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Res 13-05 Approving the Comprehensive Annual Financial Report Year Ending September 30, 2012 TOWN OF WESTLAKE RESOLUTION NO. 13-05 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS, ACCEPTING THE ANNUAL COMPREHENSIVE ANNUAL FINANCIAL REPORT PRESENTED BY PATTILLO, BROWN & HILL, L.L.P., CERTIFIED PUBLIC ACCOUNTANTS, FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012. 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 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 2011-2012 Comprehensive Annual Financial Report from Pattillo, Brown & Hill, L.L.P., Certified Public Accountants attached as Exhibit "A". 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 13-05 Page 1 of 2 SECTION 4: That this resolution shall become effective from and after its date of passage. PASSED AND APPROVED ON TRIS 25 I DAA' OF FEBRUARY, 2013, 4w�z�'�;P7 e'mk/ Laura Wheat, Mayor ATTEST: Kelly dwar , Town Secretary Tomas E. Brymer, n Manager APPROVE ;AS TO FOR vI: t L. canton Low Town attorney t : Resolution 13-05 Page 2 of 2 Town of Westlake, Texas Comprehensive Annual Financial Deport For the Fiscal Year Ended September 30, 2012 N'%TrA4SFfIC-i1 f ORK ' IN PROGRESS 147 r 11144 IIsi 1 °far UNDER (IIINSTRj]CTIO 'r A- FA#F-,X-.'ffuAF AFAF, -J�r JFAFjF J0FA%V4 -A The Town of Westlake 3 Village Circle, Suite #202 6i % I'le"? 2Pi2 1<ati-Owlellelp� Westlake, Texas 76262 www.westlake-tx.org ' dd� 7A = — A& -- — TOWN OF WESTLAKE COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2012 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 30,2012 Page Number INTRODUCTORY SECTION Letter of Transmittal ........................................................................... i—viii Certificate of Achievement ........................................................................... ix Organizational Chart ........................................................................... x Principal Town Officials ....................................................................... xi FINANCIAL SECTION Independent Auditor's Report........................................................................................ 1 —2 Management's Discussion and Analysis ....................................................................... 3 - 14 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets .................................................................................. 15 Statement of Activities.................................................................................... 16 - 17 Fund Financial Statements Balance Sheet—Governmental Funds............................................................. 18 - 19 Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds...................................................... 20 - 21 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ......................................................... 22 Statement of Net Assets—Proprietary Funds.................................................. 23 Statement of Revenues, Expenses and Changes in Fund Net Assets—Proprietary Funds........................................................ 24 (continued) TOWN OF WESTLAKE, TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Page Number FINANCIAL SECTION (Continued) Fund Financial Statements (Continued) Statement of Cash Flows—Proprietary Funds........................................................ 25 Discretely Presented Component Units Financial Statements: Discretely Presented Component Units - Combining Statement of Net Assets......................................................... 26 - 27 Discretely Presented Component Units - Combining Statement of Activities......................................................... .. 28 - 29 Notes to Financial Statements................................................................................. 30 - 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— Economic Development Fund ....................................................... 70 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Lone Star Public Facility Corporation ........................................... 71 Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— 4B Economic Development Corporation ................................... ... 72 (continued) TOWN OF WESTLAKE, TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Page Number FINANCIAL SECTION (Continued) Required Supplementary Information (Continued) Schedule of Funding Progress ................................... ................................. 73 Notes to Required Supplementary Information ................................... ....... 74 Individual Fund Schedule: Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual— Debt Service Fund ......................................................................... 75 STATISTICAL SECTION (Unaudited) Net Assets by Component............................................................................ 76 Changesin Net Assets................................... .............................................. 77 - 78 Fund Balances—Governmental Funds ................................... .................... 79 Changes in Fund Balance—Governmental Funds ...................................... 80- 81 Assessed Value and Estimated Actual Value of TaxableProperty ................................... ........................................ 82 Principal Property Tax Payers ................................... ................................. 83 Property Tax Levies and Collections........................................................... 84 Direct and Overlapping Property Tax Rates................................................ 85 Taxable Sales by Industry Type .................................................................. 86 Ratios of General Bonded Debt Outstanding .............................................. 87 Ratios of Outstanding Debt by Type ................................... ....................... 88 (continued) TOWN OF WESTLAKE, TEXAS TABLE OF CONTENTS (Continued) FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Page Number STATISTICAL SECTION (Unaudited) (Continued) Direct and Overlapping Governmental Activities Debt................................ 89 Demographic and Economic Statistics ................................... .................... 90 PrincipalEmployers .................................................................................... 91 Full-time Equivalent Town Government Employees by Function/Program .......................................................................... 92 Operating Indicators by Function/Program ........................................................... 93 Capital Asset Statistics by Function/Program ........................................................ 94 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............................................................................. 95 - 96 INTRODUCTORY SECTION Town of Westlake February 15, 2013 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, 2012, 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, 2012, 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, 2012, were fairly presented in conformity with GAAP. The independent auditors'report is presented as the first component of the financial section of this report. This report is presented in three sections: Introductory, Financial and Statistical. The Introductory Section includes this transmittal letter, a listing of Town Officials, and an organizational chart of the Town. The Financial Section includes the independent auditor's report on the basic financial statements, Management's Discussion and Analysis (MD&A), basic financial statements, the notes to 3 Village Circle 4202 •Westlake,Texas 76262 Metro: 817-430-0941 •Fax: 817-430-1812 •www.westlake-tx.org i the basic financial statements, and combining and individual fund statements and schedules. The MD&A is a narrative introduction, containing overview and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement, 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. The Statistical Section includes financial and demographic information relevant to readers of the Town's financial statements. The statistical data is generally presented on a multi-year basis. Profile of the Town Minutes from downtown Fort Worth, Texas and DFW International Airport, the Town of Westlake is home to r ar several upscale residential communities and Fortune 500 Wes ake yk 114 635 companies, all of which share a unique character and 35 377 charm, along with a commitment to excellence. The - 820 �� �� ss Town is located in northeast Tarrant County and may be conveniently accessed by several major thoroughfares, --�-" Qrilarth Dallas including SH 114 and US 377. The Town occupies approximately 7 square miles and serves a population of approximately 1,014 with an average appraised home value of$1.2 million. The Town, incorporated in 1956, is considered a Type A general-law municipality. 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. ii 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 had 520 students in FY 10-11 and serves Kindergarten thru 12th grade. The Academy graduated their first class in FY 09-10. 