712 less than the prior year because FY 2009-2010 was a wetter than normal year resulting in decreased water billing revenues and other associated fees. o Operating Expenses decreased by $121,436: • $44,633 increase for payroll and related expenses due to additional allocation percentages of the Finance department to the Utility Fund as well as a portion of the administrative assistant in the Human Resources department who was not here for a full year in the prior year. • $220,507 decrease in bad debt expense for the current fiscal year (FY 2009-2010 bad debt expense of$604 is netted against operating revenues) • $56,292 increase in other operating costs General Fund Budgetary Highlights The General Fund budget was amended in total to increase the net change in fund balance from ($784,553) to $724,753, a total of$1,509,306. o Net revenues were increased by $1,481,453 (45%). The major portion of this is attributed to the increase of permits and fees by $1,371,945 based on a $1.2 one-time building permit that had been anticipated to be received in FY 08-09, sales tax revenues were increased by $121,400 with the remaining decrease of$11,892 being the net effect of several amendments to revenue accounts. o Expenditures were decreased by $468,594 (10%) of which $488,327 was due to the creation of an "Economic Development Fund" and the transfer of the budgeted payments to the separate fund. The offsetting $19,733 is again based on the net effect of several amendments to expenditure accounts. o Transfers out were increased by $112,741 of which approximately $49K was for the civic campus water well and $63K represented the final expenditures for the Arts & Sciences Center. The general fund's actual revenue collections exceeded the amended budget by $62,973. 10 The general's fund's final expenditures were $350,615 less than the amended budget(8%). o General government over budget$44,504 o Public safety under budget $230,428 • Budgeted for 9 full time staff and only had 6 - $170,480 • Several contracts were less than budgeted- $6,555 • Employee Physicals less due to short staff—$4,785 • Vehicle fuel, uniforms, firefighter supplies - $20,670 • Vehicle repair and maintenance - $10,116 o Cultural and recreation under budget$26,642 o Public works under budget $115,049 • Staff made a conscious effort towards keeping expenditures down and the majority of this variance was due to reduction in engineering, ROW irrigation and various other contracted services. Capital Assets and Debt Administration Capital Assets. The Town's investment in capital assets for its governmental and business-type activities as of September 30, 2010, totaled $45,744,455 (net of accumulated depreciation). The investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure, and construction in progress. The net decrease in the Town's investment in capital assets for the current fiscal year was $536,726 or 1%. The major portion of this decrease is due to an increase related to the completion of the Arts & Sciences Center and its parking lot, Stagecoach Hills subdivision drainage and waterline infrastructure and two buses for the Westlake Academy. This amount was offset by$1,317,096 of depreciation which gave the Town a net decrease. Capital Assets(Net of Accumulated Depreciation) Governmental Activities Business Activities Total 2010 2009 2010 2009 2010 2009 Land $ 11,530,663 $ 11,530,663 $ - $ - $ 11,530,663 $ 11,530,663 Capital improvements 2,233,430 1,839,904 10,080,172 10,313,923 12,313,602 12,153,827 Buildings 18,486,500 18,864,812 - - 18,486,500 18,864,812 Machinery&equipment 726,222 827,309 2,300,241 2,425,234 3,026,463 3,252,543 W/W treatment rights - - 312,306 344,066 312,306 344,066 Information/Technology - - - - - - Construction in progress 74,921 135,270 - - 74,921 135,270 Total capital assets $ 33,051,736 $ 33,197,958 $ 12,692,719 $ 13,083,223 $ 455744,455 $ 46,281,181 Additional information on the Town's capital assets can be found in Note III on pages 45-46 of this report. 11 Long-term debt - At the end of the current fiscal year, the Town had total long-term debt outstanding of$25,497,361. Of this amount, $20,185,000 represents bonded indebtedness, $177,224 represents an economic development reimbursement, $72,929 represents compensated absences and $5,658,888 business-type debt. During the fiscal year 2009-2010, the Town's total debt decreased by $553,775. This decrease is primarily attributed to the principal payments on the bonded indebtedness and the payoff of the lease for the Apple computers for Westlake Academy and the Marshall's vehicle. Standard & Poor's Ratings Services, a division of the McGraw-Hill, Inc. rates the Town's debt at AA-. Additional information about the rating agency or the significance of the rating provided may be obtained from each Standard& Poor's web site. Additional information on the Town's long-term debt can be found in Note III on pages 50-53. Governmental Activities Business-type Activities Total 2010 2009 2010 2009 2010 2009 General obligation bonds $ 9,630,000 $ 9,735,000 $ - $ - $ 9,630,000 $ 9,735,000 Certificates of obligation 10,555,000 10,975,000 - - 10,555,000 10,975,000 Contractual obligations 177,224 201,402 5,658,888 5,734,191 5,836,112 5,935,593 Capital leases - 46,559 - - - 46,559 Compensated absences 63,125 - 9,804 - 72,929 - Deferred amounts (596,680) (641,016) - - (596,680) (641,016) Total long-term debt $ 19,828,669 $ 20,316,945 $ 5,668,692 $ 5,734,191 $ 25,497,361 $ 26,051,136 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS During the budget process for FY 2010-2011, the Town found itself at a juncture where it could still continue to face critical challenges and critical choices financially by relying on its major revenue sources being sales tax, franchise fees, permits & fees, large one-time building permits, and fines and forfeitures with no property tax. Numerous hours and options were presented at the Council's budget workshops and other public meetings that placed the Town's finances on solid ground, securing its vision for the future. These scenarios focused on stabilizing the General Fund's on-going revenue (i.e. ceasing the use of fund balance for daily operations and reliance on one-time, non-reoccurring revenues) as well as reinvesting in the Town's infrastructure. These revenue options utilized a municipal ad valorem (property)tax, something that the Town had never had before. The Town's estimated 2010 taxable assessed valuation is approximately $654M net of abatements; a large ad valorem tax base for a community 6.2 square miles in land area and a permanent residential population of approximately 850 with an estimated daytime population of between 10,000 and 12,000 (Monday-Friday). The FY 2010-2011 tax rate for the Town is the lowest amount in the area at $.1601 per$100 of assessed valuation ($.1562 maintenance & operations and $.0039 interest and sinking). 12 GENERAL FUND Revenue o FY 09/10 Actual $4,832,267 o FY 10/11 Budget$3,888,427 o Budgeted revenues are $943,840 less than prior year actual • FYI 0/11 includes a property tax of$1,000,430 that was not levied in prior years. • One time contribution of $83,250 from Westlake Academy Foundation to offset purchase of 2 new buses for Westlake Academy. • One time reimbursement of$100,000 from WA to offset operating expenditures. • Sales tax revenue decreased mostly due to presumed one-time payments of approximately $700K in FY 09/10 • One time building permit& fees of$1.4M in FY 09/10 Payroll&Related o FY 09/10 Actual $1,846,665 o FY 10/11 Budget $2,487,424 o Budgeted payroll &related is $640,759 more than prior year actual • In FY09/10, employee payroll was allocated to the Visitor Fund and the Utility Fund. In FY10/11 all payroll will be issued from the General Fund and offsetting transfers in from Visitor Fund ($174,971) and Utility Fund ($227,292)were budgeted instead. • Public Safety department was under-staffed in FY09/10 with only 6 employees. A full staff of 9 employees was budgeted for FY10/11 resulting in an increase of$186,506. Operating Expenditures o FY 09/10 Actual $1,939,471 o FY 10/11 Budget $1,857,275 o Budgeted operating expenditures are $82,196 less than prior year actual • One time purchase of two new buses for WA. Offset by private contribution revenue. Other Sources and Uses Transfers in oFY 09/10 Actual $123,000 o FY 10/11 Budget $420,263 • In FY09/10, employee payroll was allocated to the Visitor Fund and the Utility Fund. • In FYI 0/11 all payroll will be issued from the General Fund and offsetting transfers in from Visitor Fund ($174,971) and Utility Fund ($227,292) were budgeted instead. Transfers out o FY 09/10 Actual $101,459 o FY 10/11 Budget$2,120,759 • Transfer out to capital projects increased based on the adopted CIP to move a portion of fund balance into the Capital Projects Fund. 13 VISITORS ASSOCIATION FUND Revenue o FY 09/10 Actual $475,978 o FY 10/11 Budget $478,975 o Budgeted revenues are $2,997 more than prior year actual • Due to an increase in Arbor Day income of$4,690 and a decrease in Historical Board income of$1,033 Payroll&Related o FY 09/10 Actual $174,567 o FY 10/11 Budget $0 o Budgeted payroll &related is $174,567 less than prior year actual • In FY09/10, employee payroll was allocated the Visitor Fund. In FYI 0/11 all payroll will be issued from the General Fund and an offsetting transfer out of $174,971 was budgeted instead. Operating Expenditures o FY 09/10 Actual $245,699 o FY 10/11 Budget $241,962 o Budgeted operating expenditures are $3,737 less than prior year actual • Services decreased $27,203 due to a decrease in Marriott Transportation/Marketing expenditures of$57,000 and an increase in other contracted services of$30,000 • Supplies increased $22,629 due to expenses related to Public Arts, Historical board and Arbor Day. $l OK is budgeted for each of these organizations annually and only $10,720 was expensed for all three organizations/events for the FY 09/10. Other Sources and Uses oFY 09/10 Actual $199,713 o FY 10/11 Budget $355,915 o Budgeted other uses are $156,202 more than prior year actual • In FY09/10, employee payroll was allocated to the Visitor Fund. In FY10/11 all payroll will be issued from the General Fund and an offsetting transfer out of $174,971 was budgeted instead. 14 UTILITY FUND Revenue o FY 09/10 Actual $2,208,390 o FY 10/11 Budget $2,426,766 o Budgeted revenues are $218,376 more than prior year actual • FYI 0/11 water revenues increase $275,103 due to a scheduled rate increase which is offset by a contribution in FY 09/10 from Westlake Academy Foundation to repay a portion of the Arts and Sciences Center utility relocation. Payroll&Related o FY 09/10 Actual $241,851 o FY 10/11 Budget $0 o Budgeted payroll & related is $241,851 less than prior year actual • In FY09/10 employee payroll was allocated the Utility Fund. In FYI 0/11 all payroll will be issued from the General Fund and an offsetting transfer out of $227,292 was budgeted instead. Operating Expenses o FY 09/10 Actual $1,750,964 oFY 10/11 Budget $1,987,230 o Budgeted operating expenses are approximately $236K more than prior year actual mostly due to the following additional expenses: • Additional water costs based on a new contract with City of Fort worth • TRA Wastewater treatment expenses increased $119,210. Expenses are determined based on our projected flow and its proportionate share of the TRA system. A mid-year analysis is conducted annually and the system cost is adjusted accordingly. Additional sewer flows as a result of Deloitte University and Vaquero Golf water treatment facility were considered for FY 10/11. Other Uses o FY 09/10 Actual $0.00 o FY 10/11 Budget $245,292 o Budgeted other uses are $245,292 more than prior year actual • In FY09/10, employee payroll was allocated to the Utility Fund. In FYI 0/11 all payroll will be issued from the General Fund and an offsetting transfer out of $241,851 was budgeted instead. CONTACTING THE TOWN'S FINANCE DEPARTMENT This financial report is designed to provide our citizens, customers, and investors and creditors with a general overview of the Town's finances and to demonstrate the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Debbie Piper, Town of Westlake Finance Director, at 817-490-5712. 15 BASIC FINANCIAL STATEMENTS TOWN OF WESTLAKE,TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30,2010 Primary Government Discretely Governmental Business-type Presented Activities Activities Total Component Units ASSETS Cash and cash equivalents $ 4,040,499 $ 902,162 $ 4,942,661 $ 5,082,223 Investments 2,855,667 605,570 3,461,237 - Receivables(net of allowance) 1,461,048 696,928 2,157,976 600,329 Internal balances 267,577 ( 267,577) - - Inventories - 98,775 98,775 - Other assets 66,761 2,646 69,407 98,119 Restricted cash and cash equivalents 214,750 128,490 343,240 5,014,570 Deferred charges 347,293 - 347,293 - Capital assets: Land 11,530,663 - 11,530,663 12,070,678 Buildings and improvements 26,181,089 12,921,283 39,102,372 91,741,792 Wastewater treatment rights - 635,199 635,199 - Machinery and equipment 2,401,506 3,459,821 5,861,327 12,052,793 Construction in progress 74,921 - 74,921 - Less:accumulated depreciation ( 7,136,443) ( 4,323,584) ( 11,460,027) ( 31,839,677) Total capital assets 33,051,736 12,692,719 45,744,455 84,025,586 Intangible assets: Debt issue costs,net of amortization - - - 3,955,658 Total assets 42,305,331 14,859,713 57,165,044 98,776,485 LIABILITIES Accounts payable 1,004,521 145,103 1,149,624 896,465 Customer deposits payable - 128,490 128,490 - Unearned revenue - 411,859 411,859 3,125,708 Accrued interest payable 407,742 3,475,338 3,883,080 14,455,264 Noncurrent liabilities: Due within one year 586,881 79,488 666,369 61,407,865 Due in more than one year 19,241,788 5,589,204 24,830,992 55,753,264 Total liabilities 21,240,932 9,829,482 31,070,414 135,638,566 NET ASSETS Invested in capital assets, net of related debt 13,633,485 7,033,831 20,667,316 ( 31,675,543) Restricted for: Debt service - - - - Tourism 1,100,941 - 1,100,941 - Future projects 281,864 - 281,864 - Court security and technology 170,063 - 170,063 - Capital expenses 12,000 - 12,000 - Unrestricted 5,866,046 ( 2,003,600) 3,862,446 ( 5,186,538) Total net assets $ 21,064,399 $ 5,030,231 $ 26,094,630 $( 36,862,081) The accompanying notes are an integral part of these financial statements. 16 TOWN OF WESTLAKE, TEXAS STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government: Governmental activities: General government $ 2,272,127 $ 716,624 $ 434,709 $ 83,250 Public safety 1,698,164 80,665 - - Culture and recreation 105,997 - - - Economic Development 309,653 - - - Public works 594,705 1,597,655 15,441 - Visitor Services 420,270 - - - Education 4,138,875 102,406 403,001 - Interest on long-term debt 1,026,026 - - - Total governmental activities 10,565,817 2,497,350 853,151 83,250 Business-type activities: Water utilities 2,567,675 2,101,510 46,810 - Cemetery 27,822 5,550 - - Total business-type activities 2,595,497 2,107,060 46,810 - Total primary government $ 13,161,314 $ 4,604,410 $ 899,961 $ 83,250 Component units: Business-type activities $ 22,211,846 $ 16,199,988 $ - $ - Total component units $ 22,211,846 $ 16,199,988 $ - $ - General revenues: Sales taxes Hotel occupancy taxes Mixed beverage taxes Franchise taxes Unrestricted grants Interest income Miscellaneous Total general revenues and transfers Change in net assets Net assets,beginning Prior period adjustment Net assets,ending The accompanying notes are an integral part of these financial statements. 