HomeMy WebLinkAboutBallpark Audit 08-31-13TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
FINANCIAL REPORT
AUGUST 31, 2013
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
TABLE OF CONTENTS
AUGUST 31, 2013
Page
Number
FINANCIAL SECTION
Independent Auditors’ Report ............................................................................................. 1 – 3
Management’s Discussion and Analysis ............................................................................ 4 – 7
Financial Statements:
Statement of Net Position ................................................................................................ 8
Statement of Revenues, Expenses and Changes in Net Position ..................................... 9
Statement of Cash Flows ................................................................................................. 10
Notes to Financial Statements .......................................................................................... 11 – 19
SUPPLEMENTAL SCHEDULES
Schedule I – Schedule of Revenues and Expenses ............................................................. 20
Schedule II – Certificate of the Fixed Charges Coverage Ratio ......................................... 21 – 22
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FINANCIAL SECTION
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
Texas Student Housing Authority –
Ballpark Austin Project
Westlake, Texas
We have audited the accompanying financial statements of Texas Student Housing Authority –
Ballpark Austin Project (the “Project”), as of and for the year ended August 31, 2013, and the related
notes to the financial statements, which collectively comprise the Project’s basic financial statements as
listed in the table of contents. Texas Student Housing Authority – Ballpark Austin Project is a
component unit of the Town of Westlake.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the preparation and
fair presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
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401 WEST HIGHWAY 6 P. O. BOX 20725 WACO, TX 76702-0725 (254) 772-4901 FAX: (254) 772-4920 www.pbhcpa.com
AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 HILLSBORO, TX (254) 582-2583
TEMPLE, TX (254) 791-3460 ALBUQUERQUE, NM (505) 266-5904
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An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the Project as of August 31, 2013 and the respective changes in
financial position and, where applicable, cash flows thereof for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Emphasis of Matter Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Project will
continue as a going concern. As discussed in Note I to the financial statements, the Project is in default
on its bonds. This gives the bondholders the right to accelerate and demand payment on the bonds in
full. These conditions raise substantial doubt about its ability to continue as a going concern.
Management’s plans regarding these matters also are described in Note I. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not
modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 4 through 7 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 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 of the limited procedures do
not provide us with sufficient evidence to express an opinion or provide any assurance.
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Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the Project’s basic financial statements. The accompanying supplemental
information is presented for purposes of additional analysis and is not a required part of the basic
financial statements.
The supplemental information is the responsibility of management and was derived from and
relates directly to the underlying accounting and other records used to prepare the basic financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the
basic financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the basic financial
statements or to the basic 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 are fairly stated, in all material respects, in relation to the basic financial statements as a
whole.
January 14, 2014
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MANAGEMENT’S
DISCUSSION AND ANALYSIS
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MANAGEMENT’S DISCUSSION AND ANALYSIS
As staff of the Texas Student Housing Authority (the “Authority”) – Ballpark Austin Project (the
“Project”), we offer the readers of the Project’s financial statements this narrative overview and analysis
of the financial activities of the Project for the fiscal year ended August 31, 2013. We encourage readers
to consider the information presented herein in conjunction with the Project’s financial statements which
follow this section. As the Authority is a component unit of the Town of Westlake and is thus
considered a governmental entity, Governmental Accounting Standards Board Statement 34, Basic
Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments
has been implemented. The reader should note that this financial report addresses only the financial
condition of the Project itself.
FINANCIAL HIGHLIGHTS
The liabilities of the Project exceeded its assets at the close of the fiscal year by
$19,553,532. This is a decrease of $1,652,825 over the prior year.
Operating revenue of $3,834,799 is $110,276 more than budget, and operating
expense is $429,285 more than budget, not including depreciation and amortization.
At the end of the current fiscal year, the total cash balances were $380,577 in
unrestricted cash and $1,119,010 in restricted cash.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the Project’s basic financial
statements. The Project’s report consists of three parts, Management’s Discussion and Analysis, the
basic financial statements, and notes to financial statements. The basic financial statements include a
statement of net position, statement of revenues, expenses and changes in net position, a statement of
cash flows and supplemental schedules.