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. The Town utilizes a combination of direct service delivery along with out- sourced services in its service delivery mix. The decision as to which service to deliver directly versus out-sourcing is based on analysis of cost-effectiveness, citizen responsiveness, and customer service quality. Economic Conditions and Outlook The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the environment within which the Town operates. Local Economy While we clearly understand the nation as a whole continues to try and recover from the economic downturn, the Town remains committed to budgeting and forecasting projections based on a fiscally conservative formula. We have accomplished many great things this past year through our use of partnerships and inventive strategies to govern our community. We have begun the process of reinvesting in our infrastructure and will continue to do so over the next several years — paying special attention to unique cost sharing opportunities, both public and private. Our overall goal is to provide our residents with a living experience that is second-to-none. The Town staff is aware that the Town of Westlake does not create wealth, but instead, is entrusted with public dollars collected on behalf of our citizens. We are stewards who are fully vested in the success of the Town of Westlake and Westlake Academy. We exist as a municipal corporation for one reason and one reason only: to prioritize and deliver the best services possible with the resources provided to achieve an exceptional quality of life. This is a challenge the Staff takes very seriously, one that we pursue with vigor every day. Below, please find the milestones and strategic priorities that were achieved during FY 11-12: iii • The Westlake Town Council received the award for "Council of the Year" from the Texas City Managers Association. This honor recognizes those governing bodies that have a demonstrated commitment to ethical service, put the welfare of the citizens above personal gain, function well as a governance unit, support staff professional development, and positively impact their community. The award nomination outlined the difficult ad valorem property tax decision, the continuing commitment to professional management and development, and the Westlake Town Council's ability to work together in difficult situations. This is a great honor and recognition for your commitment to Westlake. Congratulations! • Received the International City/County Managers Association Community Sustainability Program Excellence Award for Westlake Windows: Transparent Government in Focus (TGIF). The category recognizes those communities who have shown a commitment to "innovation, excellence, and success in balancing that community's social, economic, environmental, and cultural needs". (ICMA). We submitted the award with an emphasis on our communication efforts as it related to financial sustainability, transparency with capital improvement efforts, neighborhood meetings, Westlake e-Tube, website redevelopment, email newsletters, and other forms of community outreach programs. • Completed the first full year of operations for our Communications & Community Affairs office. Additional notifications and a streamlining of our community outreach was completed through the use of electronic email "mini-newsletters" which have allowed us to provide Westlake residents with more timely and relevant Westlake-related material on a bi-weekly (or more often, if needed) basis. Our Communications Office also assisted in preparation of materials for Westlake Academy to enhance our faculty recruitment and prospective parent outreach. These materials included: o Teacher recruitment brochures o Marketing brochures o Parent prospectus covering our school's three (3) IB curriculums • The Town's previous strategic planning document was restructured from a traditional format to a comprehensive governance system which we call the Strategic Issues-focused Governance System (SIGS). The system follows a Balanced Scorecard format with a four- tiered strategy map, an issues-focused set of staff action items, outcome strategies that align with our community value statements and a program based budget allocation. • Continued implementation of the Town Council's approved Five (5) Year Capital Improvement Plan (CIP). The public / private partnership between Hillwood Properties and the Town for Dove Road improvements will be finalized by mid-August. • The Stagecoach Hills roadwork project is now completed, marking the end of a 3 year program to upgrade that subdivisions drainage, water distribution, and street systems. • Construction on the State's $15 Million Phase 1 FM 1938 (Davis Blvd.) project was completed in the fall of 2012. This completed project provides a section of four-lane and a section of six-lane divided roadway to facilitate north/south mobility. Work has begun on the Town Council-approved streetscaping plan (contained in our CIP) to help identify this new and significant entry point and corridor for our community. We anticipate this phase of enhancements to be completed by mid-summer 2013 with the next phase beginning in fall 2013. iv • Invested significant time and effort in pursuing development of a facility plan for Westlake Academy, a process that is still underway. • Deloitte University opened for full operation in October 2011 and has been an overwhelming success. While being built, it was the largest ($300 million) private construction project in Texas. It serves as Deloitte's state-of-the art national and international learning center for its employees bringing Deloitte employees to Westlake from all over the world. • What began as retail construction in FY10-11 came to fruition in FY11-12 with the opening of the new Quik Trip convenience store and the Centennial Fine Wine and Spirits store. This is Westlake's first retail development outside of Solana. It is located along the Town's western boundary at the northwest corner of SH170 and SH377 and has already had a positive impact on our sales and use tax collection rates. • In FYI 1-12 the Town neared completion of the implementation of a development agreement with Hillwood Properties whereby, as a part of commitments Hillwood had for development of Deloitte University, they invested $4.6 million in street improvements on Westlake's major roadways- Dove Road and JT Ottinger Road. • Westlake was recognized again by Forbes Magazine as one of the wealthiest communities in the United States, with a median household income of$250,000. Our community shared this spotlight with Chevy Chase, MD, a city of twice our population size. The article mentioned Westlake's small town feel, limited population, and also touched on many of our high-profile residents. • Westlake's Historic Preservation Society implemented their historic markers program with the first marker being located at the former Buck King homestead at Aspen and Pearson Lanes. The Society also held their first classic car show which was a major success both in terms of collector participation and attendance. • The Town's open enrollment charter school, Westlake Academy, finished its ninth year of operations with another strong showing of academic and extra-curricular results by our students. This year's graduating class had an overall 89% success rate in obtaining the prestigious International Baccalaureate Diploma and the 28 graduates were offered collectively over $3.5 million in scholarships and grants. The Academy's enrollment continues to grow with a preliminary number of 675 students enrolled for 2012-13 School Year. • Westlake Academy was also ranked among the best high schools in America. U.S. News & World Report ranked the school as 37th in the nation, 5th in Texas and 6th in national charter schools. They further designated the Academy as a Gold Medal recipient. Newsweek listed the school as the 18th best high school in the United States and the Washington Post shows them as 36th out of 1,800 schools across the nation. Sales tax collections decreased by 20% for FY 11-12. This reduction was primarily caused by a 67% decrease ($900K) in revenues due to collections based on an economic development agreement. The primary source of these funds was due to the construction phase of Deloitte University, which was nearing completion at the end of the prior year. The "base" sales tax revenues remained flat with an increase of$1OK when compared with FY 10-11. v $4.50 Local Sales and Use Tax $4.25 $4.00 $3.75 $3.50 $3.25 $3.00 $2.75 ,,,$2.50 o$2.25 $2.00 g $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 ■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. Financial forecasts are used by the Town to identify important warning "sign posts" that should not be ignored. Beginning in FY 09-10, as the nation's economic recession reduced Westlake's primary revenue source of sales tax, we began using a thematic approach to bring focus to the major issue or issues for that particular budget. That year's budget theme was "Critical Challenges, Critical Choices", intending to signal the need for meaningful community-wide dialogue as to how Westlake would come to grips with its vision, as well as an associated financial