17 Net(Expense)Revenue and Changes in Net Assets Primary Government Discretely Governmental Business-type Presented Activities Activities Total Component Units $( 1,037,544) $ - $( 1,037,544) $ - ( 1,617,499) - ( 1,617,499) - ( 105,997) - ( 105,997) - ( 309,653) - ( 309,653) - 1,018,391 - 1,018,391 - ( 420,270) - ( 420,270) - ( 3,633,468) - ( 3,633,468) - ( 1,026,026) - ( 1,026,026) - ( 7,132,066) - ( 7,132,066) - ( 419,355) ( 419,355) - ( 22,272) ( 22,272) - ( 441,627) ( 441,627) - ( 7,132,066) ( 441,627) ( 7,573,693) - $( 6,011,858) $( 6,011,858) 3,790,533 - 3,790,533 - 457,693 - 457,693 - 17,902 - 17,902 - 603,233 - 603,233 - 3,484,141 - 3,484,141 - 38,383 8,334 46,717 40,716 676,638 60,070 736,708 3,636 9,068,523 68,404 9,136,927 44,352 1,936,457 ( 373,223) 1,563,234 ( 5,967,506) 19,127,942 5,403,454 24,531,396 ( 34,505,288) - - - 3,610,713 $ 21,064,399 $ 5,030,231 $ 26,094,630 $( 36,862,081) 18 TOWN OF WESTLAKE,TEXAS BALANCESHEET GOVERNMENTAL FUNDS SEPTEMBER 30,2010 Debt Visitors Westlake Service Capital General Association Academy Fund Projects ASSETS: Cash and cash equivalents $ 1,397,909 $ 1,054,773 $ 869,800 $ - $ 249,161 Investments 2,048,240 - - - - Receivables Accounts receivable 390,048 83,745 246,139 - - Other receivables - - - - 79,930 Due from other funds - - - - - Other assets 37,708 2,646 26,407 - - Restricted cash and investments 214,750 - - - - TOTAL ASSETS $ 4,088,655 $ 1,141,164 $ 1,142,346 $ - $ 329,091 LIABILITIES AND FUND BALANCE: Liabilities: Accounts payable 295,670 40,223 374,413 - 91,914 Due to other funds - - - - - Totalliabilities 295,670 40,223 374,413 - 91,914 Fund Equity: Fund balance Reserved to promote tourism - 1,100,941 - - - Reserved for future projects 44,687 - - - 237,177 Reserved for court security and technology 170,063 - - - Reserved for capital expenditures - - - - - Unreserved and undesignated 3,578,235 - 767,933 - - Total fund equity 3,792,985 1,100,941 767,933 - 237,177 TOTAL LIABILITIES AND FUND EQUITY $ 4,088,655 $ 1,141,164 $ 1,142,346 $ - $ 329,091 Capital assets used in governmental activities are not financial resources and,therefore,are not reported in the funds. Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds Certain other long-term assets are not available to pay current period expenditures and therefore are not reported in the funds Net assets of governmental activities The accompanying notes are an integral part of these financial statements. 19 Property Vehicle/Equip. Economic Lone Star 4B Economic Total FM 1938 Tax Reduction Replacement Development Public Facility Development Governmental Fund Fund Fund Fund Corporation Corporation Funds $ - $ 219,204 $ 62,064 $ 4,280 $ 13,598 $ 169,710 $ 4,040,499 807,427 - - - - 2,855,667 202,094 - 193,213 - 201,047 1,316,286 - - - - - 79,930 341,026 - - - 267,577 608,603 - - - - - 66,761 - - - - - 214,750 $ - $ 1,569,751 $ 62,064 $ 197,493 $ 13,598 $ 638,334 $ 9,182,496 - 4,808 197,493 - - 1,004,521 - - - 341,026 341,026 4,808 197,493 - 341,026 1,345,547 - - - - 1,100,941 281,864 - - - - 170,063 - 12,000 - - - 12,000 1,569,751 45,256 - 13,598 297,308 6,272,081 1,569,751 57,256 - 13,598 297,308 7,836,949 $ - $ 1,569,751 $ 62,064 $ 197,493 $ 13,598 $ 638,334 33,051,736 ( 19,889,118) 64,832 $ 21,064,399 20 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Visitors Westlake General Association Academy REVENUES: Taxes Sales $ 1,597,194 $ - $ - Mixed beverage 17,902 - - Hotel occupancy - 457,693 - Franchise 603,233 - - State program revenues - - 3,687,706 Federal program revenues - - 199,436 Interest income 24,220 2,183 908 Building permits and fees 1,746,954 - - Fines and penalties 647,170 - - Contributions 90,249 - - Miscellaneous 105,345 16,102 655,601 Total revenues 4,832,267 475,978 4,543,651 EXPENDITURES: Current General government 1,644,587 - - Public safety 1,634,936 - - Culture and recreation 105,997 - - Public works 400,615 - - Economic Development - - - Visitor services - 420,270 - Education - - 4,138,875 Capital outlay - - - Debt service Principal retirement - - 38,703 Interest and other fiscal charges - - 2,793 Total expenditures 3,786,135 420,270 4,180,371 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 1,046,132 55,708 363,280 OTHER FINANCING SOURCES(USES) Transfers in 123,000 - - Transfers out ( 101,459) ( 199,713) ( 100,000) Total other financing sources(uses) 21,541 ( 199,713) ( 100,000) NET CHANGE IN FUND BALANCES 1,067,673 ( 144,005) 263,280 FUND BALANCES,BEGINNING 2,725,312 1,244,946 504,653 FUND BALANCES,ENDING $ 3,792,985 $ 1,100,941 $ 767,933 The accompanying notes are an integral part of these financial statements. 21 Debt Property Vehicle/Equip. Economic Service Capital FM 1938 Tax Reduction Replacement Development Fund Projects Fund Fund Fund Fund $ - $ - $ - $ 947,633 $ - $ 298,073 1,124 - 9,393 63 - - 443,151 - - - - 1,996 - - - - 446,271 - 957,026 63 298,073 1,264 - - - - - - 333,831 - 654,567 - - 27,536 - 525,000 - - - - - 974,370 - - - - - 1,499,370 654,567 1,264 - 27,536 333,831 ( 1,499,370) ( 208,296) ( 1,264) 957,026 ( 27,473) (35,758) 1,499,370 122,464 1,256 - 22,729 35,758 - - - ( 455,309) - - 1,499,370 122,464 1,256 ( 455,309) 22,729 35,758 ( 85,832) ( 8) 501,717 ( 4,744) - 323,009 8 1,068,034 62,000 - $ - $ 237,177 $ - $ 1,569,751 $ 57,256 $ - 22 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 (continued) Lone Star 4B Economic Total Public Facility Development Governmental Corporation Corporation Funds REVENUES: Taxes Sales $ - $ 947,633 $ 3,790,533 Mixed beverage - - 17,902 Hotel occupancy - - 457,693 Franchise - - 603,233 State program revenues - - 3,687,706 Federal program revenues - - 199,436 Interest income 29 463 38,383 Building permits and fees - - 1,746,954 Fines and penalties - - 647,170 Contributions - - 533,400 Miscellaneous - - 779,044 Total revenues 29 948,096 12,501,454 EXPENDITURES: Current General government - - 1,644,587 Public safety - - 1,634,936 Culture and recreation - - 105,997 Public works - - 401,879 Economic Development - - 333,831 Visitor services - - 420,270 Education - - 4,138,875 Capital outlay - - 682,103 Debt service Principal retirement - - 563,703 Interest and other fiscal charges - - 977,163 Total expenditures - - 10,903,344 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 29 948,096 1,598,110 OTHER FINANCING SOURCES(USES) Transfers in - - 1,804,577 Transfers out - (948,096) ( 1,804,577) Total other financing sources(uses) - (948,096) - NET CHANGE IN FUND BALANCES 29 - 1,598,110 FUND BALANCES,BEGINNING 13,569 297,308 6,238,839 FUND BALANCES,ENDING $ 13,598 $ 297,308 $ 7,836,949 The accompanying notes are an integral part of these financial statements. 23 TOWN OF WESTLAKE, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30,2010 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balance-total governmental funds $ 1,598,110 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the current period. ( 146,222) The issuance of long-term debt (e.g., bonds, leases) provided current financial resources to governmental funds, while repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued,whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. 595,737 Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore,are not reported as expenditures in governmental funds. ( 111,168) Change in net assets of governmental activities $ 1,936,457 The accompanying notes are an integral part of these financial statements. 24 TOWN OF WESTLAKE, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30,2010 Business-type Activities-Enterprise Funds Utility Cemetery Fund Fund Total ASSETS Current assets: Cash and cash equivalents $ 856,390 $ 45,772 $ 902,162 Investments 605,570 - 605,570 Accounts receivable(net of allowance) 696,928 - 696,928 Inventories - 98,775 98,775 Other assets 2,646 - 2,646 Restricted cash and investments 128,490 - 128,490 Total current assets 2,290,024 144,547 2,434,571 Noncurrent assets Capital assets: Construction in progress - - - Buildings and improvements 12,921,283 - 12,921,283 Wastewater treatment rights 635,199 - 635,199 Machinery and equipment 3,459,821 - 3,459,821 Less: accumulated depreciation ( 4,323,584) - ( 4,323,584) Total capital assets 12,692,719 - 12,692,719 Total noncurrent assets 12,692,719 - 12,692,719 Total assets 14,982,743 144,547 15,127,290 LIABILITIES Current liablities: Accounts payable 141,705 3,398 145,103 Customer deposits payable 128,490 - 128,490 Accrued interest payable 3,475,338 - 3,475,338 Due to other funds 267,577 - 267,577 Deferred revenue 411,859 - 411,859 Compensated absences 980 - 980 Contractual obligations 78,508 - 78,508 Total current liabilities 4,504,457 3,398 4,507,855 Long-term liabilities: Compensated absences 8,824 - 8,824 Contractual obligations 5,580,380 - 5,580,380 Total long-term liabilities 5,589,204 - 5,589,204 Total liabilities 10,093,661 3,398 10,097,059 NET ASSETS Invested in capital assets,net of related debt 7,033,831 - 7,033,831 Unrestricted ( 2,144,749) 141,149 ( 2,003,600) Total net assets $ 4,889,082 $ 141,149 $ 5,030,231 The accompanying notes are an integral part of these financial statements. 25 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Business-type Activities-Enterprise Funds Utility Cemetery Fund Fund Total OPERATING REVENUES: Charges for services $ 2,101,510 $ 5,550 $ 2,107,060 Contributions 46,810 - 46,810 Miscellaneous revenue 60,070 - 60,070 Total operating revenue 2,208,390 5,550 2,213,940 OPERATING EXPENSES: Payroll costs 241,319 - 241,319 Professional and contract services 64,258 27,226 91,484 Depreciation 426,172 - 426,172 Amortization of wastewater treatment rights 31,760 - 31,760 Water purchases 745,890 - 745,890 Cost of cemetary lots sold - 596 596 Other operating costs 483,416 - 483,416 Total operating expenses 1,992,815 27,822 2,020,637 OPERATING INCOME 215,575 ( 22,272) 193,303 NON-OPERATING REVENUES(EXPENSES): Interest income 8,269 65 8,334 Interest expense ( 574,860) - ( 574,860) Total non-operating revenues(expenses) ( 566,591) 65.00 ( 566,526) CHANGE IN NET ASSETS ( 351,016) ( 22,207) ( 373,223) TOTAL NET ASSETS,BEGINNING 5,240,098 163,356 5,403,454 TOTAL NET ASSETS,ENDING $ 4,889,082 $ 141,149 $ 5,030,231 The accompanying notes are an integral part of these financial statements. 26 TOWN OF WESTLAKE,TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Business-type Activities-Enterprise Funds Utility Cemetery Total Fund Fund Current Year CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 2,070,309 $ 5,550 $ 2,075,859 Cash payments to employees/retirees ( 231,515) - ( 231,515) Cash payments for goods and services ( 1,253,840) ( 23,869) ( 1,277,709) Net cash provided by operating activities 584,954 ( 18,319) 566,635 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Advances to other funds ( 71,602) - ( 71,602) Net cash provided by noncapital financing activities ( 71,602) - ( 71,602) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on debt ( 75,303) - ( 75,303) Interest paid on debt ( 108,674) - ( 108,674) Purchase of property and equipment ( 67,428) - ( 67,428) Net cash used by capital and related financing activities ( 251,405) - ( 251,405) CASH FLOWS FROM INVESTING ACTIVITIES Investment earnings 8,269 65 8,334 NET INCREASE IN CASH AND CASH EQUIVALENTS 270,216 ( 18,254) 251,962 CASH AND CASH EQUIVALENTS,BEGINNING 1,320,234 64,026 1,384,260 CASH AND CASH EQUIVALENTS,ENDING $ 1,590,450 $ 45,772 $ 1,636,222 RECONCILIATION OF TOTAL CASH AND CASH EQUIVALENTS Cash and cash equivalents $ 856,390 $ 45,772 $ 902,162 Restricted cash and cash equivalents 128,490 - 128,490 Investments 605,570 - 605,570 Total cash and cash equivalents $ 1,590,450 $ 45,772 $ 1,636,222 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 215,575 $( 22,272) $ 193,303 Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation and amortization 457,932 - 457,932 Changes in operating assets and liabilities: Receivables (114,838) - (114,838) Other assets (2,646) 596 (2,050) Accounts payable 42,370 3,357 45,727 Compensated absences 9,804 - 9,804 Customer deposits payable 2,950 - 2,950 Deferred revenue ( 26,193) - ( 26,193) Net cash provided by operating activities $ 584,954 $( 18,319) $ 566,635 The accompanying notes are an integral part of these financial statements. 27 TOWN OF WESTLAKE, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS SEPTEMBER 30,2010 Texas Student Texas Student Texas Student Housing Housing Housing Authority- Corporation- Authority- Ballpark Austin The Ridge at Town Lake Project North Texas Austin Project ASSETS Cash and cash equivalents $ 508,265 $ 502,795 $ 285,397 Accounts receivables(net of allowance) 42,697 37,248 40,411 Other assets 11,044 29,177 20,562 Restricted assets: Cash and cash equivalents 607,739 2,176,988 359,716 Capital assets: Land 4,788,265 2,200,000 2,182,816 Buildings and improvement 21,345,305 25,705,000 16,963,841 Machinery and equipment 6,993,063 1,253,841 1,211,085 Less: accumulated depreciation ( 9,977,273) ( 9,213,094) ( 4,874,235) Intangible assets: Debt issue costs,net of amortization 2,506,193 707,189 742,276 Total assets 26,825,298 23,399,144 16,931,869 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses 368,975 214,690 170,003 Unearned revenue 271,569 396,746 181,556 Accrued interest payable 5,839,532 3,130,868 807,410 Noncurrent liabilities: Due within one year 825,000 28,872,706 260,159 Due in more than one year 34,868,178 - 20,885,086 Total liabilities 42,173,254 32,615,010 22,304,214 NET ASSETS Invested in capital assets,net of related debt ( 11,083,818) ( 8,926,959) ( 5,661,738) Restricted - - - Unrestricted ( 4,264,138) ( 288,907) 289,393 Total net assets $( 15,347,956) $( 9,215,866) $( 5,372,345) The accompanying notes are an integral part of these financial statements. 28 Texas Student Housing Authority- Texas Student College Station Housing Project Authority Total $ 3,256,674 $ 529,092 $ 5,082,223 462,105 17,868 600,329 24,612 12,724 98,119 1,870,127 - 5,014,570 2,899,597 - 12,070,678 27,727,646 - 91,741,792 2,594,804 - 12,052,793 ( 7,775,075) - ( 31,839,677) - - 3,955,658 31,060,490 559,684 98,776,485 140,313 2,484 896,465 2,244,087 31,750 3,125,708 4,677,454 - 14,455,264 31,450,000 - 61,407,865 - - 55,753,264 38,511,854 34,234 135,638,566 ( 6,003,028) - ( 31,675,543) ( 1,448,336) 525,450 ( 5,186,538) $( 7,451,364) $ 525,450 $( 36,862,081) 29 TOWN OF WESTLAKE, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Business-type activities: Texas Student Housing Authority $ 837,876 $ 890,851 $ - $ - Texas Student Housing Authority: College Station Project 7,016,433 5,200,895 - - Ballpark Austin Project 5,573,909 3,614,113 - - Town Lake Austin Project 3,891,920 2,810,752 - - Texas Student Housing Corporation: The Ridge at North Texas 4,891,708 3,683,377 - - Total business-type activities 22,211,846 16,199,988 - - Total primary government $ 22,211,846 $ 16,199,988 $ - $ - General revenues: Interest income Miscellaneous Total general revenues and transfers Change in net assets Net assets,beginning Prior Period Adjustment Net assets,ending The accompanying notes are an integral part of these financial statements. 