The Project is being treated as a going concern. The Project is in default on its bonds and is not
financially able to make scheduled principal and interest payments on its outstanding debt. They are
considered an event of default by the Trustee, which gives the bondholders the right to accelerate and
demand payment of the bonds in full. Management and the property manager are in the process of
developing plans to increase occupancy and rental rates at the property to improve its financial
performance.
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The statement of net position presents information on all of the Project’s assets and liabilities with the
difference between the two reported as net position.
20132012
Current and other assets3,661,147$ 3,394,321$
Capital assets 20,567,331 21,428,008
Total assets 24,228,478 24,822,329
Long-term liabilities33,858,434 33,518,348
Other liabilities 9,923,576 9,204,688
Total liabilities 43,782,010 42,723,036
Net position
Net investment in
capital assets13,996,103)( 13,075,340)(
Unrestricted 5,557,429)( 4,825,367)(
Total net position 19,553,532)$( 17,900,707)$(
Business-type Activities
TABLE 1
TEXAS STUDENT HOUSING AUTHORITY -
BALLPARK AUSTIN PROJECT
NET POSITION
The statement of revenues, expenses and changes in net position accounts for all of the Project’s
revenues and expenses regardless of when cash is paid or received.
20132012
Total operating revenue3,834,672$ 3,782,426$
Total operating expenses3,084,203 2,759,120
Total operating income750,469 1,023,306
Interest income127 -
Interest expense2,403,421)( 2,689,697)(
Total nonoperating loss2,403,294)( 2,689,697)(
CHANGE IN NET POSITION 1,652,825)( 1,666,391)(
NET POSITION, BEGINNING 17,900,707)( 17,334,572)(
PRIOR PERIOD ADJUSTMENT - 1,100,256
NET POSITION, ENDING 19,553,532)$( 17,900,707)$(
Business-type Activities
TABLE 2
TEXAS STUDENT HOUSING AUTHORITY -
BALLPARK AUSTIN PROJECT
CHANGES IN NET POSITION
The statement of cash flows recaps how cash changed from year to year.
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FINANCIAL ANALYSIS OF THE PROJECT’S FUNDS
Notes to financial statements. The notes provide additional information that is essential to a full
understanding of the data provided in the financial statements.
Restricted cash. Restricted cash represents monies held in escrow by the trustee and are restricted for
the payment of expenses as outlined in the Trust Indenture. As of August 31, 2013, these balances were
as follows:
Admin Exp Fund36,408$
Bond Fund, Series 2001A Senior Interest394,311
Bond Fund, Series 2001B Sub B13,002
Bond Fund, Series 2001C Sub C16
Debt Service Reserve 2001A Senior108,518
Debt Service Reserve 2001B Sub B863
Repair and Replacement Fund1,313
Minimum Scholarship Fund1,944
Trustee Fee Fund706
Tax and Insurance Fund166,541
Senior Bonds Principal392,450
Sub B Bond Principal 2,938
Total 1,119,010$
Nonrestricted cash. Nonrestricted cash is available for general use of the Project.
Bonds payable. As of August 31, 2013, the following amounts on the Series A, B and C Bonds were
owed:
Series A28,840,000$
Series B 2,365,000
Series C 3,000,000
Deferred purchase price1,460,000
Less discounts 1,101,566)(
Total 34,563,434$
Fixed charge cover ratio. The bond indenture provides for a fixed charge coverage ratio of 1.25 when
payments on the A and B Bond Series are considered and 1.15 when payments on the C Bond Series are
added. At this time, the Project has only realized a ratio of .73 and .65, respectively, and is thus
technically in default of the indenture.
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ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
Leases at the Project are primarily 12-month leases, however, due to competitive and market conditions,
a relatively minor number of 10-month leases exist. These leases do bring a monthly premium over the
12-month leases. Occupancy for the fiscal year ending August 31, 2013, indicates a substantial increase
to 100%; however, rental rates, again due to competitive pressures, will not see an increase.