future. We fostered this dialogue using primarily meetings in every Westlake neighborhood, our electronic newsletter, email blasts, focus group meetings, and placing extensive financial information about the Town's financial sustainability challenges on our website. In FY 10-11 the budget theme was "Securing the Vision". The focus of that budget's theme was to progress from the FY 09-10 discussions, and seek viable solutions to Westlake's challenge of becoming financially sustainable. Ultimately, this resulted in the Town Council adopting a $.16010 per $100 of assessed valuation municipal property tax rate. This is the lowest property tax rate of any city in our area, but it stabilized the General Fund's downward fund balance trend and has allowed us to begin dealing with our road infrastructure. Decisions in FYI 0-11 led to the FY 2011-12 budget theme of "Investing in Our Future". This was because assessment of a small property tax has given us the ability to invest in the improvement of roadways and other infrastructure projects that will provide tremendous benefits to our residents and businesses over the next several years. In addition to the Town funded capital projects plan, Staff has worked hard to identify and secure infrastructure funding through public/private and inter-local funding partnerships, along with grant funding, to minimize the impact to our tax rate and General Fund while providing high-quality infrastructure. The results of the utilization of these non-Town resources to the benefit of Westlake can be seen in: vi • Construction of FM 1938/Davis Blvd, a $15 million dollar project funded primarily by State and Federal dollars • Dove Road/Pearson Lane intersection improvements, a new north entrance to Westlake Academy, as well as the Dove and J. T. Ottinger Road upgrades funded primarily by a $4.6 million dollar development agreement with Hillwood Properties. • Landscaping of the medians on the soon to be completed FM 1938/Davis Blvd. project will be funded by a $670,000 Green Belt grant from TxDOT which helps us offset the associated costs for the streetscaping of this important north/south corridor. The selection of any budget theme is intended to bring into focus how resources are recommended to be prioritized and used in order to take the next step in achieving or creating our vision, mission and community values for Westlake. Over the history of our Town, budgets have been prepared with an eye toward being fiscally conservative, while providing for the highest quality of customer service that our residential population has come to expect in Westlake. In that light, the FY 2012-13 theme of"Driving Service Excellence" focuses on providing resources that will improve our ability to deliver excellent customer service, something that is integral to maintaining Westlake's quality of life and its status as a one-of-a-kind community. 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 2012-2013 Budget. The budget details the Town's long-term goals and financial policies, and describes program accomplishments and initiatives. Other Information 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, 2011. This was the fifth 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, we also received our fifth GFOA Distinguished Budget Presentation Award for the fiscal year beginning October 1, 2011 for our municipal budget and the 3rd year for our educational services budget for Westlake Academy, a component unit of the Town. In order to qualify for the Distinguished Budget Presentation Award, the Town and Academy budget documents had to be judged proficient as a policy document, a financial plan, an operations guide, and a communications device. vii Westlake Academy has also received recognition from the Association of School Business Officials International as a recipient of the International Award for Budget Excellence for the past three years. The Finance Department received its first Popular Annual Financial Report (PAFR) converting much of the FY 2010-2011 audit document into an easy-to-read format for our residents. The goal is to encourage resident awareness as it relates to Town finances through the condensed version of the budget. The report provides an "overview of our financial position and policies, and conveys our commitment to delivering responsive services and programs in a fiscally responsible manner." 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 viii 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, 2011 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. �. . @ i3F T1� � UNT€iD NATES u, AND 'MA. RIii�a� � President Executive Director CITIZENS OF WESTLAKE MAYOR • COUNCIL Texas Student Town Town Housing Attorney Manager Executive Director Administrative Asst to the Town Intern Coordinator Manager 75% 75% Board Secretary Administrative Assistants(3) � Town Secretary Communications Nurse Planning& Public Works Development R • eniorAdml,nistrative Technician Primary Assistant 33% Principal Facilities Parks& PYP Coordinator Maintenance Recreation Exemplary - 'Senior L�A dministrative Academy Governance PYP Teachers ssistant 33% Technician 25% Town Officials,Both Dining Hall Elected and PYP Counselor Appointed, Exhibit Respect,Stewardship, Information Human Vision,and PYP Special Ed. Technology 50% Resources 50% Transparency Academy Senior Librarian Technician 25% Administrative Assistant 33% Service Excellence Secondary Fire Chief 25%Court Principal Administrator Public Service that is Responsive and MYP/DP Professional,while Coordinator 2 Lieutenants 6 Firefighter Supervisor Paramedics balancing Efficiency, MYP/DP Effectiveness and Teachers Financial Stewardship MYP/DP Finance Judge Marshal Counselors MYP/DP Finance Assistant Finance Clerk Special Ed Deputy Clerk �i I Part Time Clerk x TOWN OF WESTLAKE ELECTED AND APPOINTED OFFICIALS September 30,2012 l ELECTED OFFICIALS Mayor LAURA WHEAT Mayor Pro-Tem CAROL LANGDON Council Member MICHAEL BARRETT Council Member CLIF COX Council Member DAVID LEVITAN Council Member RICK RENNHACK APPOINTED OFFICIALS TOM BRYMER Town Manager AMANDA DEGAN GINGER AWTRY Assistant to the Town Manager Director of Communications and and Court Administrator Community Affairs DEBBIE PIPER, CPA KELLY EDWARDS, TRMC Finance Director Town Secretary EDDIE EDWARDS TODD WOOD, SPHR, IPMA-CP Director of Planning and Director of Human Resources Development and Administrative Services JARROD GREENWOOD RICHARD WHITTEN Director of Public Works Fire Chief TROY MEYER JASON POWER Facilities/Parks and Director of Information Recreation Director Technology xi FINANCIAL SECTION lk*Kl PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the 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, 2012, 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's 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 the 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 as of September 30, 2012, 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 also issued our report dated February 15, 2013, on our consideration of the Town's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grants 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 the internal control over our financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. 1 115 SOUTH CHURCH STREET■HILLSBORO,TX 76645■(254)582-2583■FAX:(254)582-5731 ■www.pbbcpa.com AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■TEMPLE,TX(254)791-3460 WACO,TX(254)772-4901 0 ALBUQUERQUE,NM(505)266-5904 Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the analysis of funding progress and budgetary comparison information on pages 3 through 14 and 67 through 74 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 schedules 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 schedules are the responsibility of management and were 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 them. Pak � '. J � February 15, 2013 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, 2012. 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 $29,857,712 (Net assets). This number must be viewed within the context that the vast majority of the Town's net assets of$21,743,854 (73%) are capital assets and that most capital assets in a government entity do not directly generate revenue nor can they be sold to generate liquid capital. Those net assets restricted for specific purposes totaled $4,726,376 (16%). The remaining $3,387,482 (11%) 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$10,930,861, which is a decrease of$35,719 in comparison with the prior year. Within this total, $5,938,621 is non-spendable, restricted, committed or assigned by management or council. • At the end of the current fiscal year, fund balance for the general fund was $5,263,805, an increase of $1,248,411 in comparison with the prior year. Of this total fund balance, $4,992,240 is unassigned. This represents 108% of the total general fund expenditures and is equivalent to 396 operating days. • The Town's capital assets (net of accumulated depreciation) increased by $568,550. The major portion of this increase is attributed to the work completed on the Roanoke Road drainage/reconstruction project, Stagecoach Hills water line project, and the purchase of an attack truck and ambulance. A total of$904 thousand was recorded as construction in progress expenses for several road and water projects, including FM 1938 improvements along with Stagecoach Hills drainage/reconstruction. A small amount was contributed to the beginning of the Academy expansion project. This total amount was offset by $1,275,215 of depreciation which gave the Town a net increase. • The Town's bonds payable decreased by $78,000 in total, due to principal payments and refundings of$7,453,000 offset by the issuance of General Obligation Refunding bonds in the amount of$7,375,000. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town's basic financial statements. The Town's basic financial statements are comprised of the following three components: 3 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. 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 cash flows. 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, property 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 26-29 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 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 and Proprietary funds for the year ended September 30, 2012. 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 4 government-wide financial statements, governmental fund financial statements focus on near-term inflows and ou flows 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. 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 eight 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, 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 18-22 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 based 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 23 -25 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 30 - 66 of this report. 5 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 - 75. 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 $29,857,712 at the close of the most recent fiscal year. The Town's combined net assets changed from a year ago, increasing $1,280,390 from $28,577,322 to $29,857,712. Our analysis below focuses on the net assets (Table 1) and changes in net assets (Table 2) of the Town's governmental and business-type activities. The largest portion of the Town's net assets, $21,743,854 (73%), 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, $4,726,376 (16%), represents resources that are subject to external or internal restrictions on how they may be used. The remaining balance of unrestricted net assets, $3,387,482 (11%), may be used to meet the government's ongoing obligations to citizens and creditors. Table 1 Condensed Statement of Net Assets At September 30, 2012 Governmental Activities Business-Type Activities Total 2012 2011 2012 2011 2012 2011 Assets: Current and other assets $ 12,185,864$ 12,449,931$ 3,503,989$ 3,401,345$ 15,689,853$ 15,851,276 Capital assets 34,313,615 33,665,877 12,376,223 12,455,411 46,689,838 46,121,288 Total Assets 46,499,479 46,115,808 15,880,212 15,856,756 62,379,691 61,972,564 Liabilities: Long-term liabilities outstanding 20,098,829 20,731,060 5,422,434 5,507,172 25,521,263 26,238,232 Other liabilities 1,784,244 2,140,365 5,216,472 5,016,645 7,000,716 7,157,010 Total Liabilities 21,883,073 22,871,425 10,638,906 10,523,817 32,521,979 33,395,242 Net Assets: Invested in capital assets, net of related debt 14,866,299 14,188,516 6,877,555 6,875,031 21,743,854 21,063,547 Restricted 4,726,376 5,607,767 - - 4,726,376 5,607,767 Unrestricted 5,023,731 3,448,100 (1,636,249) (1,542,092) 3,387,482 1,906,008 Total Net Assets $ 24,616,406$ 23,244,383$ 5,241,306$ 5,332,939$ 29,857,712$ 28,577,322 6 Table 2 Changes in Net Assets At September 30, 2012 Governmental Activities Business-Type Activities Total 2012 2011 2012 2011 2012 2011 Revenues: Program revenues: Fees,fines&charge for services $ 1,417,879 $ 1,253,967 $ 2,939,342 $ 3,092,168 $ 4,357,221 $ 4,346,135 Operating grants &contributions 5,269,841 4,472,999 24,423 - 5,294,264 4,472,999 Capital grants &contributions - 425,900 - - - 425,900 General revenues: Taxes Sales taxes 3,657,274 4,609,626 - - 3,657,274 4,609,626 Property taxes 1,441,238 1,260,112 - - 1,441,238 1,260,112 Hotel occupancy taxes 590,853 527,261 - - 590,853 527,261 Mixed beverage taxes 38,286 19,721 - - 38,286 19,721 Franchise taxes 664,991 586,836 - - 664,991 586,836 Unrestricted grants - - - - - - Interest on investments 33,353 46,248 10,077 9,929 43,430 56,177 Miscellaneous 1,112,858 691,345 84,780 145,666 1,197,638 837,011 Extraordinary items (124,346) 56,704 - - (124,346) 56,704 Special item 67,760 - - - 67,760 - Gain on sale of capital assets - 7,000 - - - 7,000 Total revenues $ 14,169,987 $ 13,957,719 $ 3,058,622 $ 3,247,763 $ 17,228,609$ 17,205,482 Expenses: General government 2,518,490 2,478,826 - - 2,518,490 2,478,826 Public safety 1,883,424 1,801,585 - - 1,883,424 1,801,585 Culture and recreation 111,765 122,400 - - 111,765 122,400 Economic development 216,901 680,823 - - 216,901 680,823 Public works 546,039 470,054 - - 546,039 470,054 Visitor services 475,719 356,365 - - 475,719 356,365 Education 6,193,560 4,884,985 - - 6,193,560 4,884,985 Interest on long-term debt 897,573 1,127,913 - - 897,573 1,127,913 Water and sewer - - 3,098,466 2,794,235 3,098,466 2,794,235 Cemetery - - 6,282 5,604 6,282 5,604 Total expenses 12,843,471 11,922,951 3,104,748 2,799,839 15,948,219 14,722,790 Inc(Dec)in net assets before transfers 1,326,516 2,034,768 (46,126) 447,924 1,280,390 2,482,692 Transfers 45,507 145,216 (45,507) (145,216) - - Change in net assets 1,372,023 2,179,984 (91,633) 302,708 1,280,390 2,482,692 Net assets,beginning 23,244,383 21,064,399 5,332,939 5,030,231 28,577,322 26,094,630 Net assets,ending $ 24,616,406 $ 23,244,383 $ 5,241,306 $ 5,332,939 $ 29,857,712$ 28,577,322 7 Governmental activities: Governmental activities increased the Town's net assets by $1,372,023 (5%), increasing net assets from $23,244,383 to $24,616,406. Unrestricted net assets, the part of net assets that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, other legal requirements, and/or Council or management's decision, increased by $1,575,631 or 7% of total governmental net assets. The majority of this increase was due to excess revenues over expenditures for the fiscal year with no restrictions on the funds. Total revenues (including transfers) for governmental activities increased by $112,559 when compared to the prior year. General revenue had a decrease of $322,586, while program revenues had an increase of$534,854. Program revenues- The major contributor to the increase is related to the receipt of state revenues for the additional students at Westlake Academy as well as Westlake Academy Foundation grants given to the Academy. General revenues—Decrease of$322,586 were primarily made up of the following components: • Sales tax decreased by $952,352 due to a reduction in revenues of approximately $900K based on the conclusion of construction regarding Deloitte in which there was an economic development agreement regarding the taxing of construction and start-up materials. • Property tax increased by $181,126 • Miscellaneous increased by $421,513 — major portion of this increase relates to the reimbursement of indirect costs from Westlake Academy to the Town for services performed by Town personnel Expenses— • Total expenses for governmental activities increased by $920,520 or approximately 7%. The major components to this increase were related to a decrease of $463,922 in economic development based on a contractual obligation reimbursement. The amount received on the construction of the project was primarily completed in the prior year with normal operating sales taxes being received for the majority of FY 11-12 and an increase in education of $1,308,575 which included expense for the addition of students and staff for Westlake Academy and the transfer of a portion of the indirect operating costs of approximately $325,000 from Academy budget to the Municipal budget. Business-type Activities: The net assets of our business-type activities ended fiscal year 2012 at $5,241,306 compared with $5,332,939 in 2011. This represents a decrease in net assets of$91,633, or 2% less than the prior fiscal year. Revenues of the Town's business-type activities were $3,058,622 for the fiscal year ending September 30, 2012. Revenues decreased $189,141 or 6% from the prior year. Operating expenses for the business-type activities were $3,104,748 for the year, an increase of$304,909 or 11%. The resulting decrease in net assets is due to several factors, including the following: • Decrease in Charges for Services was $152,826. This 5% decrease was primarily realized because FY 10/11 was a drier year than normal resulting in increased water billing revenues and other associated fees in the prior year. 8 • The Town's increase in expenses of$304,909 is attributed to interest expense and additional expenses related to the wastewater treatment accounts. 