30 Net(Expense)Revenue and Changes in Net Assets Primary Government Governmental Business-type Activities Activities Total $ - $ 52,975 $ 52,975 ( 1,815,538) ( 1,815,538) ( 1,959,796) ( 1,959,796) ( 1,081,168) ( 1,081,168) ( 1,208,331) ( 1,208,331) ( 6,011,858) ( 6,011,858) ( 6,011,858) ( 6,011,858) 40,716 40,716 3,636 3,636 44,352 44,352 ( 5,967,506) ( 5,967,506) ( 34,505,288) ( 34,505,288) 3,610,713 3,610,713 36,862,081) $( 36,862,081) 31 TOWN OF WESTLAKE, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2010 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Westlake, Texas (the "Town") was incorporated under the provisions of the laws of the State of Texas on December 26, 1956. The Town operates under a Board- Manager form of government and provides the following services as authorized by the laws of the State of Texas: public safety; cultural and recreation; and economic development. A. Reporting Entity The accompanying financial statements comply with the provisions of the GASB statements No. 14 and 39. "The Financial Reporting Entity," in that the Town's basic financial statements include the accounts of the Town's financial reporting entity, including the primary government, organizations for which the Town is financially accountable and other organizations for which the nature and significance of their relationship with the Town are such that inclusion would cause the Town's financial statement to be misleading or incomplete. The criteria for including organizations as component units within the Town's reporting entity, includes whether: ■ The organization is legally separate (can sue and be sued in their own name); ■ The Town holds the corporate powers of the organization; ■ The Town appoints a voting majority of the organization's board; ■ The Town is able to impose its will on the organization; ■ The organization has the potential to impose a financial benefit/burden on the Town; and ■ There is fiscal dependency by the organization on the Town. Component units are blended with the balances and transactions of the Town if one of the following criterion are met: ■ The component unit is substantially the same governing body as the Town; or ■ The component unit provides services entirely (or almost entirely) to the Town or benefits the Town exclusively (or almost exclusively) ; or ■ The Town is able to impose its will on the component unit. (continued) 32 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reporting Entity (Continued) Based on the aforementioned criteria, the Town has the following component units: Lone Star Public Facilities Corporation, 4B Economic Development Corporation, Westlake Academy, Texas Student Housing Authority, Texas Student Housing Authority Ballpark Austin Project; Texas Student Housing Authority Town Lake Austin Project, Texas Student Housing Authority College Station Project and Texas Student Housing Corporation - The Ridge at North Texas. B. Component Units Discretely Presented The Texas Student Housing Authority, Texas Student Housing Ballpark Austin Project, Texas Student Housing Town Lake Austin Project, Texas Student Housing College Station Project, and Texas Student Housing Corporation — The Ridge at North Texas Project (collectively, "Texas Student Housing') are Texas nonprofit organizations as a duly constituted authority of the Town pursuant to Section 53.35(b) of the Texas Education Code, as amended (Act). Texas Student Housing's primary purpose is to construct, own, and operate student housing facilities on college campuses in Texas. The board consists of seven directors which are appointed by the Town's governing body and has the ability to remove at will the appointed members, thus the governing body can impose its will on the organizations. Housing entities are reported as Enterprise Funds. The Town is not responsible for the long-term debt of the Texas Student Housing entities. All Texas Student Housing entities have separately issued financial statements. These statements can be obtained by contacting the Texas Student Housing Authority, 3 Village Circle, Suite 207, Westlake, Texas 76262. The financial statements are formatted to allow the user to clearly distinguish between the primary government and the discretely presented component units. Blended Lone Star Public Facilities Corporation is a Texas nonprofit corporation that acts on behalf of the Town to further the public purposes under the Public Facilities Corporation Act, as it's duly constituted authority and instrumentality. The board of directors, appointed by the Town's governing body, is comprised of seven members, of whom five must be members of the Town's governing body. Since a voting majority of the board of directors is on the Town's governing body, the Town can impose its will on the entity. (continued) 33 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Component Units (Continued) Blended (Continued) 4B Economic Development Corporation is a Texas nonprofit industrial corporation under the Development Corporation Act of 1979 formed to promote economic development within the Town and the State of Texas in order to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by developing, implementing, financing, and providing one or more projects defined and permitted under Section 4B of the Act. The board of directors is composed of seven persons appointed by the members of the Town's governing board. Four of the members of the board of directors are members of the Town's governing board. Since a voting majority of the board of directors is on the Town's governing body, the Town can impose its will on the entity. Westlake Academy ("Academy') is an open-enrollment charter school, as provided by Subchapter D, Chapter 12, of the Texas Education Code. The Town of Westlake ("Charter Holder") applied for and became the first municipality in Texas to ever receive this special charter designation. The board consists of six trustees and is appointed by the Town's governing body. Currently, all the members of the board of trustees are members of the Town's governing body. Since a voting majority of the board of directors is on the Town's governing body, the Town can impose its will on the entity. The Academy's year-end is August 31. C. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the non-fiduciary activities of the Town. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual Governmental Funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements. (continued) 34 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town. The Town uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental Funds are those through which most governmental functions of the Town are financed. The acquisition, use, and balances of the Town's expendable financial resources and the related liabilities (except those accounted for in the proprietary fund type) are accounted for through governmental funds. The measurement focus is upon determination of changes in financial position, rather than upon income determination. The Town reports the following major governmental funds: General Fund—to account for all financial resources except those required to be accounted for in another fund. The General Fund balance is available for any purpose, provided it is expended or transferred in accordance with the legally adopted budget of the Town. Special Revenue Funds—to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. Visitors Association Fund — to account for municipal hotel occupancy taxes collected and expenditures to promote tourism and the convention and hotel industry. (continued) 35 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus,Basis of Accounting,and Financial Statement Presentation(Continued) Property Tax Reduction Fund — to account for activity relating to the Property Tax Reduction Fund. Westlake Academy Fund — to account for all financial resources of the Academy. FM 1938 Fund—to account for activity relating to the FM 193 8 Fund. Vehicle and Equipment Replacement Fund — to account for activity relating to the Vehicle and Equipment Replacement Fund. Lone Star Public Facilities Corporation —to account for activity relating to the Lone Star Public Facilities Corporation. 4B Economic Development Corporation —to account for activity relating to 4B Economic Development Corporation. Economic Development Fund — to account for activity relating to the Economic Development Fund. Debt Service Fund — to account for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds in a Debt Service Fund. Capital Proiects Fund —to account for proceeds from long-term financing and revenue and expenditures related to authorized construction and other capital asset acquisitions. Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Town's Enterprise Fund are charges to customers for sales and services. Operating expenses for the Enterprise Fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. The Town reports the following major proprietary fund: Utility Fund — to account for revenues and expenses related to providing water and sewer services to the general public on a continuing basis. Cemetery Fund—to account for the operations of the Town's cemetery. (continued) 36 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus,Basis of Accounting,and Financial Statement Presentation(Continued) Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both 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 Town has elected not to follow subsequent private-sector guidance. As a general rule, the effect of interfand activity has been eliminated from the government- wide financial statements. Exceptions to this general rule are charges between the Town's water and wastewater function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. Amounts reported as program revenues include: 1) charges to customer or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenue. Likewise, general revenue includes all taxes. E. Assets, Liabilities, and Net Assets or Equity Cash and Cash Equivalents Cash and investments of all funds, including restricted cash, are available upon demand and are considered to be "cash equivalents." For purposes of the statement of cash flows, the Town considers highly-liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents. State statues authorize the Town to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas or the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than "A" or its equivalent; (5) certificates of deposit by state or national banks domiciled in this state that are (a) guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or, (b) secured by obligations that are described by (1) — (4); or (6) fully collateralized direct repurchase agreements having a defined termination date, secured by obligations described by (1) pledged with third-party selected or approved by the Town, and placed through a primary government securities dealer. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. (continued) 37 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets,Liabilities, and Net Assets or Equity(Continued) Interfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as "due from other funds" or "due to other funds" on the balance sheet. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Inventories Inventories, which are expended as they are consumed, are stated at the lower of cost or market on a first-in, first-out basis. Fund Changes and Transactions Between Funds Legally authorized transfers are treated as operating transfers and are included in the results of operations of both governmental and proprietary funds. The Town allocates an indirect cost percentage of the salaries, wages and related costs of personnel who perform administrative services as well as other indirect costs necessary for the operation of various funds. Expenses are budgeted and paid from the appropriate fund. Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. The cost of nominal maintenance and repairs that do not add value to the asset or materially extend assets' lives are not capitalized. Donated assets are valued at their fair market value on the date donated. Assets capitalized have an original cost of $5,000 or more and over three years of life. All infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), regardless of the acquisition date or amount, have been included. Estimated historical cost for initial reporting of infrastructure assets (those reported by governmental activities) was valued by estimating the current replacement cost of the infrastructure and using an index to deflate the cost to the estimated acquisition/construction year. As the Town constructs or acquires additional capital assets, including infrastructure assets, they are capitalized and reported at historical cost. (continued) 38 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets,Liabilities, and Net Assets or Equity (Continued) Capital Assets (Continued) Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Assets Years Water and sewer system 10-50 Buildings 20-50 Machinery and equipment 3-30 Improvements 5-30 Information systems and software 3 Compensated Absences The Town's policy allows employees to earn 5 days of vacation and 5 days of sick leave between six months and one year of service, and 10 days of vacation and 10 days of sick leave between one year and two years of service. After completion of 5 years of service, 15 days of vacation and 15 days of sick leave per year are earned. After completion of 10 years of service, 20 days of vacation and 20 days of sick leave per year are earned. The Town makes sick and vacation time available in full at the beginning of each year, and hours are actually earned throughout the year. Unused, earned vacation hours are paid upon termination or retirement at the employee's normal hourly rate; accumulated, unused sick time is not payable upon termination or retirement. Long-term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs, even if withheld from the actual proceeds, are reported as expenditures. Reserved and Designated Fund Equity Reserved fund balances are not appropriable for expenditure or are legally segregated for a specific future use. Designated fund balances are established to indicate tentative plans for financial resources utilization in a future period. (continued) 39 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvement of those assets, adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed on there use either through enabling legislations adopted by the Town or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Assets The governmental fund balance sheet includes a reconciliation between fund balance — total governmental funds and net assets—governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains, "Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds." The details of this $19,889,118 difference are as follows: Certificates of obligation bonds $ 20,362,224 Deferred charges for issuance costs(to be amortized over life of debt) (943,973) Compensated absences 63,125 