CONTACTING THE PROJECT’S FINANCIAL MANAGEMENT
This financial report is designed to provide the reader with a general overview of the Project’s finances
and to demonstrate the Project’s accountability for the money it receives. If you have any questions
about this report, or need additional information, please contact Pete Ehrenberg at (817) 490-5723.
FINANCIAL STATEMENTS
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ASSETS
Current assets:
Cash 380,577$
Restricted cash 1,119,010
Accounts receivable 16,249
Total current assets 1,515,836
Capital assets:
Land 4,788,265
Other capital assets, net of accumulated depreciation 15,779,066
Total capital assets 20,567,331
Intangible assets:
Deferred financing costs, net of amortization 2,145,311
Total intangible assets 2,145,311
Total assets 24,228,478
LIABILITIES
Current liabilities:
Accounts payable 224,618
Accrued liabilities 950,997
Unearned revenue and prepaid rent192,187
Accrued interest 7,850,774
Bonds payable 705,000
Total current liabilities 9,923,576
Long-term liabilities:
Bonds payable 32,398,434
Deferred purchase price 1,460,000
Total long-term liabilities 33,858,434
Total liabilities 43,782,010
NET POSITION
Net investment in capital assets13,996,103)(
Unrestricted 5,557,429)(
Total net position 19,553,532)$(
The accompanying notes are an integral part of these financial statements.
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
STATEMENT OF NET POSITION
AUGUST 31, 2013
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OPERATING REVENUES
Rental income 3,733,076$
Other income 101,596
Total operating revenues 3,834,672
OPERATING EXPENSES
Personnel 338,583
Contract services 56,767
Utilities 588,850
Repairs and maintenance107,862
Turnover 431,063
Advertising and promotion56,941
Administration 274,739
Management fees 188,342
Depreciation 860,677
Amortization 180,379
Total operating expenses 3,084,203
OPERATING INCOME 750,469
NONOPERATING REVENUES (EXPENSES)
Interest income 127
Interest expense 2,403,421)(
Total nonoperating revenues (expenses)2,403,294)(
CHANGE IN NET POSITION 1,652,825)(
NET POSITION, BEGINNING 17,900,707)(
NET POSITION, ENDING 19,553,532)$(
The accompanying notes are an integral part of these financial statements.
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
STATEMENT OF REVENUES, EXPENSES
FOR THE YEAR ENDED AUGUST 31, 2013
AND CHANGES IN NET POSITION
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CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from tenants 3,675,889$
Miscellaneous other income 101,596
Cash paid to employees 330,606)(
Cash paid to suppliers 1,633,614)(
Net cash provided by operating activities 1,813,265
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Interest paid 1,423,370)(
Net cash used by capital and related financing activities 1,423,370)(
NET CHANGE IN CASH AND CASH EQUIVALENTS 390,022
CASH AND CASH EQUIVALENTS, BEGINNING 1,109,565
CASH AND CASH EQUIVALENTS, ENDING 1,499,587$
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income 750,469$
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation and amortization1,041,057
Changes in operating assets and liabilities:
Accounts receivable 2,902
Trade accounts payable 70,949
Unearned revenue 60,089)(
Accrued liabilities 7,977
Net cash provided by operating activities 1,813,265$
The accompanying notes are an integral part of these financial statements.