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. As of the end of the current fiscal year, the Town's governmental funds reported combined ending fund balances of $10,930,861; a decrease of $35,719 in comparison with the prior year. Approximately 46% of this total ($4,992,240) constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of fund balance is nonspendable, restricted, committed or assigned to indicate that it is not available for new spending because it has already been committed. The following tables present a summary of general, special revenue, capital project, and debt service fund revenues and expenditures for the fiscal year ended September 30, 2012, and the amount and percentage of increases and decreases in relation to the prior year. Table 3 Summary of Governmental Fund Revenues Increase Percent 2011-12 Percent (Decrease) Increase Revenues Amount of Total from 2010/11 (Decrease) Taxes $ $ Sales 3,657,274 25.7% (952,352) -20.7% Property 1,442,068 10.1% 184,822 14.7% Mixed beverage 38,286 0.3% 18,565 94.1% Hotel occupancy 590,853 4.2% 63,592 12.1% Franchise 664,991 4.7% 78,155 13.3% Subtotal-Taxes 6,393,472 44.9% (607,218) -8.7% State program 4,369,635 30.7% 423,977 10.7% Federal program 152,351 1.1% (5,094) -3.2% Interest income 33,353 0.2% (12,895) -27.9% Building permits and fees 598,394 4.2% 67,748 12.8% Fines and penalties 622,338 4.4% 16,633 2.7% Contributions 732,535 5.1% 552,472 306.8% Miscellaneous 1,323,237 9.3% 342,421 34.9% Total Revenues $ 14,225,315 100.0% $ 778,044 5.8% 9 Table 4 Summary of Governmental Fund Expenditures Increase Percent 2011-12 Percent (Decrease) Increase Expenditures Amount of Total From 2010/11 (Decrease) General government $ 1,878,885 13.0% $ 145,561 8.4% Public safety 2,224,469 15.4% 381,718 20.7% Culture and recreation 111,765 0.8% (10,635) -8.7% Public works 391,115 2.7% 64,366 19.7% Economic development 243,939 1.7% (462,452) -65.5% Visitor services 475,719 3.3% 119,354 33.5% Education 6,193,560 43.0% 1,308,575 26.8% Capital outlay 1,110,476 7.7% 86,704 8.5% Debt service 1,768,918 12.3% 94,095 5.6% Total Expenditures $ 14,398,846 100.0% $ 1,727,286 13.6% Below are summaries and explanations of the material increase (decrease) in fund balances from FY 2011 to FY 2012 of the Governmental Funds that are contained in the above totals: General Fund-Fund balance increased$1,248,411 (31%) • Sales tax - FY 11-12 was the first year sales tax payments from the Property Tax Reduction portion of our receipts were recorded in the General Fund versus its own fund. The total amount was $914K. In addition to these additional receipts, the Town received a contribution of $325K from the Westlake Academy for indirect costs for services performed by Town staff. 4B Economic Development Corporation Fund-Fund balance decreased$89,193 • All funds received were transferred to the Debt Service Fund for the annual bond payments. • Fund balance decreased due to the reduction of a receivable from the Utility fund for an interfund loan made to the Utility Fund for several utility projects in past years Visitors Association Fund- Fund balance decreased by $58,734 • Primarily due to a budgeted transfer of funds for the partial payment of the bonds related to the Arts & Sciences Center. Capital Projects Fund - Fund balance decreased by $1,053,529 due to the usage of bond funds for various approved capital projects. Proprietary funds. The Town's proprietary fund statements provide the same type of information found in the government-wide financial statements with greater detail. Total net assets of the Proprietary Funds amounted to $5,241,306, a decrease of$91,633. Operating income totaled $3,048,545 which was offset by a net non-operating revenues (expenses) total of $704,659. • Revenues were $189,141 less than the prior year primarily due to charges for services • Operating Expenses increased by$304,909 due to the increase in the purchase of water. 10 General Fund Budgetary Highlights The General Fund budget for fiscal year 2012 was amended in total to increase the net change in fund balance from($110,509) to $1,066,876, a total increase of$1,177,385. • The amended budget for net revenues was increased by $916,674 (18%) with the majority of the increase noted below: o Sales Tax - $582,500— received more taxes than anticipated due to construction at Deloitte University which we thought would be completed in the prior year. Several months of the construction materials sales tax receipts were received in FY 11-12. o Property Tax - $105,211 - original budget was based on September values but then updated o Franchise Tax - $82,375 — additional receipt from a franchisee that we had not anticipated o Fines and penalties - $103,389—more than anticipated traffic violations • The amended budget for expenditures decreased by $501,661 (10%). The major components of this decrease are below: o General government - $(288,353) ■ ($356K) - This is based on a change in how we were booking payroll. We were wanting all payroll expense to be shown in the General Fund and had originally budgeted transfers in from other funds in the "Transfers In"" line-item (below the line) but determined it would be best to book as a contra account in the operating portion of the budget. ■ $52K — Increase in legal expenditures due to 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 denied any liability and obtained a favorable judgment from the Court o Public Works—- $(190,255)—Majority of this is related to how payroll was recorded. See above explanation. In additional, several larger maintenance projects were postponed. The General Fund actual revenue collections were more than the amended budget by $25,372 and the final expenditures were $120,289 less than budgeted(3%). • General government - $41,482 — majority of this amount is made up additional legal expenditures based on lawsuit • Public Safety $(93,946)—EMS/Fire was understaffed by one position for the fiscal year • Cultural and recreation—$(38,569)—mainly related to contract services for landscaping, etc. • Public Works $(29,256) —primarily related to street drainage expenditures and the reduction of several maintenance projects. 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, 2012, totaled $46,689,838 (net of accumulated depreciation). The investment in capital assets includes land, buildings, improvements, machinery and equipment, 11 infrastructure, and construction in progress. The net increase in the Town's investment in capital assets for the current fiscal year was $568,550 or 1%. The major portion of this increase is attributed to the work completed on the Roanoke Road drainage/reconstruction project, Stagecoach Hills water line project, and the purchase of an attack truck and ambulance. A total of $904 thousand was recorded as construction in progress expenses for several road and water projects, including FM 1938 improvements along with Stagecoach Hills drainage/reconstruction. A small amount was contributed to the beginning of the Academy expansion project. This total amount was offset by $1,275,215 of depreciation which gave the Town a net increase. Table 5 Town's Capital Assets (Net of Accumulated Depreciation) Governmental Activities Business-Type Activities Total 2012 2011 2012 2011 2012 2011 Land $ 11,896,663 $ 11,896,663 $ - $ - $ 11,896,663 $ 11,896,663 Capital improvements 2,386,902 2,361,688 9,883,837 9,955,542 12,270,739 12,317,230 Buildings 17,767,343 18,198,192 - - 17,767,343 18,198,192 Machinery& equipment 710,703 561,394 2,069,390 2,183,855 2,780,093 2,745,249 W/W treatment rights - - 248,786 280,546 248,786 280,546 Construction in progress 1,552,004 647,940 174,210 35,468 1,726,214 683,408 Total capital assets $ 34,313,615 $ 33,665,877 $ 12,376,223 $ 12,455,411 $ 46,689,838 $ 46,121,288 Additional information on the Town's capital assets can be found in Note III on pages 44-45 of this report. Long-term debt - At the end of the current fiscal year, the Town had total long-term debt outstanding of $26,462,364. Of this amount, $22,057,938 represents bonded indebtedness, $124,618 economic development reimbursement, and $5,498,668 business-type debt. During the fiscal year 2011-2012, the Town's total debt payable decreased by $577,011. This decrease is primarily attributed to the scheduled repayment of principal and interest on outstanding bonded debt. Standard & Poor's Ratings Services, a division of the McGraw-Hill, Inc. has just increased the Town's rate from AA- to AA. Additional information about the rating agency or the significance of the rating provided may be obtained from Standard&Poor's web site. Additional information on the Town's long-term debt can be found in Note III on pages 50-54. 