Accrued interest payable 407,742 Net adjustment to reduce fund balance-total governmental funds to arrive at net assets- governmental activities $ 19,889,118 (continued) 40 II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) Explanation of Certain Differences Between the Governmental Fund Statement of Revenue, Expenditures and Chances in Fund Balances and the Government-wide Statement of Activities The governmental fund statement of revenues, expenditures and changes in fund balances includes a reconciliation between net changes in fund balances — total governmental fund and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains, "Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $146,222 difference are as follows: Capital contributions $ 83,250 Capital outlay($52,411 reclassified to expense repairs) 629,692 Depreciation expense (859,164) Net adjustment to decrease net changes in fund balances- total governmental funds to arrive at changes in net assets of governmental activities $ (146,222) Another element of that reconciliation states, "The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Details of this $595,737 difference are as follows: Principal repayments: General obligation debt $ 525,000 Capital lease 46,559 Deferred rebates 24,178 Net adjustment to increase net changes in fund balances- total governmental funds to arrive at changes in net assets ofgovernmental activities $ 595,737 (continued) 41 II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) Explanation of Certain Differences Between the Governmental Fund Statement of Revenue, Expenditures and Changes in Fund Balances and the Government-wide Statement of Activities (Continued) Another element of that reconciliation states, "Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this $111,168 difference are as follows: Municipal court fines $ (820) Accrued interest (11,856) Compensated absences 63,125 Amortization of deferred charge on refunding 44,336 Amortization of issuance costs 16,383 Net adjustment to decrease net changes in fund balances- total governmental funds to arrive at changes in net assets of governmental activities $ 111,168 III. DETAILED NOTES ON ALL FUNDS Deposits and Investments Legal provisions generally permit the Town to invest in certificates of deposit, repurchase agreements, public funds investment pools, direct obligations of the United States of America or its subdivisions and state and local government securities. The Town did not engage in repurchase or reverse repurchase agreement transactions during the current year. During the year ended September 30, 2010, the Town had investments with TexPool. TexPool, a public funds investment pool created by the Treasurer of the State of Texas acting by and through the Texas Treasury Safekeeping Trust Company, which is empowered to invest funds and acts as custodian of investments purchased with local investment funds. These investments are not required to be categorized because the investor is not issued securities, but rather it owns an undivided beneficial interest in the assets of the respective funds. The fair value of the position in TexPool is the same as the value of the pool shares. On September 1, 1989, local government investment pools became authorized investments for the majority of public entities in Texas. The Interlocal Cooperation Act was amended by the 71" Texas Legislature to facilitate the creation of local government investment pools in Texas. This act permits the creation of investment pools to which a majority of political subdivisions (local governments) may delegate, by contract, the authority to make investments purchased with local investment funds and to hold legal title as custodian of the investments. TexPool was organized to conform with the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the Public Funds Investment Act, Chapter 2256 of the Texas Government Code. (continued) 42 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) 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. Among other things, it requires the Town to adopt, implement, and publicize its investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar — weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. Statutes and the Town's investment policy authorized the Town to invest in the following investments as summarized in the table below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio in One Issuer Obligations of, or guaranteed by Governmental entities 2 years None None Certificates of deposit 1 year None None Mutual funds 2 years 80% None Investment pools - None None At September 30, 2010, the Town's investments included investment pools in the name of the Town or its agent in the Town's name. The Town's investments were as follows: Minimum Rating Carrying Fair Legal as of Primary government Amount Value Rating Year-end Investments: TexPool $ 27,806 $ 27,806 N/A AAA-m Certificates of deposit 3,461,237 3,461,237 N/A AAA-A Cash 5,258,095 5,258,095 N/A N/A Total cash and investments $ 8,747,138 $ 8,747,138 Reconciliation of total cash and investments at September 30, 2010, are as follows: Cash and cash equivalents $ 8,403,898 Restricted cash and investments 343,240 Total cash and investments $ 8,747,138 (continued) 43 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) The Town's entire cash deposits in the bank of$5,651,201 on September 30, 2010, were covered by federal depository insurance or by collateral. Carrying Weighted Average Component units Amount Fair Value Maturity(Days) Investments: Cash and cash equivalents $ 5,082,223 $ 5,082,223 N/A Total $ 5,082,223 $ 5,082,223 Interest Rate Risk. This is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. In order to limit interest and market rate risk from changes in interest rates, the Town's investment policy sets a maximum stated maturity limit of two years for obligations of the United States Government, its agencies and instrumentalities (excluding mortgage backed securities) and one year for fully insured or collateralized certificates of deposit. No more than 80% of the Town's monthly average balance may be invested in money market funds. Additionally, the Town invests in an investment pool that purchases a combination of shorter term investments with an average maturity of less than 29 days thus reducing the interest rate risk. Information about the sensitivity of the fair values of the Town's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Town's Investments. The Town has negotiated an interest rate for all checking account deposits; therefore, cash is considered in the balance of our investments. Credit Risk. This 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. Presented above is the minimum rating required by (where applicable) the Public Funds Investment Act, the Town's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. (continued) 44 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets Capital asset activity for the year ended September 30, 2010, was as follows: Primary Government Beginning Prior Period Ending Balance Increases Decreases Adjustment Balance Governmental activities: Capital assets,not being depreciated: Land $ 11,530,663 $ $ $ $ 11,530,663 Construction in progress 135,270 87,217 147,566 74,921 Total assets not being depreciated 11,665,933 87,217 147,566 11,605,584 Capital assets,being depreciated: Capital improvements 4,342,188 578,418 - 4,920,606 Buildings 21,213,443 47,040 21,260,483 Machinery and equipment 2,201,243 147,833 2,349,076 Information systems and software 52,430 52,430 Total capital assets being depreciated 27,809,304 773,291 28,582,595 Less accumulated depreciation: Capital improvements 2,502,284 184,892 2,687,176 Buildings 2,348,631 425,352 2,773,983 Machinery and equipment 1,373,934 248,920 1,622,854 Information systems and software 52,430 52,430 Total accumulated depreciation 6,277,279 859,164 7,136,443 Total capital assets being depreciated,net 21,532,025 ( 85,873) 21,446,152 Governmental activities capital assets,net $ 33,197,958 $ 1,344 $ 147,566 $ $ 33,051,736 Business-type activities: Capital assets,not being depreciated: Construction in progress $ - $ $ - $ $ - Total assets not being depreciated - - Capital assets,being depreciated: Capital improvements 12,853,855 67,428 12,921,283 Wastewater treatment rights 635,199 - 635,199 Machinery and equipment 3,459,821 - 3,459,821 Total capital assets being depreciated 16,948,875 67,428 17,016,303 Less accumulated depreciation: Capital improvements 2,539,932 301,179 2,841,111 Wastewater treatment rights 291,133 31,760 322,893 Machinery and equipment 1,034,587 124,993 1,159,580 Total accumulated depreciation 3,865,652 457,932 4,323,584 Total capital assets being depreciated,net 13,083,223 ( 390,504) 12,692,719 Business-type activities capital assets,net $ 13,083,223 $( 390,504) $ $ $ 12,692,719 (continued) 45 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Depreciation was charged to departments of the primary government as follows: Governmental activities: General government $ 619,668 Public safety 52,383 Public works 187,113 Total depreciation expense -governmental activities $ 859,164 A summary of discretely presented component units' capital assets at September 30,2010, follows: Texas Student Housing Authority-Ballpark Austin Project Beginning Ending Balance Additions Deletions Balance Capital assets,not being depreciated: Land $ 4,788,265 $ - $ - $ 4,788,265 Total capital assets, not being depreciated 4,788,265 - - 4,788,265 Capital assets,being depreciated: Building 21,345,305 - - 21,345,305 Furniture and fixtures 6,993,063 - - 6,993,063 Total capital assets, being depreciated 28,338,368 - - 28,338,368 Less accumulated depreciation for: Building 5,454,911 711,510 - 6,166,421 Furniture and fixtures 3,661,686 149,166 - 3,810,852 Total accumulated depreciation 9,116,597 860,676 - 9,977,273 Total capital assets, being depreciated, net 19,221,771 ( 860,676) - 18,361,095 Capital assets,net $ 24,010,036 $( 860,676) $ - $ 23,149,360 (continued) 46 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Corporation -The Ridge at North Texas Beginning Ending Balance Additions Deletions Balance Capital assets,not being depreciated: Land $ 2,200,000 $ - $ - $ 2,200,000 Total capital assets, not being depreciated 2,200,000 - - 2,200,000 Capital assets,being depreciated: Building 25,705,000 - - 25,705,000 Furniture and fixtures 1,253,841 - - 1,253,841 Total capital assets, being depreciated 26,958,841 - - 26,958,841 Less accumulated depreciation for: Building 5,987,874 856,833 - 6,844,707 Furniture and fixtures 2,355,184 13,203 - 2,368,387 Total accumulated depreciation 8,343,058 870,036 - 9,213,094 Total capital assets, being depreciated,net 18,615,783 ( 870,036) - 17,745,747 Capital assets,net $ 20,815,783 $( 870,036) $ - $ 19,945,747 (continued) 47 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Authority-Town Lake Austin Project 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: Building and improvements 3,000,279 604,098 - 3,604,377 Capitalized purchase costs 175,248 28,484 - 203,732 Land improvements 374,212 - - 374,212 Unit appliances 168,648 - - 168,648 Furniture and fixtures 523,266 - - 523,266 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 (continued) 48 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Authority - College Station Project Beginning Ending Balance Additions Retirements Balance Capital assets,not being depreciated: Land $ 2,899,597 $ - $ - $ 2,899,597 Total capital assets, not being depreciated 2,899,597 - - 2,899,597 Capital assets,being depreciated: Building 27,727,646 - - 27,727,646 Furniture and fixtures 2,594,804 - - 2,594,804 Total capital assets, being depreciated 30,322,450 - - 30,322,450 Less accumulated depreciation for: Building 4,372,287 896,177 - 5,268,464 Furniture and fixtures 2,384,687 121,924 - 2,506,611 Total accumulated depreciation 6,756,974 1,018,101 - 7,775,075 Total capital assets, being depreciated,net 23,565,476 ( 1,018,101) - 22,547,375 Capital assets,net $ 26,465,073 $( 1,018,101) $ - $ 25,446,972 Restricted Cash General Fund Within the governmental funds, $214,750 in cash and cash equivalents represents funds held to assist in the financing of future projects and court security and technology. Proprietary Fund Within the proprietary funds, $128,490 of the fund represents customer deposits received for water and sewer usage that are refundable upon termination of service. Discretely Presented Component Units Within the discretely presented component units, $5,014,570 in cash and cash equivalents represents funds held for debt service. (continued) 49 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Leases The Town entered into a lease agreement as lessee for financing the acquisition of a vehicle for the warrant division of the municipal court. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of their future minimum lease payments as of the inception date. Governmental Activities Asset: Machinery and equipment $ 23,000 Less: Accumulated depreciation (18,400) Total $ 4,600 Westlake Academy entered into lease agreement as a lessee for financing the acquisition of computers for student use. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of their future minimum lease payments as of the inception date. The computers were not capitalized because the value of each one was less than$5,000. During the year ended September 30, 2010, both Capital Leases above were paid in full. General Long-term Debt Long-term liability activity for the year ended September 30, 2010, was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Combination tax and limited Pledge Revenue Certificates of Obligation, Series 2002 $ 5,145,000 $ - $ 265,000 $ 4,880,000 $ 280,000 Combination tax and limited Pledge Revenue Certificates of Obligation, Series 2003 5,830,000 - 155,000 5,675,000 160,000 General Obligation Refunding Bonds, Series 2007 7,330,000 - 20,000 7,310,000 25,000 Less deferred amounts on refunding ( 641,016) - ( 44,336) ( 596,680) - General Obligation Bonds, Series 2008 2,405,000 - 85,000 2,320,000 90,000 Compensated absences - 78,514 15,389 63,125 6,313 Capital leases 46,559 - 46,559 - - Fidelity Tax Reimbursement 201,402 - 24,178 177,224 25,568 $ 20,316,945 $ 78,514 $ 566,790 $ 19,828,669 $ 586,881 (continued) 50 III. DETAILED NOTES ON ALL FUNDS (Continued) General Long-term Debt(Continued) Debt service requirements of certificates of obligation and general obligations to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2011 $ 555,000 $ 946,778 $ 1,501,778 2012 580,000 918,450 1,498,450 2013 610,000 888,528 1,498,528 2014 640,000 856,906 1,496,906 2015 675,000 823,442 1,498,442 2016-2020 3,885,000 3,619,276 7,504,276 2021-2025 4,950,000 2,550,839 7,500,839 2026-2030 5,820,000 1,310,943 7,130,943 2031-2033 2,470,000 166,218 2,636,218 Total $ 20,185,000 $ 12,081,380 $ 32,266,380 On August 10, 1998, the Town entered into an economic development agreement with Fidelity Texas Limited Partnership ("Fidelity") which provided that Fidelity will receive a rebate of one percent of local sales taxes collected by the Town and paid by Fidelity. The agreement provided that the rebate will be paid to Fidelity within 30 days of each calendar quarter from the sales taxes received by the Town. On November 13, 2000, the agreement was amended to allow for a payment schedule of 15 annual equal installments for sales tax rebate due and payable to Fidelity. The amount due will not bear interest. The loan is discounted to present value and amortized over the life of the loan using the effective interest method. Debt service requirements for deferred rebates to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2011 $ 25,568 $ 10,190 $ 35,758 2012 27,038 8,720 35,758 2013 28,593 7,165 35,758 2014 30,236 5,522 35,758 2015 31,975 3,783 35,758 2016-2016 33,814 1,944 35,758 Total $ 177,224 $ 37,324 $ 214,548 (continued) 51 III. DETAILED NOTES ON ALL FUNDS (Continued) General Long-term Debt(Continued) The Certificates of Obligation, Series 2002 and 2003 require the Town to provide certain updated financial information and operating data to certain information vendors annually, as permitted by SEC Rule 15c2-12 (the "Rule"). The issuer will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission(the "SEC"). During the fiscal year ended September 30, 2008, the Town issued General Obligation bonds of $2.5 million. These bonds were used for the construction of an Arts & Sciences Center that was completed during the current fiscal year. Proprietary Long-term Debt Elevated Water Storage Facility On October 9, 2000, the Town approved an interlocal agreement with the City of Keller, which provided for the joint construction, operation, maintenance and use of an elevated water storage facility and appurtenances. The Town recorded a contractual obligation of$1,466,000 based on the terms of the interlocal agreement, which requires 20 annual principal and interest payments to the City of Keller, with payments due each September 30 at interest rates ranging from 5.0% to 5.65%. Dove Road Water Line and West Pump Station In April 2000, the Town approved an agreement with the Hillwood Development Corporation ("Hillwood"). In the agreement, Hillwood agreed to bear all initial costs for the design, engineering and constructions of the Dove Road Water Line and the West Pump Station that will service the residents of the Town. The Town agreed to reimburse Hillwood for the cost of the project upon completion and the Town's acceptance of the project, which occurred in June 2001, solely from a $.25 charge per 1,000 gallons of usage. The Town further agreed to deposit debt service revenue of $.25 per 1,000 gallons of usage collected from Town residents to fund its repayment to Hillwood. Debt service revenue will be allocated between Hillwood service area and Town service area by 52% and 48%, respectively and deposited into two separate debt service funds that will result in debt service revenue to pay the respective share of the construction cost. The Town recorded a limited pledge contractual obligation of$4,679,944 for the project cost based upon the terms of the agreement, which requires 239 monthly principal and interest payments to Hillwood, at an interest rate of 6.75%. If the Town collects insufficient funds to pay current interest on the debt, the interest payment may be deferred. No portion of debt payments will be applied to the principal component, until all current and deferred interest is fully paid. The obligation of the Town to pay the purchase price and interest thereon is not a general obligation of the Town but is a limited recourse obligation payable solely from debt service revenue. (continued) 52 III. DETAILED NOTES ON ALL FUNDS (Continued) Proprietary Long-term Debt (Continued) Dove Road Water Line and West Pump Station (Continued) Proprietary long-term debt as of September 30, 2010, is as follows: Outstanding Outstanding Current Description 9/30/2009 Issued Retired 9/30/2010 Portion Contractual obligations: Elevated water storage $ 1,054,247 $ - $ 75,303 $ 978,944 $ 78,508 Limited pledge contractual obligation: Dove Road Water Line and West Pump Station 4,679,944 - - 4,679,944 - Compensated absences - 11,489 1685 9,804 980 $ 5,734,191 $ 11,489 $ 76,988 $ 5,668,692 $ 79,488 The schedule of future payments by the Town under these agreements is as follows: Year Ending Total September 30, Principal Interest Requirements 2011 $ 78,508 $ 605,796 $ 684,304 2012 81,712 642,329 724,041 2013 86,519 681,356 767,875 2014 91,325 723,034 814,359 2015 94,530 767,701 862,231 2016-2020 546,350 4,649,381 5,195,731 2021-2025 4,679,944 733,738 5,413,682 Total $ 5,658,888 $ 8,803,335 $ 14,462,223 Discretely Presented Long-term Debt Texas Student Housing Authority - College Station Project The Project's installment note payable is summarized as follows: Interest Lender/Security/Due Date Rate Balance Cambridge Student Housing Financing Company, L.P.; substantially all assets and assignment of rents; due November 1, 2039 8.00% $ 31,450,000 (continued) 53 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt (Continued) Texas Student Housing Authority-College Station Project(Continued) The Project's installment note is payable monthly with principal and interest payments of $231,545 until November 1, 2039. The following is a summary of long-term debt transactions of the Project for the year ended August 31, 2010: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year $ 31,775,000 $ - $ 325,000 $ 31,450,000 $ 31,450,000 The Project's original developer refinanced the installmept note through a secondary offering with Cambridge Student Housing Financing Company, L.P. The debt certificates were sold to private investors in the following classes: Class(Series) Offering Total A $ 16,900,000 B 4,350,000 C 4,820,000 D 5,380,000 Total $ 31,450,000 Each class has certain rights and privileges, as contained in the private placement memorandum. As a part of the offering, the Project entered into a trust agreement with J. P. Morgan Trust Company, N.A. (the "Trustee") for the purpose of determining that each class is paid in accordance with the private placement memorandum. At August 31, 2010, the Project was not in compliance with the fixed charge coverage ratio. Should the project default, the lender may accelerate the maturity of the unpaid portion of the principal payable under the installment sale agreement. However, the Authority does not anticipate this event will occur, since foreclosure by private interests would result in the loss of tax-exempt status for the Project. (continued) 54 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt(Continued) Texas Student Housing Authority - Town Lake Austin Project Amounts Due Beginning Within One Balance Increases Decreases Ending Balance 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 - Total $ 21,384,493 $ - $ 239,248 $ 21,145,245 $ 260,159 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 for the bonds range from 7.76% to 8.69% at present and principal and interest payments are made monthly. The future debt service requirements of the bonds are as follows: Year Ending 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 2031-2033 9,184,705 1,707,029 10,891,734 Totals $ 21,145,245 $ 27,579,229 $ 48,724,474 Texas Student Housing Authority -Ballpark Austin Project The long-term debt activity of the Ballpark Austin Project is as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Bonds: 2001A Bonds $ 30,760,000 $ - $ 610,000 $ 30,150,000 $ 640,000 2001B Bonds 2,365,000 - - 2,365,000 185,000 2001C Bonds 3,000,000 - - 3,000,000 - Less discounts ( 1,341,906) - ( 60,085) ( 1,281,821) - Total $ 34,783,094 $ - $ 549,915 $ 34,233,179 $ 825,000 (continued) 55 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt(Continued) Texas Student Housing Authority-Ballpark Austin Project(Continued) The bonds are payable solely from the revenues generated by the Project and secured by the revenues pledged and assigned under the terms of the trust indenture. Interest rates on the bonds range from 4.00% to 11.00% and are payable semi-annually. The debt service requirements of the bonds are as follows: Year Ending Governmental Activities August 31, Principal Interest Total 2011 $ 825,000 $ 2,280,294 $ 3,105,294 2012 715,000 2,247,194 2,962,194 2013 755,000 2,208,144 2,963,144 2014 795,000 2,166,875 2,961,875 2015 840,000 2,123,456 2,963,456 2016-2020 4,935,000 9,876,319 14,811,319 2021-2025 6,440,000 8,368,800 14,808,800 2026-2030 8,445,000 6,364,500 14,809,500 2031-2033 11,765,000 2,597,450 14,362,450 Totals $ 35,515,000 $ 38,233,032 $ 73,748,032 At August 31, 2006, the Project had not made interest payments on the Subordinate 2001C Bond Series since July 2003, and the Subordinate 2001C Bond is in default. In addition, the Project's fixed charges coverage ratio was not in compliance with the covenants of the indenture. These events do not constitute an event of default that accelerates the bonds. As a result,the maturities are presented under the original repayment terms. Texas Student Housing Corporation - The Ridge at North Texas The long-term debt activity of the Ridge at North Texas is as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Bonds: 2001A Bonds $ 26,955,000 $ - $ 575,000 $ 26,380,000 $ 26,380,000 2001B Bonds 3,240,000 - - 3,240,000 3,240,000 Less discounts ( 784,779) - ( 37,485) ( 747,294) ( 747,294) Total $ 29,410,221 $ - $ 537,515 $ 28,872,706 $ 28,872,706 (continued) 56 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt(Continued) Texas Student Housing Corporation -The Ridge at North Texas (Continued) The debt originally was to be amortized through 2031 with varying monthly principal payment amounts ranging from $2,618,093 to $3,465,280 for interest and principal. The annual requirements to amortize all debts outstanding as of August 31, 2010, are as follows and have not been adjusted for the default of the bonds. Under the original terms of the Indenture, a total of $575,000 in principal and $2,047,593 in interest is due in fiscal 2010. The total interest to be paid will depend on the ultimate maturities of the bonds. Year Ending August 31, Principal Interest Total 2011 $ 29,620,000 $ 27,532,225 $ 57,152,225 The Town of Westlake does not have any liability for the payment of debt of the discretely presented component units as the bonds are non-recourse to both the Town and Texas Student Housing Authority. Deferred Revenue Deferred revenue in the proprietary fund of $411,859 relates to the collection of the entire amount due on six Ductbank leases as follows: One 25-year lease with AT&T local network services and five 20, 25 and 30-year leases with Verizon Southwest for use of the Town's Ductbank. Commitments and Contingencies Lease Obligations The Town has commitments relative to municipal services, and contractual relationships concerning certain utilities and public safety resources, which are normal in its ongoing activity. Noncancellable obligations consist of agreements for services at September 30, 2010. Minimum lease payments and contractual obligations under these noncancellable leases and agreements as of September 30, 2010, are as follows: Year Ending September 30, Amount 2011 $ 151,040 2012 1,238 Total $ 152,278 Rental expenditures in 2010 were $223,033. (continued) 57 III. DETAILED NOTES ON ALL FUNDS (Continued) Commitments and Contingencies (Continued) Interlocal Agreement with the City of Southlake In August 1995, the Town entered into an agreement with the City of Southlake to allow the Town to utilize capacity in a sewer line and to set forth their respective rights and obligations with respect to the sewer line owned by the City of Southlake. The Town is obligated to share in the cost of construction, operation and maintenance of the water sewer line. The sewer line was constructed in 2000. Additionally, the Town must pay the City of Southlake all transportation, treatment and related costs allocable to the metered flow of sewage from the Town into the sewer line. Federal and State Program Revenues The Town received financial assistance from various federal and state governmental agencies in the form of grants for Westlake Academy. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any unallowed disbursement resulting from such audits becomes a liability of the Town. In the opinion of the Town management, no material refunds will be required as a result of unallowed disbursements (if any) by the grantor agencies. Sources of federal and state program revenues for the year ended September 30, 2010, were as follows: Westlake Source Academy Total Federal program revenues: U. S.Department of Education-Passed through State Department of Education $ 199,436 $ 199,436 Total federal program revenues: $ 199,436 $ 199,436 State program revenues: State Department of Education $ 3,687,706 $ 3,687,706 (continued) 58 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions Interfund receivables and payables at September 30, 2010, were as follows: Due from Due to Other Funds Other Funds Property tax reduction fund: 4B Economic Development Corporation fund $ 341,026 $ - 4B Economic Development Corporation fund: Property Tax Reduction fund - 341,026 Utility fund 267,577 - Utility fund: 4B Economic Development Corporation fund - 267,577 $ 608,603 $ 608,603 The amount payable to the property tax reduction fund is related to payments made to the debt service fund on behalf of the 4B economic development fund, which will be repaid by the end of the 2010-2011 fiscal year. The amount payable to the 4B economic development fund from the utility fund is related to an interfund loan made for several waterlines and connections and is scheduled to be repaid at a rate of$29,731 per year through fiscal year 2018-2019. (continued) 59 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions (Continued) Interfund transfers between the primary government's funds consisted of: Transfers Transfers To Funds From Funds Primary Government General fund: Westlake Academy $ - $ 100,000 Economic Development fund 35,758 - Capital Projects fund 60,701 - Property Tax Reduction fund - 23,000 Vehicle and Equipment Replacement fund 5,000 - Debt Service fund: Visitors Association fund - 179,266 4B Economic Development Corporation fund - 948,096 Property Tax Reduction fund - 372,008 Visitors Association fund: Debt service fund 179,266 - Capital Projects fund 20,447 - FM 1938 fund: Property Tax Reduction fund - 1,256 Property Tax Reduction fund: General fund 23,000 - Debt Service fund 372,008 - FM 1938 fund 1,256 - Capital Projects fund 41,316 - Vehicle and Equipment Replacement fund 17,729 - Vehicle and Equipment Replacement fund: General fund - 5,000 Property Tax Reduction fund - 17,729 4B Economic Development Corporation fund: Debt Service fund 948,096 - Capital Projects fund: General fund - 60,701 Visitors Association fund - 20,447 Property Tax Reduction fund - 41,316 Economic Development fund: General fund - 35,758 Westlake Academy: General fund 100,000 - Totals $ 1,804,577 $ 1,804,577 Inter-fund transfers are reported in the governmental funds and proprietary fund financial statements. In the government-wide statements, inter-fund transfers are eliminated within the governmental activities column and business-type column, as appropriate. (continued) 60 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions (Continued) Transfers are used to (1) move revenues collected in the special revenue funds to finance various programs in accordance with budgetary authorizations, (2) move receipts restricted for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, (3) reimburse one fund for services provided to another fund and (4) move unrestricted general fund revenues either to build up the fund balance in the Vehicle and Equipment Replacement Fund for future expenditures or transfer payment for economic development agreement into newly created fund specifically for this purpose. The non-recurring transfer from Westlake Academy to the General Fund was to help offset indirect costs for the Academy provided by the Town during the year. Receivables Governmental Funds Enterprise Funds Property Tax Economic Westlake Visitors Westlake Reduction Development 4B Utility General Association Academy Fund Fund Corporation Fund Total Receivables: Sales tax $ 208,881 $ - $ $ 201,047 $ 193,213 $ 201,047 $ - $ 804,188 Other taxes - 79,765 - - - - 79,765 Franchise fees 149,254 - - - - 149,254 Accounts - - - - - 917,254 917,254 Other 31,913 3,980 246,139 1,047 - - 785 283,864 Gross receivables 390,048 83,745 246,139 202,094 193,213 201,047 918,039 2,234,325 Less:Allowance for uncollectibles - - - - - 221,111 221,111 Net total receivables $ 390,048 $ 83,745 $ 246,139 $ 202,094 $ 193,213 $ 201,047 $ 696,928 $ 2,013,214 Water Purchase and Wastewater Treatment Contracts The Town has a contract with the City of Fort Worth, Texas, to purchase water. Under the contract, the Town may obtain from the City of Fort Worth, a supply of potable water at a reasonable rate based on water usage. The rate charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2010 was $745,890. IV. OTHER INFORMATION Retirement Plan Plan Description The Town provides pension benefits for all of its eligible employees through a non-traditional, joint contributory, hybrid defined benefit plan in the statewide Texas Municipal Retirement System (TMRS), an agent multiple-employer public employee retirement system. The plan provisions that have been adopted by the Town are within the options available in the governing state statutes of TMRS. (continued) 61 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Plan Description (Continued) TMRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information (RSI) for TMRS; the report also provides detailed explanations of the contributions, benefits and actuarial methods and assumptions used by the System. This report may be obtained by writing to TMRS, P. O. Box 149153, Austin, Texas 78714-9153 or by calling 800-924-8677; in addition, the report is available on TMRS' website at www.TMRS.com. The plan provisions are adopted by the governing body of the Town, within the options available in the state statutes governing TMRS. Plan provisions for the Town were as follows: Plan Year 2009 Plan Year 2010 Employee deposit rate 7.0% 7.0% Matching ratio (town to employee) 2 to 1 2 to 1 Years required for vesting 5 5 Service retirement eligibility (expressed as age/years of service) 60/5, 0/20 60/5, 0/20 Updated service credit 100%repeating, 100%repeating, transfers transfers Annuity increase (to retirees) 0% of CPI 0% of CPI repeating repeating Contributions Under the state law governing TMRS, the contribution rate for each town is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for that city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. (continued) 62 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) The Town contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the Town make contributions monthly. Since the Town needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. The annual pension cost and net pension obligation/(asset) are as follows: Annual Required Contribution(ARC) $ 130,590 Interest on Net Pension Obligation - Adjustment to the ARC - Annual Pension Cost 130,590 Contributions Made ( 130,590) Increase(Decrease)in Net Pension Obligation - Net Pension Obligation/(Asset),beginning of year - Net Pension Obligation/(Asset),ending of year $ - Accounting Annual Actual Percentage Net Year Pension Contribution of APC Pension Ending Cost(APC) Made Contributed Obligation 09/30/08 $ 108,827 $ 108,827 100% $ - 09/30/09 138,554 138,554 100% - 09/30/10 130,590 130,590 100% The required contribution rates for fiscal year 2010 were determined as part of the December 31, 2007 and 2008 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2009, also follows: Valuation Date 12/31/07 12/31/08 12/31/09 Actuarial Cost Method Projected Unit Credit Projected Unit Credit Projected Unit Credit Amortization Method Level percent Level percent Level percent of payroll of payroll of payroll GASB 25 Equivalent Single 25 years; 24 years; 23 years; Amortization Period closed period closed period closed period Amortization Period for new 25 years 25 years 25 years Gains/Losses Asset Valuation Method Amortized Cost Amortized Cost 10-year Smoothed Market Actuarial Assumptions: Investment Rate of Return* 7% 7.5% 7.5% Projected Salary Increases* Varies by Varies by Varies by age and service age and service age and service *Includes Inflation at 3.0% 3.0% 3.0% Cost-of-Living Adjustments 0.0% 0.0% 0.0% (continued) 63 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) The funded status as of December 31, 2009, the most recent actuarial valuation date, is as follows: Actuarial Actuarial Actuarial Actuarial Annual Accrued Liability Valuation Value of Accrued Percentage Accrued Covered as a Percentage Date Assets Liability Funded Liability Payroll of Covered Payroll 12/31/2007 $ 792,775 $ 1,059,135 74.9% $ 266,360 $ 1,257,653 21.2% 12/31/2008 1,052,148 1,445,196 72.8% 393,048 1,536,837 25.6% 12/31/2009 1,337,183 1,810,429 73.9% 473,246 1,658,452 28.5% The schedule of funding progress presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. Other Postemployment Benefits Supplemental Death Benefits Fund The Town also participates in the cost sharing multiple-employer defined benefit group term life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The Town elected, by ordinance to provide group term life insurance coverage to both current and retired employees. The Town may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death); retired employees are insured for $7,500; this coverage is an"other postemployment benefit," or OPEB. The Town contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree term life insurance during employees' entire careers. (continued) 64 IV. OTHER INFORMATION (Continued) Other Postemployment Benefits (Continued) Supplemental Death Benefits Fund (Continued) The Town's contributions to the TMRS SDBF for the fiscal years ended 2010 and 2009 were $2,070 and $2,141, respectively, which equaled the required contributions each year. Fiscal year 2009 was the transition year for the implementation of GASB 45; therefore, two years of contributions are disclosed. Schedule of Contribution Rates Annual Actual Plan/ Required Contribution Percentage Calendar Contribution Made of ARC Year (Rate) (Rate) Contributed 2008 0.17% 0.17% 100% 2009 0.12% 0.12% 100% 2010 0.14% 0.14% 100% Risk Management The Town is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees, and natural disasters. The Town's general liability, workers' compensation liability, law enforcement liability, errors and omissions liability, and automobile liability coverage is insured by the Texas Municipal League, a public entity risk pool. The Town's only responsibility to the Texas Municipal League is to pay premiums for insurance and related deductible amounts of these policies. Other risk of loss is covered by commercial insurance. Settlements of claims have not exceeded coverage in the past three years. Contingent Liabilities Litigation The Town and Academy are currently involved in a lawsuit for wrongful termination brought by the former head of school and his wife, a former teacher. The Town and Academy deny liability. The lawsuit is being handled by the Academy's insurance carrier and no additional liability to the Academy is anticipated. The Town is also involved in a lawsuit to determine the rights of the Town to levy a property tax and its authority to expend collected tax revenues on school operations at the Academy. The Town denies any liability. No additional liability to the Town is anticipated. Various other claims and lawsuits are pending against the Town. In the opinion of Town management, after consultation with legal counsel, the potential loss on these claims and lawsuits will not materially effect the Town's financial position. (continued) 65 IV. OTHER INFORMATION (Continued) Contingent Liabilities (Continued) Circle T Municipal Utility Districts The Town has agreements in place with Municipal Utility District's (MUDS) #1 and #3 on the Circle T property in Westlake which is controlled by AIL Investments, L.P. As this property develops, AIL Investments, L.P. agreed to de-annex developed property from the MUDS in exchange for pro-rata payments on water and sewer infrastructure installed by the MUD at their inception. To date, two projects, Chrysler Financial and Deloitte University, have been or are being developed within these MUDS. Discussions regarding the Town's payment to AIL Investments, L.P. in exchange for de-annexation of these two tracks from the Circle T MUDS have taken place but have not come to a conclusion as to the settlement amounts. These discussions are ongoing until the Town receives full documentation that it determines is adequate to support the requested payments. The Town of Westlake holds full rights and privileges under the State granted Certificate of Convenience and Necessity (CCN) and can serve all water and sewer customers within these MUD boundaries regardless of the status of these negotiations. Westlake Academy Building Site In 2002, the Town purchased 24.59 acres for the site of Westlake Academy and executed a Promissory Note in the amount of$1,475,400 with a rate of 6% interest. The $1,475,400 was placed into escrow in July, 2002. In July, 2003 the Escrow Agent delivered total funds in the amount of$1,495,665 to the "Seller", leaving a balance of$68,259 at that date. The "Seller"has informed the Town that this amount plus accrued interest is now payable. The Town is in negotiations with the "Seller" and contends that it has satisfied the terms and the intent of the sales agreement. Subsequent Event In December 2010, the Town Council approved a list of capital improvements, which are to be funded by a combination of cash from the Property Tax Reduction Fund, available fund balance in the General Fund and issuance of new debt. The debt is expected to be issued in early 2011 and the capital improvements are expected to be completed over the next five years. 66 REQUIRED SUPPLEMENTARY INFORMATION TOWN OF WESTLAKE, TEXAS GENERAL FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 General Fund Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 1,452,600 $ 1,574,000 $ 1,597,194 $ 23,194 Mixed beverages 17,750 17,750 17,902 152 Franchise 646,675 609,500 603,233 ( 6,267) Federal program revenues 180 - - - Interest income 11,200 14,425 24,220 9,795 Building permits and fees 505,220 1,877,165 1,746,954 ( 130,211) Fines and penalties 547,460 578,860 647,170 68,310 Contributions from others - 1,200 90,249 89,049 Other miscellaneous income 106,756 96,394 105,345 8,951 Total revenues 3,287,841 4,769,294 4,832,267 62,973 EXPENDITURES Current General government and administration 1,584,933 1,600,083 1,644,587 ( 44,504) Public safety 1,869,429 1,865,364 1,634,936 230,428 Cultural and recreational 120,021 132,639 105,997 26,642 Public works 519,634 515,664 400,615 115,049 Economic development 488,327 - - - Capital Outlay 23,000 23,000 - 23,000 Total expenditures 4,605,344 4,136,750 3,786,135 350,615 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 1,317,503) 632,544 1,046,132 413,588 OTHER FINANCING SOURCES(USES) Transfers in 541,000 213,000 123,000 ( 90,000) Transfers out ( 8,050) ( 120,791) ( 101,459) 19,332 Total other financing sources(uses) 532,950 92,209 21,541 ( 70,668) NET CHANGE IN FUND BALANCE ( 784,553) 724,753 1,067,673 342,920 FUND BALANCE,BEGINNING 2,725,312 2,725,312 2,725,312 - FUND BALANCE,ENDING $ 1,940,759 $ 3,450,065 $ 3,792,985 $ 342,920 67 TOWN OF WESTLAKE,TEXAS VISITORS ASSOCIATION FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Hotel occupancy $ 450,000 $ 450,000 $ 457,693 $ 7,693 Interest income 3,700 1,700 2,183 483 Other miscellaneous income 23,275 28,275 16,102 ( 12,173) Total revenues 476,975 479,975 475,978 ( 3,997) EXPENDITURES Visitors services 424,696 507,336 420,270 87,066 Total expenditures 424,696 507,336 420,270 87,066 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 52,279 ( 27,361) 55,708 83,069 OTHER FINANCING SOURCES(USES) Transfers out (282,275) ( 279,275) ( 199,713) 79,562 Total other financing sources(uses) ( 282,275) ( 279,275) ( 199,713) 79,562 NET CHANGE IN FUND BALANCE ( 229,996) ( 306,636) ( 144,005) 162,631 FUND BALANCE,BEGINNING 1,244,946 1,244,946 1,244,946 - FUND BALANCE,ENDING $ 1,014,950 $ 938,310 $ 1,100,941 $ 162,631 68 TOWN OF WESTLAKE, TEXAS WESTLAKE ACADEMY SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED AUGUST 31,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES State program revenues $ 3,637,109 $ 3,665,938 $ 3,687,706 $ 21,768 Federal program revenues 119,976 198,416 199,436 1,020 Interest income 3,000 625 908 283 Other miscellaneous income 552,464 678,294 655,601 ( 22,693) Total revenues 4,312,549 4,543,273 4,543,651 378 EXPENDITURES Education 4,015,713 4,321,524 4,138,875 182,649 Debt Service Principal Retirement 38,703 38,703 38,703 - Interest 3,297 2,793 2,793 - Total expenditures 4,057,713 4,363,020 4,180,371 182,649 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 254,836 180,253 363,280 ( 183,027) OTHER FINANCING SOURCES(USES) Transfers out ( 100,000) ( 100,000) ( 100,000) - Total other financing sources(uses) ( 100,000) ( 100,000) ( 100,000) - NET CHANGE IN FUND BALANCE 154,836 80,253 263,280 183,027 FUND BALANCE,BEGINNING 504,653 504,653 504,653 - FUND BALANCE,ENDING $ 659,489 $ 584,906 $ 767,933 $ 183,027 69 TOWN OF WESTLAKE,TEXAS FM 1938 FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Contributions $ - $ - $ - $ - Total revenues - - - - EXPENDITURES Public Works - 1,264 1,264 - Total expenditures - 1,264 1,264 - EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES - ( 1,264) ( 1,264) - OTHER FINANCING SOURCES(USES) Transfers in - 1,256 1,256 - Total other financing sources(uses) - 1,256 1,256 - NET CHANGE IN FUND BALANCE - ( 8) ( 8) - FUND BALANCE,BEGINNING 8 8 8 - FUND BALANCE,ENDING $ 8 $ - $ - $ - 70 TOWN OF WESTLAKE,TEXAS PROPERTY TAX REDUCTION FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 726,300 $ 912,000 $ 947,633 $ 35,633 Interest income 1,000 5,800 9,393 3,593 Total revenues 727,300 917,800 957,026 39,226 EXPENDITURES General government - - - - Total expenditures - - - - EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 727,300 917,800 957,026 39,226 OTHER FINANCING SOURCES(USES) Transfers out ( 1,035,680) ( 635,511) ( 455,309) 180,202 Total other financing sources(uses) ( 1,035,680) ( 