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 2013
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TEXAS STUDENT HOUSING AUTHORITY –
BALLPARK AUSTIN PROJECT
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2013
I. GENERAL STATEMENT
Texas Student Housing Authority (the “Authority”), a higher education authority, was established
on January 23, 1995, as a duly constituted authority of the Town of Westlake, Texas, pursuant to
Section 53.11 of Chapter 53 of the Texas Education Code, as amended. The Authority’s purpose
among other things is to acquire, finance, and operate student housing facilities. The Authority
operates several student housing facilities in Texas and one of the housing projects is the Ballpark
Austin Project (the “Project”). The Project was purchased from Jefferson Commons – Austin,
L.P., a Delaware limited partnership on December 27, 2001. The Project obtained its financing
through the issuance of Texas Student Housing Authority – Student Housing Revenue Bonds
(Austin, Texas Project), Series 2001A, Series 2001B and Subordinate Series 2001C. The bonds
were issued through a trust indenture by and between the Authority and the Bank of New York,
the, trustee. The Series 2001A, 2001B and Subordinate Series 2001C Bonds were issued in the
face amounts of $34,175,000, $2,470,000 and $3,000,000, respectively. The accompanying
financial statements present the operations of the Project, whose revenue streams are pledged for
the bonds described herein.
The 2013 financial statements were prepared assuming the Project will continue as a going
concern. The Project’s bonds payable are considered to be in default due to the discontinuance of
certain principal and interest payments. These are considered an event of default by the Trustee,
which gives the bondholders the right to accelerate and demand payment of the bonds in full.
Management and the property manager are in the process of developing and implementing plans to
increase occupancy and rental rates at the property to improve its financial performance.
II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Project’s significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
A. Reporting Entity
For financial reporting purposes, management has considered all potential component units.
The decision to include a potential component unit in the reporting entity was made by
applying the criteria set forth in GASB Statement No. 14 as amended by GASB Statement
Nos. 39 and 61. The criterion used is as follows:
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Financial Accountability – The primary government is deemed to be financially
accountable if it appoints a voting majority of the organization’s governing body
and 1) is able to impose its will on that organization; or 2) there is a potential for
the organization to provide specific financial benefits to, or impose specific
financial burdens on, the primary government. Additionally, the primary
government may be financially accountable if an organization is fiscally
dependent on the primary government regardless of whether the organization has
a separately elected governing board appointed by a higher level of government or
a jointly appointed board.
B. Measurement Focus and Basis of Accounting
The Project uses the economic resources measurement focus. This means that all assets,
liabilities, equity, revenues, and expenses are accounted for using the accrual basis of
accounting. Revenue is recognized when earned and expenses are recognized when they are
incurred.
Private-sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in both the government-wide and proprietary fund financial
statements to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. Governments also have the option of following
subsequent private-sector guidance for their business-type activities and Enterprise Funds,
subject to this same limitation. The government has elected not to follow subsequent private-
sector guidance.
C. Assets, Liabilities and Net Position or Equity
Income Taxes
The Project is an instrumentality of the Town and, therefore, its income is not subject to
federal income taxation pursuant to Section 115 of the Internal Revenue Code.
Cash and Cash Equivalents
The Project considers all highly liquid investments with maturity of three months or less
when purchased to be cash equivalents. At August 31, 2013, the Project had no such
investments included in cash and cash equivalents.
In addition, the Project has restricted cash of $1,119,010 that is held by the trustee for the
bonds payable under provisions of the trust indenture. During the year ended August 31,
2013, the Authority did not receive any investment income from cash. See Note III for risk
disclosures and breakdown of restricted cash accounts.
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Accounts Receivable
Accounts receivable are stated at amounts management expects to collect from outstanding
balances. Management writes off uncollectible amounts through a charge-off to expense. At
year-end, management assesses the accounts receivable balance and establishes a valuation
allowance based on historical experience and an evaluation of the outstanding balances. As
of August 31, 2013, management has determined that all accounts doubtful of collection have
been charged to operations and an allowance is not required.
Deferred Financing Costs
Costs associated with the issuance of bonds are deferred and amortized over the term of the
bonds.
Advertising Costs
All adverting costs are expensed as they are incurred. Advertising costs for the year ended
August 31, 2013, were approximately $56,941.
Capital Assets
Property and equipment have been recorded at the date of acquisition at cost. Routine
maintenance and repair costs to ready the units for the next period are expensed as incurred.
Expenditures directly related to the improvement of property are capitalized at cost. The
Project capitalizes the cost of roof replacements and expenditures for other major property
improvements.