12 Table 6 Outstanding Debt at Year-End Governmental Activities Business-Type Activities Total 2012 2011 2012 2011 2012 2011 General obligation bonds $ 17,180,938 $ 9,515,000 $ - $ - $ 17,180,938 $ 9,515,000 Certificates of obligation 4,877,000 12,210,000 - - 4,877,000 12,210,000 Contractual obligations 124,618 151,656 5,498,668 5,580,380 5,623,286 5,732,036 Notes payable 34,075 50,000 - - 34,075 50,000 Compensated absences 81,905 75,235 11,428 9,449 93,333 84,684 Deferred amounts (1,346,268) (552,344) - - (1,346,268) (552,344) Total long-term debt $ 20,952,268 $ 21,449,547 $ 5,510,096 $ 5,589,829 $ 26,462,364 $ 27,039,376 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS While we clearly understand the nation as a whole continues to try and recover from the economic downturn, the Town remains committed to budgeting and forecasting projections based on a fiscally conservative formula. We have accomplished many great things this past year through our use of partnerships and inventive strategies to govern our community. We have begun the process of reinvesting in our infrastructure and will continue to do so over the next several years—paying special attention to unique cost sharing opportunities, both public and private. Our overall goal is to provide our residents with a living experience that is second-to-none. In the FY 2012-13 budget, General Fund revenues and transfers are budgeted to decrease by $684K (11%). The decrease is primarily related to the reduction of the indirect cost reimbursement from the Westlake Academy to the Town for services performed by Town personnel as well as a reduction in permits and fees. Sales tax represents 46% of the total revenue budget with 21% being contributed to property tax and 12%to franchise fees. Westlake's assessed valuation increased by 11.2% for FY 12-13; however, the portion of this assessed valuation that we can actually use to levy an ad valorem tax deceased by 8%. This was due largely to tax abatements on Fidelity II and Deloitte University. Fidelity is able to receive these abatements in FY 12-13; however, they were not eligible in FY 11-12 because they did not meet their employment targets required in our economic development agreements with them. Even with these abatements lowering the portion of our assessed valuation on which we can levy our property tax in FY 12-13, we were still able to keep our tax rate the same as the previous year at $.15684 per $100 of assessed valuation($.141970 maintenance and operations and$.014870 interest and sinking). 13 Operating budgeted expenditures in the General Fund are projected to increase by only $40K (1%). The method for funding a second ground storage water tank for our water system is still under consideration. Because of that, it was budgeted in FY 12-13 to transfer, through an inter-fund loan, funds from the General Fund to the Utility Fund. The amount of$2M is scheduled to be re-paid over five years with a $400,000 annual payment. However, if we can work out the ability to issue bonds for this project, that would be the preferred method of financing this needed facility and an inter-fund loan from the General Fund to the Utility Fund will not be necessary. Subsequent to the adoption of the budget, the Town is considering funding a portion of this project with bonds and only transferring $500K. The Capital Projects Fund's fund balance will increase due to $8.5M issuance for Westlake Academy facility expansion. This increase as well as the ongoing implementation of the (5) Year Capital Improvement Program (CIP) will bring the fund balance to $3.3M. The CIP is reviewed, updated, and approved each year by the Town Council. The FM 1938/ Davis Blvd. streetscape plan will begin in earnest this coming year and the final expenditures for the J. T. Ottinger and Dove Road improvements will wind down. We will also begin to implement the enhancement projects along SH 114/Hwy 170 during the 12-13 fiscal year and start reconstruction and drainage work on Dove Road east of FM 1938. A transfer from the General Fund to the Major Maintenance and Replacement Fund continues this fiscal year, with transfers out of $550,000. The expenditures will be used for plant/building maintenance at the Academy, trail repair work, replacement of an existing vehicle, as well as technology upgrades. A portion of the remaining balance will be held for the future replacement of the ladder truck for the Fire Department in FY 2016-17. Internal Service funds show a 23% increase of $220,205, due to the transfer of funds into the two major maintenance and equipment replacement funds (Utility and General),to accumulate funds for various repair and replacement items. The net change to Fund balance for Westlake Academy is positive due, in part, to a $300 thousand contribution from the Westlake Academy Foundation which is intended to help with the negative impact of the reduction in State funding for public schools across Texas. Special Revenue funds project a 13% decrease in total fund balance in the amount of$164,923 by the end of FY 2012-13. This reduction is primarily due to the Visitors Association Fund (i.e. Hotel-Motel Occupancy Tax Fund), where debt service payments are budgeted to be transferred for the bond issue payment related to construction of the Westlake Academy Sam and Margaret Lee Arts & Sciences Center. Total revenues and other sources in for the Utility Fund were budget at $4.8M with 43% being contributed to water revenue and 42% to a transfer in from the General Fund for the construction of the ground storage tank. As stated above, this amount may be amended during the FY 2012-13. Expenses and other uses are budgeted at$4.6M with the 47% of this being attributed to capital outlay/projects. 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. 14 BASIC FINANCIAL STATEMENTS TOWN OF WESTLAKE,TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30,2012 Primary Government Discretely Governmental Business-type Presented Activities Activities Total Component Units ASSETS Cash and cash equivalents $ 9,955,686 $ 2,587,845 $ 12,543,531 $ 6,003,203 Investments - - - - Receivables(net of allowance) 1,212,007 847,608 2,059,615 575,547 Internal balances 178,384 ( 178,384) - - Inventories - 97,880 97,880 - Other assets 81,689 - 81,689 - Restricted cash and cash equivalents 264,709 149,040 413,749 4,818,871 Deferred charges 493,389 - 493,389 3,553,390 Capital assets: Land 11,896,663 - 11,896,663 12,070,678 Buildings and improvements 26,806,318 13,333,561 40,139,879 91,741,792 Wastewater treatment rights - 635,199 635,199 - Machinery and equipment 2,844,174 3,466,046 6,310,220 12,052,793 Construction in progress 1,552,004 174,210 1,726,214 - Less:accumulated depreciation ( 8,785,544) ( 5,232,793) ( 14,018,337) ( 38,575,352) Total capital assets 34,313,615 12,376,223 46,689,838 77,289,911 Total assets 46,499,479 15,880,212 62,379,691 92,240,922 LIABILITIES Accounts payablc 622,526 59,604 682,130 1,556,911 Customer deposits payable - 149,040 149,040 - Unearned revenue 52,154 385,217 437,371 3,557,642 Accrued interest payable 256,125 4,534,949 4,791,074 21,408,653 Noncurrent liabilities: Due within one year 853,439 87,662 941,101 2,349,674 Due in more than one year 20,098,829 5,422,434 25,521,263 111,178,833 Total liabilities 21,883,073 10,638,906 32,521,979 140,051,713 NET ASSETS Invested in capital assets, net of related debt 14,866,299 6,877,555 21,743,854 ( 36,238,596) Restricted for: Tourism 1,052,546 - 1,052,546 - Future projects 2,714,662 - 2,714,662 - Debt service 22,657 - 22,657 - Education 758,127 - 758,127 - Economic development 178,384 - 178,384 - Unrestricted 5,023,731 ( 1,636,249) 3,387,482 ( 11,572,195) Total net assets $ 24,616,406 $ 5,241,306 $ 29,857,712 $( 47,810,791) The accompanying notes are an integral part of these financial statements. 15 TOWN OF WESTLAKE, TEXAS STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Program Revenues Operating Capital Charges f6t Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General governmeni $ 2,518,490 $ 673,090 $ - $ - Public safet} 1,883,424 142,402 - - Culture and recreatior 111,765 - - - Economic Developmen 216,901 - - - Public works 546,039 407,328 - - Visitor Services 475,719 - - - Educatior 6,193,560 195,059 5,269,841 - Interest on long-term debt 897,573 - - - Total governmental activities 12,843,471 1,417,879 5,269,841 - Business-type activities Water utilities 3,098,466 2,934,842 24,423 - Cemetery 6,282 4,500 - - Total business-type activities 3,104,748 2,939,342 24,423 - Total primary government $ 15,948,219 $ 4,357,221 $ 5,294,264 $ - Component units, Business-type activities $ 24,427,233 $ 17,899,141 $ - $ - Total component units $ 24,427,233 $ 17,899,141 $ - $ - General revenues: Sales taxes Property taxes Hotel occupancy taxes Mixed beverage taxes Franchise taxes Interest income Miscellaneous Transfers Extraordinary item Special item Total general revenues and transfers Change in net asset; Net assets,beginning Net assets,ending The accompanying notes are an integral part of these financial statements. 