635,511) ( 455,309) 180,202 NET CHANGE IN FUND BALANCE ( 308,380) 282,289 501,717 219,428 FUND BALANCE,BEGINNING 1,068,034 1,068,034 1,068,034 - FUND BALANCE,ENDING $ 759,654 $ 1,350,323 $ 1,569,751 $ 219,428 71 TOWN OF WESTLAKE, TEXAS VEHICLE/EQUIPMENT REPLACEMENT FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Interest income $ - $ 50 $ 63 $ 13 Total revenues - 50 63 13 EXPENDITURES Capital Outlay 41,000 41,000 27,536 13,464 Total expenditures 41,000 41,000 27,536 13,464 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 41,000) ( 40,950) ( 27,473) 13,477 OTHER FINANCING SOURCES(USES) Transfers in 89,336 94,336 22,729 ( 71,607) Total other financing sources(uses) 89,336 94,336 22,729 ( 71,607) NET CHANGE IN FUND BALANCE 48,336 53,386 ( 4,744) ( 58,130) FUND BALANCE,BEGINNING 62,000 62,000 62,000 - FUND BALANCE,ENDING $ 110,336 $ 115,386 $ 57,256 $( 58,130) 72 TOWN OF WESTLAKE, TEXAS ECONOMIC DEVELOPMENT FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ - $ 250,000 $ 298,073 $ 48,073 Total revenues - 250,000 298,073 48,073 EXPENDITURES Economic Development - 285,758 333,831 ( 48,073) Total expenditures - 285,758 333,831 ( 48,073) EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES - ( 35,758) ( 35,758) - OTHER FINANCING SOURCES(USES) Transfers in - 35,758 35,758 - Total other financing sources(uses) - 35,758 35,758 - NET CHANGE IN FUND BALANCE - - - - FUND BALANCE,BEGINNING - - - - FUND BALANCE,ENDING $ - $ - $ - $ - 73 TOWN OF WESTLAKE,TEXAS LONE STAR PUBLIC FACILITY CORPORATION SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Interest income $ 100 $ 100 $ 29 $( 71) Total revenues 100 100 29 ( 71) EXPENDITURES General government - - - - Total expenditures - - - - NET CHANGE IN FUND BALANCE 100 100 29 ( 71) FUND BALANCE,BEGINNING 13,569 13,569 13,569 - FUND BALANCE,ENDING $ 13,669 $ 13,669 $ 13,598 $( 71) 74 TOWN OF WESTLAKE, TEXAS 4B ECONOMIC DEVELOPMENT CORPORATION SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 726,300 $ 912,000 $ 947,633 $ 35,633 Interest income 1,100 375 463 88 Total revenues 727,400 912,375 948,096 35,721 EXPENDITURES General government - - - - Total expenditures - - - - EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 727,400 912,375 948,096 35,721 OTHER FINANCING SOURCES(USES) Transfers out ( 757,131) ( 942,106) ( 948,096) ( 5,990) Total other financing sources(uses) ( 757,131) ( 942,106) ( 948,096) ( 5,990) NET CHANGE IN FUND BALANCE ( 29,731) ( 29,731) - 29,731 FUND BALANCE,BEGINNING 297,308 297,308 297,308 - FUND BALANCE,ENDING $ 267,577 $ 267,577 $ 297,308 $ 29,731 75 TOWN OF WESTLAKE,TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30,2010 (Unaudited) BUDGETARY INFORMATION - The Town follows these procedures annually in establishing the budgetary data reflected in the budgetary comparison schedules: 1. The Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following October 1. The budget includes proposed expenditures and the means of financing them. 2. Prior to October 1, the budget is legally adopted through passage of an ordinance. This budget is reported as the Original Budget in the budgetary comparison schedules. 3. During the fiscal year,changes to the adopted budget may be authorized, as follows: a) Items requiring Town Council action - appropriation of fund balance reserves; transfers of appropriations between funds; new inter-fund loans or advances; and creation of new capital projects or increases to existing capital projects. b) Items delegated to the Town Manager — appropriation balances from an expenditure account to another within a single fund 4. Annual budgets are legally adopted and amended as required for the general, special revenue and debt service funds. Project length budgets are adopted for the capital projects funds. All budgets are adopted on a basis consistent with generally accepting accounting principles. Budgets are adopted for the proprietary funds annually only as a management tool. There are no legally mandated budgetary constraints for the proprietary funds. 5. Budget amounts are reflected after all authorized amendments and revisions. This budget is reported as the Final Budget in the budgetary comparison schedules. 6. The appropriated budget is prepared by fund, function and department. The Town's management may make transfers of appropriations within a fund. Transfers of appropriations between funds require the approval of the Town Council. The legal level of budgetary control is the fund level. The Town Council made several supplementary budget appropriations during the year. 7. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting under which purchase orders, contracts and other commitments for the expenditure of resources are recoded to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Encumbrances lapse at year-end and do not constitute expenditures or liabilities because the commitments must be reappropriated and honored during the subsequent year. 8. Expenditures exceeded appropriations in the general government and administration function of the General Fund. The excess was covered by unspent budget in other functions and available fund balances. Expenditures exceeded appropriations in the Economic Development Fund for the year. The deficit was covered by additional collections of revenue. In addition, transfers out exceeded appropriations in the 4B Economic Development Corporation Fund.The deficit was covered by additional collections of revenue. 76 INDIVIDUAL FUND SCHEDULE TOWN OF WESTLAKE, TEXAS DEBT SERVICE FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010 Variance Final Budgeted Favorable Amounts Actual (Unfavorable) REVENUES Contributions $ - $ - $ - Total revenues - - - EXPENDITURES Debt service Principal retirement 525,000 525,000 - Interest and other fiscal charges 974,750 974,370 380 Total expenditures 1,499,750 1,499,370 380 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 1,499,750) ( 1,499,370) 380 OTHER FINANCING SOURCES(USES) Transfers in 1,499,750 1,499,370 ( 380) Total other financing sources(uses) 1,499,750 1,499,370 ( 380) NET CHANGE IN FUND BALANCE - - - FUND BALANCE,BEGINNING - - - FUND BALANCE,ENDING $ - $ - $ - 77 STATISTICAL SECTION STATISTICAL SECTION (Unaudited) This part of the Town of Westlake, Texas' comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the Town's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the Town's financial performance and well-being have changed over time. 78-83 Revenue Capacity This schedule contains information to help the reader assess the Town's most significant local revenue sources. Although sales taxes are the Town's most significant local revenue source, information about principal revenue payers is confidential under Texas statutes, and; therefore, not disclosed. Trend information about sales tax revenue is provided in Table 5. 84 Debt Capacity These schedules present information to help the reader assess the affordability of the Town's current levels of outstanding debt and the Town's ability to issue additional debt in the future. 85-87 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town's financial activities take place. 88-89 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the Town's financial report relates to the services the Town provides and the activities it performs. 90-92 Sources: Unless otherwise noted, the information in these schedules is derived from annual financial reports for the relevant year. Table 1 TOWN OF WESTLAKE, TEXAS NET ASSETS BY COMPONENT LAST FIVE FISCAL YEARS (Accrual Basis of Accounting-unaudited) Fiscal Year 2006 2007 2008 2009 2010 Governmental activities: Invested in capital assets,net of related debt $ 9,171,657 $ 9,646,644 $ 10,313,743 $ 13,244,690 $ 13,633,485 Restricted 1,406,756 1,719,771 2,004,763 1,761,067 1,564,868 Unrestricted 3,023,875 3,305,542 3,835,751 4,122,185 5,866,046 Total governmental activities net assets $ 13,602,288 $ 14,671,957 $ 16,154,257 $ 19,127,942 $ 21,064,399 Business-type activities: Invested in capital assets,net of related debt $ 8,436,729 $ 8,097,807 $ 7,726,576 $ 7,349,032 $ 7,033,831 Unrestricted ( 1,846,851) ( 2,008,243) ( 1,997,281) ( 1,945,578) ( 2,003,600) Total business-type activities net assets $ 6,589,878 $ 6,089,564 $ 5,729,295 $ 5,403,454 $ 5,030,231 Primary government: Invested in capital assets,net of related debt $ 17,608,386 $ 17,744,451 $ 18,040,319 $ 20,593,722 $ 20,667,316 Restricted 1,406,756 1,719,771 2,004,763 1,761,067 1,564,868 Unrestricted 1,177,024 1,297,299 1,838,470 2,176,607 3,862,446 Total primary government net assets $ 20,192,166 $ 20,761,521 $ 21,883,552 $ 24,531,396 $ 26,094,630 Note: The Town began to report accrual information when it implemented GASB Statement 34 in fiscal year 2004. Source: Annual financial reports 78 Table 2 TOWN OF WESTLAKE, TEXAS CHANGES IN NET ASSETS LAST FIVE FISCAL YEARS (Accrual basis of accounting- Unaudited) Fiscal Year 2006 2007 2008 2009 2010 EXPENSES Governmental activities: General government $ 1,811,281 $ 1,941,289 $ 2,031,460 $ 2,203,882 $ 2,272,127 Public Safety 1,705,528 1,738,080 1,795,782 1,939,441 1,698,164 Cultural and Recreational 91,444 86,560 129,641 115,770 105,997 Economic Development 35,759 120,753 473,451 207,044 309,653 Public Works 613,956 455,481 1,013,804 1,028,934 594,705 Visitor Services 393,115 217,992 312,777 341,270 420,270 Education 2,249,998 2,672,698 3,305,220 3,722,705 4,138,875 Interest on long term debt 1,021,779 869,327 991,184 1,068,935 1,026,026 Total governmental activities expenses 7,922,860 8,102,180 10,053,319 10,627,981 10,565,817 Business-type activities: Water and Sewer 2,137,831 2,206,618 2,410,765 2,694,407 2,567,675 Cemetery - - 13,299 473 27,822 Total business-type activities expenses 2,137,831 2,206,618 2,424,064 2,694,880 2,595,497 Total primary government program expenses $ 10,060,691 $ 10,308,798 $ 12,477,383 $ 13,322,861 $ 13,161,314 PROGRAM REVENUES Governmental activities: Fees, fines,and charges for services: General Government $ 742,176 $ 785,771 $ 522,215 $ 677,948 $ 716,624 Public Safety 136,870 165,255 113,755 107,634 80,665 Public Works 699,753 625,340 902,875 594,338 1,597,655 Education 98,357 85,925 42,839 98,314 102,406 Operating grants and contributions 3,686,964 1,257,058 1,296,378 1,522,935 853,151 Capital grants and contributions 1,455,626 - - 2,059,624 83,250 Total governmental activities program revenues 6,819,746 2,919,349 2,878,062 5,060,793 3,433,751 Business-type activities: Charges for services: Water and Sewer 1,842,238 1,657,186 2,037,306 2,345,236 2,101,510 Cemetery 2,100 - 5,550 Operating grants and contributions 19,653 - - - 46,810 Capital grants and contributions - - 169,034 - - Total business-type activities program revenues 1,861,891 1,657,186 2,208,440 2,345,236 2,153,870 Total primary government program revenues $ 8,681,637 $ 4,576,535 $ 5,086,502 $ 7,406,029 $ 5,587,621 (Continued) 79 Table 2 TOWN OF WESTLAKE, TEXAS CHANGES IN NET ASSETS LAST FIVE FISCAL YEARS (Accrual basis of accounting- Unaudited) Fiscal Year 2006 2007 2008 2009 2010 NET(EXPENSE)REVENUES Governmental activities $( 1,103,114) $( 5,182,831) $( 7,175,257) $( 5,567,188) $( 7,132,066) Business-type activities ( 275,940) ( 549,432) ( 215,624) ( 349,644) ( 441,627) Total primary government net expense ( 1,379,054) ( 5,732,263) ( 7,390,881) ( 5,916,832) ( 7,573,693) GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental activities: Taxes Sales $ 1,810,706 $ 2,197,756 $ 3,590,575 $ 3,664,409 $ 3,790,533 Hotel Occupancy 415,544 458,471 527,662 497,769 457,693 Mixed Beverage 13,674 14,066 16,177 17,869 17,902 Franchise 457,004 560,312 649,108 624,401 603,233 Unrestricted grants and contributions 1,822,200 2,259,643 2,500,817 2,960,590 3,484,141 Investment earnings 98,824 261,622 188,459 61,224 38,383 Miscellaneous 448,827 466,654 564,973 568,782 676,638 Transfers 45,319 33,976 220,819 61,321 - Total governmental activities 5,112,098 6,252,500 8,258,590 8,456,365 9,068,523 Business-type activities: Investment earnings 25,604 46,158 32,103 7,858 8,334 Miscellaneous 56,025 36,936 44,071 77,266 60,070 Transfers ( 45,319) ( 33,976) ( 220,819) ( 61,321) - Total business-type activities 36,310 49,118 ( 144,645) 23,803 68,404 Total primary government 5,148,408 6,301,618 8,113,945 8,480,168 9,136,927 CHANGE IN NET ASSETS Governmental activities 4,008,984 1,069,669 1,083,333 2,889,177 1,936,457 Business-type activities ( 239,630) ( 500,314) ( 360,269) ( 325,841) ( 373,223) Total primary government $ 3,769,354 $ 569,355 $ 723,064 $ 2,563,336 $ 1,563,234 Note: The Town began to report accrual information when it implemented GASB Statement 34 in fiscal year 2004. Source: Annual financial reports (Concluded) 80 Table 3 TOWN OF WESTLAKE,TEXAS FUND BALANCES GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) Fiscal Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 General fund Reserved $ - $ - $ - $ 329,608 $ 131,657 $ 434,375 $ 563,176 $ 303,639 $ 193,105 $ 214,750 Unreserved 2,006,348 1,700,025 1,608,248 670,465 805,769 2,850,789 2,533,123 2,503,099 2,532,207 3,578,235 Total general fund $ 2,006,348 $ 1,700,025 $ 1,608,248 $ 1,000,073 $ 937,426 $ 3,285,164 $ 3,096,299 $ 2,806,738 $ 2,725,312 $ 3,792,985 All other governmental funds Reserved Special revenue funds $ 6,002,623 $ 5,287,758 $ 539,019 $ 818,525 $ 779,244 $ 869,694 $ 1,183,020 $ 1,527,724 $ 1,256,954 $ 1,112,941 Capital projects funds - 11,071,320 2,748,579 213,297 - 102,687 102,376 3,233,471 323,009 237,177 Unreserved,reported in: Special revenue funds - - - 12,391 181,960 427,720 846,214 1,666,371 1,933,564 2,693,846 Total all other governmental funds $ 6,002,623 $ 16,359,078 $ 3,287,598 $ 1,044,213 $ 961,204 $ 1,400,101 $ 2,131,610 $ 6,427,566 $ 3,513,527 $ 4,043,964 Note: Economic Development Funds were classified as special revenue funds through FY 2002 and considered discretely presented component units through FY 2007. Upon further consideration,the 413 Economic Development Corporation and Lone Star Public Facility Corporation funds are now classified as blended component units. Source: Annual financial reports 81 Table 4 TOWN OF WESTLAKE,TEXAS CHANGES IN FUND BALANCES,GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) Fiscal Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 REVENUES Taxes $ 2,663,738 $ 1,863,255 $ 1,874,312 $ 1,656,628 $ 1,741,788 $ 2,696,928 $ 3,230,605 $ 4,783,522 $ 4,804,448 $ 4,869,361 Licenses,fees and permits 700,313 253,919 508,154 802,060 740,027 748,016 900,121 1,108,083 860,697 1,746,954 Fines and penalties 401,755 548,375 680,794 1,007,142 751,036 651,090 554,376 523,515 647,170 State program revenues 53,309 995,784 1,597,362 1,925,043 2,387,733 2,673,680 3,163,129 3,687,706 Federal program revenues 311,298 462,315 285,392 75,662 49,200 75,207 56,134 199,436 Investment earnings 343,107 351,243 151,591 33,180 41,786 98,824 261,622 188,459 61,224 38,383 Contributions 1,286,611 1,324,264 4,964,085 1,079,768 1,048,308 1,264,262 533,400 Other revenues 1,475 233,675 16,099 184,221 292,690 547,184 552,579 607,812 673,400 779,044 Total revenues 3,708,633 3,103,847 3,463,138 6,101,593 7,030,451 11,806,778 9,112,718 11,039,447 11,406,809 12,501,454 EXPENDITURES General government 857,217 1,592,597 1,087,368 1,725,211 