The trust indenture (dated December 1, 2001) provides for a repair and replacement fund
requirement. The covenant states that no less frequently than every five years following the
date of issuance of the bonds, the Project will cause a professional engineer or firm of such
engineers to conduct a physical assessment of the Project and to submit a written report
concerning the physical condition of the Project and the engineer’s recommendations for
capital improvements needed at the Project.
Depreciation is computed using the straight-line method over the estimated useful lives as
follows:
Estimated
Asset ClassUseful Lives
Building30
Furniture, fixtures and equipment3 - 20
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III. DETAILED NOTES ON ALL FUNDS
A. Cash and Investments
At August 31, 2013, the carrying amount of Texas Student Housing Authority – Ballpark
Austin Project deposits (cash with interest bearing accounts and restricted cash held in
interest bearing accounts) was in total $1,499,587 of which $1,119,010 represented restricted
cash. The following is the breakdown of the restricted cash.
Restricted Cash
Restricted cash represents amounts placed on deposit in accounts and held by the trustee,
which are restricted for the payment of expenses as required by the trust indenture. At
August 31, 2013, restricted cash consists of the following funds and accounts:
Fund/Account Description
Admin Exp Fund36,408$
Bond Fund, Series 2001A Senior Interest394,311
Bond Fund, Series 2001 B Sub B13,002
Bond Fund, Series 2001C Sub C16
Debt Service Reserve 2001A Senior108,518
Debt Service Reserve 2001B Sub B863
Repair and Replacement Fund1,313
Minimum Scholarship Fund1,944
Trustee Fee Fund706
Tax and Insurance Fund166,541
Senior Bonds Principal392,450
Sub B Bond Principal 2,938
Total 1,119,010$
The following is a brief description of the funds and accounts making up the restricted cash
balance at year-end, as defined by the trust indenture:
Revenue Fund – The Revenue Fund was established for monthly deposits from
the depository account that holds general revenues of the Project. All monies are
deposited in the Revenue Fund and then properly distributed to the other funds, as
required by the trust indenture. Amounts in the fund at year-end represent
amounts that have not been distributed to the other funds due to timing of the
interfund transfers.
Bond Fund – The trustee makes monthly deposits in the Bond Fund pursuant to
the trust indenture. Amounts in the Bond Fund shall be used solely to fund the
payment of principal and interest on the bonds, for the redemption of the bonds at
or prior to maturity, and to purchase bonds on the open market. In the event of
default, amounts in this fund may pay the fees and expenses of the trustee prior to
making any payments to the bondholders. This fund has three accounts, the
Series 2001A, 2001B and the Series 2001C accounts.
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Repair and Replacement Fund – Amounts in the Repair and Replacement Fund
may be a) used to pay the maintenance and repair costs related to the Ballpark
Austin property, which the Project is obligated to pay pursuant to the trust
indenture; and b) transferred to the Bond Fund to pay principal of, or interest on,
the bonds to the extent there are insufficient monies in the Bond Fund.
Surplus Fund – The trustee shall deposit any remaining amount in the Revenue
Fund into the Surplus Fund. Amounts on deposit in the Surplus Fund will be
released to the Project if certain release tests are satisfied. If the release tests are
not satisfied, the trustee will retain the monies on deposit in the Surplus Fund.
Trustee Fee Fund – Amounts are deposited in the Trustee Fee Fund on a monthly
basis and are intended to pay the fees to the trustee at year-end.
Series A Principal Fund – Amounts in the Series A Principal Fund represent
sinking fund payments set aside for repayment of the principal balance on the
Series A Bonds.
Series B Principal Fund – Amounts in the Series B Principal Fund represent
sinking fund payments set aside for repayment of the principal balance on the
Series B Bonds.
Operating Reserve Fund – Amounts in the Operating Reserve Fund may be
transferred to the property manager to fund operations if the transfer from the
Revenue Fund is not sufficient to pay operating expenses. Amounts may also be
transferred to the Bond Fund to pay principal and interest on the bonds, to the
extent there are insufficient monies in the Bond Fund on any interest payment date.