16 Net(Expense)Revenue and Changes in Net Assets Primary Governmen' Discretely Governmental Business-type Presented Activities Activities Total Component Units $( 1,845,400) $ - $( 1,845,400) $ - ( 1,741,022) - ( 1,741,022) - ( 111,765) - ( 111,765) - ( 216,901) - ( 216,901) - ( 138,711) - ( 138,711) - ( 475,719) - ( 475,719) - ( 728,660) - ( 728,660) - ( 897,573) - ( 897,573) - ( 6,155,751) - ( 6,155,750) - - ( 139,201) ( 139,201) - - ( 1,782) ( 1,782) - - ( 140,983) ( 140,983) - ( 6,155,751) ( 140,983) ( 6,296,733) - $( 6,528,092) $( 6,528,092) 3,657,274 - 3,657,274 - 1,441,238 - 1,441,238 - 590,853 - 590,853 - 38,286 - 38,286 - 664,991 - 664,991 - 33,353 10,077 43,430 22,770 1,112,858 84,780 1,197,638 1 45,507 ( 45,507) - - ( 124,346) - ( 124,346) - 67,760 - 67,760 - 7,527,774 49,350 7,577,124 22,771 1,372,023 ( 91,633) 1,280,390 ( 6,505,321) 23,244,383 5,332,939 28,577,322 ( 42,405,726) $ 24,616,406 $ 5,241,306 $ 29,857,712 $( 47,810,791) 17 TOWN OF WESTLAKE,TEXAS BALANCESHEET GOVERNMENTAL FUNDS SEPTEMBER 30,2012 Debt Visitors Westlake Service General Association Academy Fund ASSETS: Cash and cash equivalents $ 4,637,252 $ 977,700 $ 681,617 $ 22,657 Receivables Property taxes 1,796 - - 240 Accounts receivable 557,579 88,164 225,459 - Due from other funds 149,641 - - Other assets 6,856 - 74,833 - Restricted cash and investments 264,709 - - - TOTAL ASSETS $ 5,617,833 $ 1,065,864 $ 981,909 $ 22,897 LIABILITIES AND FUND BALANCE: Liabilities: Accounts payable 352,232 11,818 112,165 - Deferred revenue 1,796 1,500 50,654 240 Due to other funds - - - Totalliabilities 354,028 13,318 162,819 240 Fund Balances: Nonspendable: Prepaid items 6,856 - 60,963 Restricted for: Tourism - 1,052,546 - - Future projects 49,941 - - - Debt service - - 22,657 Education 758,127 - Economic development - - Committed for: Court security and technology 192,768 - - Assigned for: Future equipment purchase 22,000 Unassigned 4,992,240 - Total fund balances 5,263,805 1,052,546 819,090 22,657 TOTAL LIABILITIES AND FUND BALANCES $ 5,617,833 $ 1,065,864 $ 981,909 $ 22,897 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 deferred in the funds Net assets of governmental activities The accompanying notes are an integral part of these financial statements. 18 Economic Lone Star 4B Economic Total Capital Development Public Facility Development Governmental Projects Fund Corporation Corporation Funds $ 3,622,884 $ - $ 13,576 $ $ 9,955,686 - - - - 2,036 104,230 - 149,641 1,125,073 - - 178,384 328,025 - 81,689 - - - - 264,709 $ 3,622,884 $ 104,230 $ 13,576 $ 328,025 $ 11,757,218 42,081 104,230 - - 622,526 - - - 54,190 - - - 149,641 149,641 42,081 104,230 - 149,641 826,357 - - - - 67,819 - - - 1,052,546 3,580,803 13,576 - 3,644,320 - - - - 22,657 - 758,127 178,384 178,384 - 192,768 22,000 - - - - 4,992,240 3,580,803 - 13,576 178,384 10,930,861 $ 3,622,884 $ 104,230 $ 13,576 $ 328,025 34,313,615 ( 20,715,004) 86,934 $ 24,616,406 19 TOWN OF WESTLAKE,TEXAS STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Debt Visitors Westlake Service General Association Academy Fund REVENUES: Taxes Sales $ 2,534,774 $ - $ - $ - Property 1,271,975 - - 170,093 Mixed beverage 38,286 - - - Hotel occupancy - 590,853 - - Franchise 664,991 - - - State program revenues - - 4,369,635 - Federal program revenues - - 152,351 - Interest income 14,060 3,438 2,417 - Building permits and fees 598,394 - - - Fines and penalties 622,338 - - - Contributions 325,520 7,015 - - Miscellaneous 80,936 6,425 1,227,872 - Total revenues 6,151,274 607,731 5,752,275 170,093 EXPENDITURES: Current General government 1,878,885 - - - Public safety 2,224,469 - - - Culture and recreation 111,765 - - - Public works 391,115 - - - Economic Development - - - - Visitor services - 475,719 - - Education - - 5,793,560 - Capital outlay - - - - Debt service Principal retirement - - - 668,000 Interest and other fiscal charges - - - 952,027 Bond issuance costs - - - 148,891 Total expenditures 4,606,234 475,719 5,793,560 1,768,918 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 1,545,040 132,012 ( 41,285) ( 1,598,825) OTHER FINANCING SOURCES(USES) Transfers in 583,857 - - 1,465,086 Transfers out ( 880,486) ( 190,746) - - Bonds issued - - - 7,799,196 Payment to escrow agent - - - ( 7,650,305) Special item - - 67,760 - Extraordinary item - - ( 124,346) - Total other financing sources(uses) ( 296,629) ( 190,746) ( 56,586) 1,613,977 NET CHANGE IN FUND BALANCES 1,248,411 ( 58,734) ( 97,871) 15,152 FUND BALANCES,BEGINNING 4,015,394 1,111,280 916,961 7,505 FUND BALANCES,ENDING $ 5,263,805 $ 1,052,546 $ 819,090 $ 22,657 The accompanying notes are an integral part of these financial statements. 20 Economic Lone Star 4B Economic Total Capital Development Public Facility Development Governmental Projects Fund Corporation Corporation Funds $ - $ 208,181 $ - $ 914,319 $ 3,657,274 - - - 1,442,068 - - 38,286 - - - - 590,853 - 664,991 - - - - 4,369,635 - - - 152,351 12,545 - 45 848 33,353 - - - - 598,394 - - - - 622,338 400,000 - - - 732,535 8,004 - - - 1,323,237 420,549 208,181 45 915,167 14,225,315 - - - - 1,878,885 - - 2,224,469 - - 111,765 - - - 391,115 243,939 - - 243,939 - - - - 475,719 400,000 - - - 6,193,560 1,110,476 - - - 1,110,476 - - - - 668,000 - - - - 952,027 - - - - 148,891 1,510,476 243,939 - - 14,398,846 ( 1,089,927) ( 35,758) 45 915,167 ( 173,531) 36,398 35,758 - - 2,121,099 - - - ( 1,004,360) ( 2,075,592) - - - - 7,799,196 - - - - ( 7,650,305) - 67,760 - - - - ( 124,346) 36,398 35,758 - ( 1,004,360) 137,812 ( 1,053,529) - 45 ( 89,193) ( 35,719) 4,634,332 - 13,531 267,577 10,966,580 $ 3,580,803 $ - $ 13,576 $ 178,384 $ 10,930,861 21 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 30,2012 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balance-total governmental funds $( 35,719) 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. 647,738 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 1,258 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. 710,963 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. 47,783 Change in net assets of governmental activities $ 1,372,023 The accompanying notes are an integral part of these financial statements. 22 TOWN OF WESTLAKE, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30,2012 Business-type Activities-Enterprise Funds Utility Cemetery Fund Fund Total ASSETS Current assets: Cash and cash equivalents $ 2,537,706 $ 50,139 $ 2,587,845 Investments - - - Accounts receivable(net of allowance) 847,608 - 847,608 Inventories - 97,880 97,880 Other assets - - - Restricted cash and investments 149,040 - 149,040 Total current assets 3,534,354 148,019 3,682,373 Noncurrent assets Capital assets: Construction in progress 174,210 - 174,210 Buildings and improvements 13,333,561 - 13,333,561 Wastewater treatment rights 635,199 - 635,199 Machinery and equipment 3,466,046 - 3,466,046 Less: accumulated depreciation ( 5,232,793) - ( 5,232,793) Total capital assets 12,376,223 - 12,376,223 Total noncurrent assets 12,376,223 - 12,376,223 Total assets 15,910,577 148,019 16,058,596 LIABILITIES Current liablities: Accounts payable 58,937 667 59,604 Customer deposits payable 149,040 - 149,040 Accrued interest payable 4,534,949 - 4,534,949 Due to other funds 178,384 - 178,384 Deferred revenue 385,217 - 385,217 Compensated absences 1,143 - 1,143 Contractual obligations 86,519 - 86,519 Total current liabilities 5,394,189 667 5,394,856 Long-term liabilities: Compensated absences 10,285 - 10,285 Contractual obligations 5,412,149 - 5,412,149 Total long-term liabilities 5,422,434 - 5,422,434 Total liabilities 10,816,623 667 10,817,290 NET ASSETS Invested in capital assets,net of related debt 6,877,555 - 6,877,555 Unrestricted ( 1,783,601) 147,352 ( 1,636,249) Total net assets $ 5,093,954 $ 147,352 $ 5,241,306 The accompanying notes are an integral part of these financial statements. 23 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Business-type Activities-Enterprise Funds Utility Cemetery Fund Fund Total OPERATING REVENUES: Charges for services $ 2,934,842 $ 4,500 $ 2,939,342 Contributions 24,423 - 24,423 Miscellaneous revenue 84,780 - 84,780 Total operating revenue 3,044,045 4,500 3,048,545 OPERATING EXPENSES: Payroll costs 253,673 - 253,673 Professional and contract services 30,187 5,984 36,171 Depreciation 426,775 - 426,775 Amortization of wastewater treatment rights 31,760 - 31,760 Water purchases 980,212 - 980,212 Cost of cemetary lots sold - 298 298 Other operating costs 661,123 - 661,123 Total operating expenses 2,383,730 6,282 2,390,012 OPERATING INCOME 660,315 ( 1,782) 658,533 NON-OPERATING REVENUES(EXPENSES): Interest income 9,906 171 10,077 Interest expense ( 714,736) - ( 714,736) Total non-operating revenues(expenses) ( 704,830) 171 ( 704,659) INCOME(LOSS)BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS ( 44,515) ( 1,611) ( 46,126) Transfer in 50,000 - 50,000 Transfer out ( 95,507) - ( 95,507) Total transfers and capital contributions ( 45,507) - ( 45,507) CHANGE IN NET ASSETS ( 90,022) ( 1,611) ( 91,633) TOTAL NET ASSETS,BEGINNING 5,183,976 148,963 5,332,939 TOTAL NET ASSETS,ENDING $ 5,093,954 $ 147,352 $ 5,241,306 The accompanying notes are an integral part of these financial statements. 24 TOWN OF WESTLAKE,TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Business-type Activities-Enterprise Funds Utility Cemetery Total Fund Fund Current Year CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 3,333,070 $ 4,500 $ 3,337,570 Cash payments to employees/retirees ( 251,694) - ( 251,694) Cash payments for goods and services ( 2,041,740) ( 5,316) ( 2,047,056) Net cash provided by operating activities 1,039,636 ( 816) 1,038,820 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer from other funds 50,000 - 50,000 Transfer to other funds ( 95,507) - ( 95,507) Advances to other funds ( 29,731) - ( 29,731) Net cash provided by noncapital financing activities ( 75,238) - ( 75,238) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on debt ( 81,712) - ( 81,712) Interest paid on debt ( 123,081) - ( 123,081) Purchase of property and equipment ( 379,348) - ( 379,348) Net cash used by capital and related financing activities ( 584,141) - ( 584,141) CASH FLOWS FROM INVESTING ACTIVITIES Investment earnings 9,906 171 10,077 NET INCREASE IN CASH AND CASH EQUIVALENTS 390,163 ( 645) 389,518 CASH AND CASH EQUIVALENTS,BEGINNING 2,296,583 50,784 2,347,367 CASH AND CASH EQUIVALENTS,ENDING $ 2,686,746 $ 50,139 $ 2,736,885 RECONCILIATION OF TOTAL CASH AND CASH EQUIVALENTS Cash and cash equivalents $ 2,537,706 $ 50,139 $ 2,587,845 Restricted cash and cash equivalents 149,040 - 149,040 Total cash and cash equivalents $ 2,686,746 $ 50,139 $ 2,736,885 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 660,315 $( 1,782) $ 658,533 Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation and amortization 458,536 - 458,536 Changes in operating assets and liabilities: Receivables 313,717 - 313,717 Other assets 2,589 299 2,888 Accounts payable ( 372,807) 667 ( 372,140) Compensated absences 1,979 - 1,979 Customer deposits payable 5,260 - 5,260 Deferred revenue ( 29,953) - ( 29,953) Net cash provided by operating activities $ 1,039,636 $( 816) $ 1,038,820 The accompanying notes are an integral part of these financial statements. 