2,243,162 2,542,295 1,385,492 1,516,346 1,519,600 1,644,587 Public safety 409,512 1,007,589 1,282,112 1,547,857 1,554,115 1,627,641 1,665,879 1,731,317 1,890,469 1,634,936 Cultural and recreational 5,967 10,472 14,043 9,099 96,617 91,444 86,560 129,641 115,770 105,997 Economic development 661,077 1,093,673 56,832 53,006 35,758 35,759 141,197 495,071 229,907 401,879 Public works - - 68,979 125,499 112,764 434,716 276,789 846,604 841,822 333,831 Protective inspection - - 187,922 80,935 - - - - Visitor services - - 131,395 172,542 448,604 393,115 226,992 312,777 341,270 420,270 Education - - 156,870 1,368,113 1,877,398 2,249,998 2,672,698 3,305,220 3,722,705 4,138,875 Debt service Principal - - 1,475,400 - - 350,000 470,000 395,000 593,937 563,703 Interest - 78,012 836,533 986,534 1,028,104 1,028,634 1,240,950 923,944 990,641 977,163 Bond issuance cost 33,000 - - Capital outlay 174,959 1,344,137 14,096,533 2,917,185 263,681 371,860 836,787 463,918 4,335,114 682,103 Total expenditures 2,108,732 5,126,480 19,393,987 8,985,981 7,660,203 9,125,462 9,003,344 10,152,838 14,581,235 10,903,344 EXCESS(DEFICIENCY) OF REVENUES OVER (UNDER)EXPENDITURES$ 1,599,901 $( 2,022,633) $(15,930,849) $( 2,884,388) $( 629,752) $ 2,681,316 $ 109,374 $ 886,609 $( 3,174,426) $ 1,598,110 (Continued) 82 Table 4 TOWN OF WESTLAKE, TEXAS CHANGES IN FUND BALANCES,GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) Fiscal Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 OTHER FINANCING SOURCES(USES): Proceeds from sale of land $ - $ - $ - $ - $ 412,239 $ - $ - $ - $ - $ - Issuance of debt - 12,400,000 6,351,613 - - - - 2,500,000 117,640 - Refunding bonds issued 7,465,000 - - - Payments to bond escrow agent ( 7,088,706) - - - Cost to issue debt ( 451,613) Proceeds from capital lease 23,000 - - - Transfer in from component u - - 1,155,912 - - - - - - - Transfers in - 588,852 225,000 - 172,010 704,577 1,212,558 2,160,174 2,435,486 1,804,577 Transfers out - ( 588,852) ( 225,000) - ( 100,153) ( 659,258) ( 1,178,582) ( 1,939,355) ( 2,374,165) ( 1,804,577) Total other financing sources(uses) - 12,400,000 7,055,912 - 484,096 45,319 433,270 2,720,819 178,961 - Prior period adjustment 32,828 60,000 - - - Correction of an error (327,235) NET CHANGES IN FUND BALANCES $ 1,599,901 $ 10,050,132 $( 8,874,937) $( 2,851,560) $( 145,656) $ 2,786,635 $ 542,644 $ 3,607,428 $( 2,995,465) $ 1,598,110 DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES - % 2.1% 43.6% 16.3% 13.9% 15.7% 20.9% 14.0% 15.4% 15.0% Note: Economic Development Funds were classified as special revenue funds through FY 2002 and considered discretely presented component units through FY 2007. Upon further consideration,the 413 Economic Development Corporation and Lone Star Public Facility Corporation funds are now classified as blended component units. Source:Annual Financial Reports (Concluded) 83 Table 5 TOWN OF WESTLAKE, TEXAS TAXABLE SALES BY INDUSTRY TYPE LAST FIVE FISCAL YEARS (Unaudited) Fiscal Year NAICS Industry Type 2006 2007 2008 2009 2010 11 Agriculture,Forestry,Fishing and Hunting $ 31 $ 67 $ 54 $ 210 $ - 21 Mining 2,321 - 1,012 20 400 22 Utilities 463,222 212,336 194,359 185,819 178,693 23 Construction 81,542 200,791 635,134 411,718 68,306 31-33 Manufacturing 1,120,328 360,010 186,128 95,395 386,492 42 Wholesale Trade 248,702 284,082 178,003 72,034 105,557 44-45 Retail 408,556 253,293 493,309 445,839 1,097,007 48-49 Transportation and Warehousing 63 491 - 2,784 556 51 Information 538,210 223,672 246,591 355,603 159,513 52 Financial and Insurance 10,162 343,446 120,187 64,994 87,188 53 Real Estate and Rental and Leasing 178,047 204,398 102,515 123,191 327,207 54 Professional, Scientific,and Technical Services 111,746 452,018 180,288 156,385 202,263 56 Admin and Support and Waste Mgmt&Rem Sry 245,562 45,809 105,811 15,102 39,539 61 Education Services 895 317 85 2,984 619,228 62 Health Care and Social Assistance 10 - 109 - - 71 Arts,Entertainment and Recreation 49,474 224,101 177,446 175,517 158,996 72 Accommodation and Food Services 34,021 57,084 65,779 54,416 140,996 81 Other Services(except Public Administration) 130,476 130,392 32,621 1,490 4,462 92 Public Administration 170 - - - 11 $ 3,623,538 $ 2,992,308 $ 2,719,431 $ 2,163,501 $ 3,576,414 Town direct sales tax rate 2.00% 2.00% 2.00% 2.00% 2.00% Note: Information on sales tax by NAICS was not available prior to 2006. Comparison will be made to the prior year until ten-year prior comparison can be made. Due to confidentiality issues,the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the Town's sales tax revenue. The Town does not currently levy property tax.The main source of direct rate revenue is sales tax, which does not have overlapping governments. Source: Texas State Comptroller reports 84 Table 6 TOWN OF WESTLAKE, TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST NINE FISCAL YEARS General Bonded Debt Outstanding Percentage General Certificates of Actual Fiscal Obligation of Taxable Per Year Bonds Obligation Total Sales Capita 2002 $ - $ 12,400,000 $ 12,400,000 21.00% $ 42,907 2003 - 18,810,000 18,810,000 15.77% 62,079 2004 - 18,810,000 18,810,000 21.31% 57,348 2005 - 18,810,000 18,810,000 18.91% 52,986 2006 - 18,460,000 18,460,000 10.19% 26,447 2007 7,365,000 11,755,000 19,120,000 13.05% 27,198 2008 9,850,000 11,375,000 21,225,000 11.82% 27,038 2009 9,735,000 10,975,000 20,710,000 11.30% 26,382 2010 9,630,000 10,555,000 20,185,000 10.65% 23,831 Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements. There was no debt issued until fiscal year 2002. See Table 9 for population data. 85 Table 7 TOWN OF WESTLAKE,TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (Unaudited) Business-Type Governmental Activities Activities General Certificates Other Total Percentage Fiscal Obligation of Capital Contractual Primary of Personal Per Year Bonds Obligation Leases Obligations Government Income Capita 2001 $ - $ - $ - $ 6,145,944 $ 6,145,944 55% $ 24,102 2002 - 12,400,000 - 6,113,904 18,513,904 143% 64,062 2003 - 18,810,000 - 6,100,577 24,910,577 178% 82,213 2004 - 18,810,000 - 6,027,387 24,837,387 159% 75,724 2005 - 18,810,000 - 5,980,921 24,790,921 143% 69,834 2006 - 18,460,000 - 5,878,381 24,338,381 69% 34,869 2007 7,365,000 11,755,000 23,000 5,822,299 24,965,299 68% 35,513 2008 9,850,000 11,375,000 15,264 5,763,022 27,003,286 64% 34,399 2009 9,735,000 10,975,000 46,559 5,734,191 26,490,750 27% 33,746 2010 9,630,000 10,555,000 - 5,658,888 25,843,888 24% 30,512 Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements. No debt was issued until fiscal year 2000. See Table 9 for personal income and population data. 86 Table 8 TOWN OF WESTLAKE,TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30,2010 (Unaudited) Overlapping Amount of Taxing Body Debt Outstanding As of Percent Amount Keller ISD(net debt) $ 726,828,078 09/01/2009 4.57% $ 33,216,043 Northwest ISD(net debt) 503,926,021 09/30/2008 0.50% 2,519,630 Carroll ISD(gross debt) 195,080,040 03/31/2010 5.72% 11,158,578 Trophy Club MUD#1 (net debt) 7,713,250 03/31/2010 36.99% 2,853,131 Tarrant County Hospital District(gross debt) 28,000,000 03/31/2010 0.76% 212,800 Tarrant County College(net debt) 36,495,000 03/31/2010 0.76% 277,362 Tarrant County(net debt) 321,866,349 01/31/2009 0.76% 2,446,184 Total Overlapping Debt 52,683,729 Town of Westlake Outstanding Debt 20,185,000 Total Direct&Overlapping Debt $ 72,868,729 Source: Texas Municipal Report prepared by employees of the Municipal Advisory Council of Texas("MAC") 87 Table 9 TOWN OF WESTLAKE, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (Unaudited) Per Capita Tarrant County Calendar Estimated Personal Personal Unemployment Year Population Income Income Rate 2001 255 $ 11,093,548 $ 43,504 4.5% 2002 289 12,949,868 44,809 6.1% 2003 303 13,984,514 46,154 6.3% 2004 328 15,592,502 47,538 5.6% 2005 355 17,3 82,312 48,964 5.1% 2006 698 35,202,364 50,433 4.7% 2007 703 36,518,166 51,946 4.3% 2008 785 42,001,086 53,505 4.9% 2009 785 98,190,940 125,084 7.7% 2010 847 109,124,532 128,837 8.2% Sources: Population for 2000 is from the 2000 census. The Town took over the utilility billing in 2004 and estimated the population by using number of residential water accounts and assuming a 2.5 average household size. Fiscal Years 2001 through 2003 are estimated. Tarrant County Unemployment Rate information taken from Texas Workforce Commission. American Community Survey(ACS) Note: Due to the size of the Town,per capita personal income was not available except for information taken from the 2000 census. Estimates have been made based on a 3%annual increase in cost of living. 88 Table 10 TOWN OF WESTLAKE,TEXAS PRINCIPAL EMPLOYERS CURRENT FISCAL YEAR (Unaudited) 2010 Percentage of Estimated Total Town Employer Employees Employment Fidelity Investments 3,600 41.63% Core Logic 2,400 27.76% Wells Fargo 600 6.94% Chrysler Financial 950 10.99% McKesson Corporation 187 2.16% Marriott Solana Hotel 150 1.73% Walco International 159 1.84% Vaquero Club 132 1.53% Levi Strauss 92 1.06% Town of Westlake/Westlake Academy 83 0.96% Total 8,353 97% Note: Information on the Principal Employers from 1999 is not available. Information will be accumulated over the next ten years until a ten-year prior comparison can be made. Source: Maguire Partner's tenant records and contact with employers of the Town 89 Table 11 TOWN OF WESTLAKE, TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 General government Town manager 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Assistant to town manager 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Administrative 0.50 1.50 1.50 0.50 0.50 0.50 0.00 0.00 0.75 0.50 Building official 0.00 0.00 0.00 1.00 1.00 1.00 1.00 1.00 1.33 1.33 Town secretary 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Facilities/Grounds maintenan 0.00 0.00 0.00 0.50 0.50 0.50 0.50 0.75 1.08 0.92 Municipal 0.00 2.00 2.00 3.50 3.75 3.75 4.00 4.00 4.25 4.50 Finance 0.00 1.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Payroll/Human Resources 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.33 1.33 Public safety(EMS) 0.00 1.00 10.00 10.00 10.00 11.00 11.00 11.00 9.00 9.00 Culture and recreation 0.00 0.00 0.00 0.50 0.50 0.50 0.50 0.75 0.75 0.92 Public works 0.00 0.00 0.00 1.00 1.00 1.00 1.00 1.50 1.50 1.50 Marketing and public affairs 0.00 0.00 0.00 1.00 1.00 1.00 0.00 0.00 0.00 Education 0.00 0.00 0.00 20.50 25.15 32.40 36.40 43.00 48.10 55.62 Total 3.50 8.50 19.50 44.50 49.40 57.65 60.40 69.00 74.09 81.62 Source: Prior Town budgets and Academy personnel records Note: A full time municipal employee is scheduled to work 2,080 hours per year(including vacation and sick leave). Fulltime equivalent employment is calculated by dividing total labor hours by 2,080. A full time education employee is scheduled to work 1,122 hours per year. 90 Table 12 TOWN OF WESTLAKE, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 General government Building permits issued 13 19 27 54 53 36 64 60 49 21 Building permit values $ 8,684,000 $ 12,495,020 $ 23,620,817 $ 46,698,935 $ 56,415,093 $ 42,910,780 $ 46,923,814 $ 180,707,159 $ 39,278,318 $ 27,575,445 Police(Contract with Keller PD) Motor vehicle stops 3,968 3,968 9,993 9,237 9,586 8,992 10,045 10,357 9,247 9,763 Traffic accident investigations 86 86 91 180 163 164 225 208 266 273 Part I crimes 16 16 46 19 26 30 25 26 23 19 DWI arrests 55 55 117 70 86 56 53 45 24 32 Fire/EMS Fire runs N/A N/A 108 78 148 136 153 169 118 172 Ambulance runs N/A N/A 150 115 135 207 251 159 184 187 Inspections N/A N/A N/A N/A 89 161 96 132 15 71 Public Works-General Street resurfacing(sq. footage) 0.00 0.00 1.65 1.30 0.00 1.35 1.01 0.00 0.00 0.00 Potholes repaired 0.00 0.00 0.00 40.00 40.00 20.00 0.00 20.00 10.00 5.00 Public Works-Utility Number of water accounts 67 102 130 177 271 338 386 419 437 478 Water main breaks N/A N/A N/A 1 3 3 2 4 5 6 Avg daily consumption MG(water) 0.269 0.404 0.382 0.501 0.817 1.031 0.729 0.999 1.020 0.889 Peak daily consumption MG(water) 2.203 1.820 1.244 1.423 2.198 2.677 1.978 2.060 2.740 2.460 System capacity-MG(water) 0.685 0.685 0.685 1.685 1.685 1.685 1.685 1.685 1.685 1.685 Water purchased(in gallons x 000) 98,229 147,423 138,288 183,356 298,124 376,264 266,158 364,764 372,933 324,843 Water sold(in gallons x 1000) N/A 154,702 127,998 150,869 230,657 338,085 246,280 340,743 313,495 290,000 Wastewater Number of new sewer connections 40 75 105 139 179 211 235 240 251 254 Avg daily sewage treatment 0.0630 0.0610 0.0710 0.0950 0.1270 0.1320 0.1370 0.124 0.101 0.063 (thousands of gallons) Source: Various Town departments Notes: N/A represents information that is unavailable. 91 Table 13 TOWN OF WESTLAKE, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fire Stations 0.00 0.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Public Works-Utility Pump station 1.00 1 1 1 1 1 1 1 1 1 Lift station 0.00 2 2 2 2 2 2 2 2 3 Telecommunications Duct Bank(LF) 0.00 21,573 24,073 36,703 38,303 38,303 38,303 43,703 49,103 51,803 Telecommunications Duct Bank Manhole; 0.00 53 58 91 95 95 95 104 113 122 Water Water mains(LF) 24,000.00 34,000 48,000 52,000 57,500 58,300 59,200 64,600 70,000 79,000 Fire hydrants 10.00 24 55 76 95 119 119 130 130 154 Storage capacity MG 0.69 0.69 0.69 1.69 1.69 1.68 1.69 1,685.00 1.69 1.69 Wastewater Sanitary sewers(LF) 8,700.00 15,300 18,100 20,000 15,000 35,000 35,000 39,300 39,300 49,900 Manholes 20.00 50 115 160 200 250 250 267 284 304 Public Works-Utility Streets(miles) 10.50 10.80 10.80 10.80 10.80 10.80 10.80 10.80 10.80 10.80 Highways(miles) 0.00 0 0 0 0 0 0 0 0 0 Streetlights 0.00 0 0 0 0 0 0 0 0 0 Traffic signals(school zone flashers) 0.00 0 2 2 2 2 2 2 2 2 Parks and recreation Acreage 13.50 14 14 14 14 19 19 25 25 25 Playgrounds 0.00 2 2 2 2 2 2 2 2 2 Softball/soccer field 0.00 1 1 1 1 1 1 1 1 1 Football field 0.00 0 0 0 0 0 0 1 1 1 Source: Various Town departments Note: No capital asset indicators are available for the general government. 92 COMPLIANCE SECTION lvk�*Mi PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS Town Council Town of Westlake, Texas 3 Village Circle, Suite 202 Westlake, Texas 76262 Members of the Council: We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units and each major fund of the Town of Westlake, Texas, (the "Town") as of and for the year ended September 30, 2010, which collectively comprise the Town's basic financial statements and have issued our report thereon dated February 22, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Town's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Town's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Town's financial statements that is more than inconsequential will not be prevented or detected by the Town's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Town's internal control. 93 115 SOUTH CHURCH STREET■HILLSBORO,TX 76645■(254)582-2583■FAX:(254)582-5731 ■www.pbhcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■TEMPLE,TX(254)791-3460 WACO,TX(254)772-4901 ■ALBUQUERQUE,NM(505)266-5904 Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements,noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, the Town Council, and federal and state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. piftki V February 22, 2011 94