Debt Service Reserve 2001 Account – The amounts on deposit in this account are
to be used for the purpose of paying principal and interest on the Series 2001A
bonds as they become due in the event there should be insufficient funds in the
Bond Fund.
Debt Service Reserve 2001B Account – The amounts on deposit in this account
are to be used for the purpose of paying principal and interest on the Series 2001B
Bonds as they become due in the event there should be insufficient funds in the
Bond Fund.
Project Fund – Amounts in the Project Fund are held and disbursed for costs of
the Project.
Residual Fund – Amounts in the Residual Fund related to three accounts – the
Subordinate Bond Amortization Account – Series C, the Issuer Education
Account and the Supplemental Management Fee Account. Based on release, tests
funds are then transferred to each respective account. In addition, insurance funds
are held to pay costs of maintaining insurance on the Project.
Minimum Scholarship Fund – The amounts on deposit in this account represent
the minimum annual scholarship amount determined as of the most recent
Education Funds Transfer date.
Tax and Insurance Fund – The amounts on deposit in this account represent
1/12th of the ad valorem property taxes, if any, and 1/12th of the annual premiums
for insurance due, determined in accordance with the annual budget.
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The Public Funds Investment Act (Government Code Chapter 2256) contains specific
provisions in the areas of investment practices, management reports and establishment of
appropriate policies relating to a governmental entity’s cash and investments.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an instrument. Generally, the longer the maturity of an investment the greater the
sensitivity of its fair value to changes in market interest rates. Texas Student Housing
Authority – Ballpark Austin Project is not significantly exposed to interest rate risk as all
investments earn a variable rate.
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to
the holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. The Public Funds Investment Act has a minimum
rating that is required for investments. Texas Student Housing Authority – Ballpark Austin
Project holds all of its cash and investments with the bond trustee and commercial banks.
Concentration of Credit Risk
The investment policy of Texas Student Housing Authority – Ballpark Austin Project is
subject to the indenture agreement of the bonds. As of August 31, 2013, the Project held all
of its restricted cash balances with the trustee, which represents 74.6% of the total cash and
investments held at August 31, 2013.
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside party. The custodial
credit risk for investments is the risk that, in the event of the failure of the counterparty to a
transaction, a government will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. The Public Funds Investment Act does
not contain legal or policy requirements that would limit the exposure to custodial credit risk
for deposits or investments, other than the following provision for deposits: The Public
Funds Investment Act requires that a financial institution secure deposits made by state or
local governmental units by pledging securities in an undivided collateral pool held by a
depository regulated under state law (unless so waived by the governmental unit). The
market value of the pledged securities in the collateral pool must equal at least the bank
balances less FDIC insurance at all times.
As of August 31, 2013, $101,217 of the Project’s $351,217 bank balance was collateralized
with a Bank Deposit Guarantee Bond from the Project’s depository. The remaining balance,
$250,000, was covered by FDIC insurance.
17
B. Capital Assets
Capital asset activity for the Project for the year ended August 31, 2013, was as follows:
BeginningEnding
BalanceAdditionsRetirementsBalance
Capital assets, not being depreciated:
Land 4,788,265$ -$ -$ 4,788,265$
Total capital assets,
not being depreciated 4,788,265 - - 4,788,265
Capital assets, being depreciated:
Building21,345,305 - - 21,345,305
Improvements, furniture
and fixtures 6,993,063 - - 6,993,063
Total capital assets,
being depreciated 28,338,368 - - 28,338,368
Less accumulated depreciation for:
Building7,589,442)( 711,510)( - 8,300,952)(
Improvements, furniture
and fixtures 4,109,184)( 149,166)( - 4,258,350)(
Total accumulated depreciation 11,698,626)( 860,676)( - 12,559,302)(
Total capital assets,
being depreciated, net 16,639,742 860,676)( - 15,779,066
Capital assets, net 21,428,007$ 860,676)$( -$ 20,567,331$
C. Bonds Payable
The bonds are tax-exempt governmental obligations under the Internal Revenue Code. The
bonds payable represent amounts due to the bondholders, via the trustee, and payable under
the terms of the trust indenture dated December 1, 2001. The bonds are payable solely from
the revenues generated by the Project and are secured by the revenues pledged and assigned
under the terms of the trust indenture. The Town of Westlake does not have any liability for
the payment of the bonds, as the bonds are non-recourse to both the Town of Westlake and
Texas Student Housing Authority. Interest rates on the bonds range from 4.00% to 11.00%
and are payable semi-annually on July 1 and January 1 of each year thereafter.
At August 31, 2013, 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.
18
The following is a summary of long-term debt transactions of the Project for the 12-month
period ended August 31, 2013:
The Project has a deferred purchase commitment for $1,460,000 as part of the original
purchase of the Project. The deferred purchase price accrues interest at a rate of 11% per
annum. The first deferred purchase price installment shall be payable on September 1 of the
first year after the Series C Bonds have been paid in full (scheduled final payment on Series
C Bonds is in 2033), and the remaining installments shall be paid on each anniversary
thereafter until the deferred purchase price and all interest thereon has been paid in full. As
of August 31, 2013, there have been no payments made on the deferred purchase price.
The debt is to be amortized through 2033 with varying payment amounts ranging from
$330,000 to $4,505,000 for interest and principal. The annual requirements to amortize all
debts outstanding as of August 31, 2013, are as follows:
D. Net Position
Net position represent the residual assets after liabilities are deducted. These assets are
reported in the following categories:
Net Investment in Capital Assets – The component of net position that reports the
difference between capital assets less both the accumulated depreciation and the
outstanding balance of debt, excluding unspent proceeds, that is directly
attributable to the acquisition, construction, or improvement of these capital
assets.
Amounts
BeginningEndingDue WithinInterest
BalanceIncreasesDecreasesBalanceOne YearPaid
Revenue Bonds:
2001A Bonds28,840,000$ -$ 28,840,000$ 705,000$ 1,806,931$
2001B Bonds2,365,000 - - 2,365,000 -
2001C Bonds3,000,000 - - 3,000,000 - -
Deferred purchase price1,460,000 - - 1,460,000 - -
Less discounts 1,161,651)( - 60,085)( 1,101,566)( - -
Total 34,503,349$ -$ 60,085)$( 34,563,434$ 705,000$ 1,806,931$
Year Ending
August 31,PrincipalInterestTotal
20141,035,000$ 2,006,275$ 3,041,275$
2015800,000 1,962,856 2,762,856
2016845,000 1,916,950 2,761,950
2017890,000 1,868,556 2,758,556
2018940,000 1,817,406 2,757,406
2019-20235,510,000 8,218,281 13,728,281
2024-20287,210,000 6,433,000 13,643,000
2029-203312,470,000 4,062,075 16,532,075
2034-2038 4,505,000 - 4,505,000
Totals 34,205,000$ 28,285,399$ 62,490,399$
Governmental Activities
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Restricted Net Position – The component of net position calculated by reducing the
carrying value of restricted assets by the amount of any related debt outstanding.
Unrestricted – The difference between the assets and liabilities that is not reported
in net position net investment in capital assets and restricted net position.
E. Management Fees
Beginning June 1, 2004, the Project retained Asset Campus Management for property
management and recorded property management fees of approximately $188,342 for the year
ended August 31, 2013.
F. Concentrations
The Project consists of one property in Austin, Texas, and is dependent upon the Austin area
and the higher education facilities in the Austin area for revenues.
G. Commitments and Contingencies
The Project has yet to have an arbitrage calculation performed for its outstanding debt. After
that analysis, the Project may incur a liability for interest earned in accordance with Internal
Revenue Service regulations.
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SUPPLEMENTAL SCHEDULES
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BudgetActualVariance
REVENUES AND OTHER SUPPORT
Rental income3,595,073$ 3,733,076$ 138,003$
Other income129,450 101,596 27,854)(
Interest income - 127 127
Total revenues and other 3,724,523 3,834,799 110,276
OPERATING EXPENSES
Personnel329,681 338,583 8,902)(
Contract services83,520 56,767 26,753
Utilities533,227 588,850 55,623)(
Repairs and maintenance87,670 107,862 20,192)(
Turnover243,875 431,063 187,188)(
Advertising and promotion89,000 56,941 32,059
Management fees185,509 188,342 2,833)(
Administration 61,380 274,739 213,359)(
Total operating expenses 1,613,862 2,043,147 429,285)(
REVENUES AVAILABLE FOR FIXED CHARGES 2,110,661 1,791,652 319,009)(
OTHER EXPENSES
Depreciation and amortization- 1,041,056 1,041,056)(
Interest expense - 2,403,421 2,403,421)(
Total other expenses - 3,444,477 3,444,477)(
EXCESS OF EXPENSES OVER REVENUES 2,110,661$ 1,652,825)$( 3,763,486)$(
FOR THE YEAR ENDED AUGUST 31, 2013
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK AUSTIN PROJECT
SCHEDULE I - SCHEDULE OF REVENUES AND EXPENSES
BUDGET AND ACTUAL
20
CALCULATION OF FIXED CHARGES COVERAGE RATIO
Total gross revenues 3,834,799$
Total expenses5,487,624)$(
Add:
Interest expense2,403,421
Depreciation and amortization1,041,056
Property management fees 188,342
Adjusted expenses 1,854,805)(
Adjusted net operating income available to pay fixed charges 1,979,994$
Fixed charges/maximum principal and interest for
fiscal year-end 3,032,544$
Fixed charges coverage ratio 0.65
Required ratio 1.15
Pass or fail Fail
FOR THE YEAR ENDED AUGUST 31, 2013
TEXAS STUDENT HOUSING AUTHORITY
BALLPARK
SCHEDULE II - FIXED CHARGES COVERAGE RATIO
21
22
TEXAS STUDENT HOUSING AUTHORITY –
BALLPARK AUSTIN PROJECT
SCHEDULE II – CERTIFICATE OF
THE FIXED CHARGES COVERAGE RATIO
AUGUST 31, 2013
We are providing this letter, as required by the Trust Indenture by and between Texas Student Housing
Authority – Ballpark Austin Project (the “Project”) and the Bank of New York (the “Trustee”), dated
December 1, 2001, relating to Texas Student Housing Authority – Ballpark Austin Project Student
Housing Revenue Bonds the “Indenture,” to certify the Fixed Charges Coverage Ratio as of August 31,
2013.
The Fixed Charges Coverage Ratio is defined in the Indenture as the ratio of revenue available for fixed
charges to fixed charges. Further, fixed charges are defined in the Indenture as the sum of all cash
outflows related to the Project that the Issuer cannot avoid without violating long-term contractual or
legal obligations (those obligations which extend for a period greater than one year), including, but not
limited to, (i) interest on indebtedness other than short-term indebtedness, and (ii) scheduled payments
of principal on indebtedness other than short-term indebtedness, provided that maximum annual debt
service shall be used for purposes of computing (i) and (ii) above.
The audited financial statements indicate revenue available for fixed charges for the 12-month period
ended August 31, 2013, to be $1,979,994.
Based on the above revenues and fixed charges utilizing Bond A and Bond B, we calculate that the fixed
charges coverage ratio as of August 31, 2013, to be .73 which is based on 12 months of operations.
Based on the above revenues and fixed charges utilizing Bond A, Bond B and Bond C, we calculate that
the fixed charges coverage ratio as of August 31, 2013, to be .65 which is based on 12 months of
operations.
Based on the above budgeted revenues and fixed charges utilizing Bond A and Bond B, we calculate
that the fixed charges coverage ratio as of August 31, 2013, to be .69 which is based on 12 months of
operations.
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