25 TOWN OF WESTLAKE, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS SEPTEMBER 30,2012 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 $ 590,771 $ 676,602 $ 275,717 Accounts receivables(net of allowance) 19,151 110,360 56,173 Restricted assets: Cash and cash equivalents 518,794 2,002,044 108,046 Deferred charges 2,265,605 639,311 648,474 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 ( 11,698,625) ( 10,946,544) ( 6,186,177) Total assets 24,822,329 21,640,614 15,259,975 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses 713,128 414,003 259,749 Unearned revenue 252,276 418,739 128,194 Accrued interest payable 7,254,284 4,627,379 1,951,612 Noncurrent liabilities: Due within one year 985,000 647,515 307,159 Due in more than one year 33,518,348 27,050,161 20,300,324 Total liabilities 42,723,036 33,157,797 22,947,038 NET ASSETS Invested in capital assets,net of related debt ( 13,075,340) ( 9,485,379) ( 6,435,918) Unrestricted ( 4,825,367) ( 2,031,804) ( 1,251,145) Total net assets $( 17,900,707) $( 11,517,183) $( 7,687,063) The accompanying notes are an integral part of these financial statements. 26 Texas Student Housing Authority- Texas Student College Station Housing Project Authority Total $ 4,142,293 $ 317,820 $ 6,003,203 388,890 973 575,547 2,189,987 - 4,818,871 - - 3,553,390 2,899,597 - 12,070,678 27,727,646 - 91,741,792 2,594,804 - 12,052,793 ( 9,744,006) - ( 38,575,352) 30,199,211 318,793 92,240,922 170,031 - 1,556,911 2,726,546 31,887 3,557,642 7,575,378 - 21,408,653 410,000 - 2,349,674 30,310,000 - 111,178,833 41,191,955 31,887 140,051,713 ( 7,241,959) - ( 36,238,596) ( 3,750,785) 286,906 ( 11,572,195) $( 10,992,744) $ 286,906 $( 47,810,791) 27 TOWN OF WESTLAKE, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Business-type activities: Texas Student Housing Authority $ 1,150,106 $ 852,277 $ - $ - Texas Student Housing Authority: College Station Project 7,821,953 5,818,085 - - Ballpark Austin Project 5,448,817 3,782,426 - - Town Lake Austin Project 4,215,434 2,811,775 - - Texas Student Housing Corporation: The Ridge at North Texas 5,790,923 4,634,578 - - Total business-type activities 24,427,233 17,899,141 - - Total primary government $ 24,427,233 $ 17,899,141 $ - $ - 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. 28 Net(Expense)Revenue and Changes in Net Assets Texas Student Texas Student Texas Student Texas Student Housing Housing Housing Housing Authority- Corporation- Authority- Authority- Texas Student Ballpark Austin The Ridge at Town Lake College Station Housing Project North Texas Austin Project Project Authority Total $ - $ - $ - $ - $( 297,829) $( 297,829) - - - ( 2,003,868) - ( 2,003,868) ( 1,666,391) - - - - ( 1,666,391) - - ( 1,403,659) - - ( 1,403,659) ( 1,156,345) - - - ( 1,156,345) ( 1,666,391) ( 1,156,345) ( 1,403,659) ( 2,003,868) ( 297,829) ( 6,528,092) ( 1,666,391) ( 11156,345) ( 1,403,659) ( 2,003,868) ( 297,829) ( 6,528,092) 22,433 - 306 31 22,770 22,433 - 306 32 22,771 ( 1,666,391) ( 1,133,912) ( 1,403,659) ( 2,003,562) ( 297,797) ( 6,505,321) ( 17,334,572) ( 10,383,271) ( 6,283,404) ( 8,989,182) 584,703 ( 42,405,726) 1,100,256 - - - - 1,100,256 $( 17,900,707) $( 11,517,183) $( 7,687,063) $( 10,992,744) $ 286,906 $( 47,810,791) 29 TOWN OF WESTLAKE, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2012 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 Council- 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. 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. (continued) 30 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 202, 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. 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. (continued) 31 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Component Units (Continued) Blended (Continued) 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. 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. (continued) 32 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus,Basis of Accounting,and Financial Statement Presentation(Continued) 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. Westlake Acadeniv Fund — to account for all financial resources of the Academy. Lone Star Public Facilities Corporation — to account for activity relating to the Lone Star Public Facilities Corporation. (continued) 33 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus,Basis of Accounting,and Financial Statement Presentation(Continued) 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 agreements. 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 funds: 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. 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 interfund 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. (continued) 34 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans. All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All property tax receivables are shown net of an allowance for uncollectibles. The net property tax receivable allowance is equal to 25 percent of outstanding property taxes at September 30, 2012. (continued) 35 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Receivables and Payables (Continued) The Town's property taxes are levied on October 1 on the assessed value listed as of the prior January 1 for all real and business personal property located in the Town. Assessed values are established at 100% of estimated market value. Property taxes attach as an enforceable lien on property as of January 1. Taxes are due by January 31 following the October 1 levy date and are considered delinquent after January 31 of each year. 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 and prepaid items Inventories, which are expended as they are consumed, are stated at the lower of cost or market on a first-in, first-out basis. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. 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) 36 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 and each successive year through five 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. (continued) 37 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity(Continued) Fund Equity and Net Assets The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the Town is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: • Nonspendable: This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) are legally or contractually required to be maintained intact. Nonspendable items are not expected to be converted to cash or are not expected to be converted to cash within the next year. • Restricted: This classification includes amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or(b) imposed by law through constitutional provisions or enabling legislation. • Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by board resolution of the Town council, the Town's highest level of decision making authority. These amounts cannot be used for any other purpose unless the Town council removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. • Assigned: This classification includes amounts that are constrained by the Town's intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the Town council. • Unassigned: This classification includes the residual fund balance for the General Fund. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance amounts. In the government-wide financial statements, 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 improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed on their use either though the enabling legislations adopted by the Town or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. (continued) 38 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Fund Equity and Net Assets (Continued) The government-wide and fund level financial statements report restricted fund balances for amounts not available for appropriation or legally restricted for specific uses. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, it is the City's policy to use restricted resources first, then unrestricted resources as needed. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. In the government-wide financial statements, the City's restrictions on net assets are for amounts that are not available for appropriation. The City's restricted net assets are as follows: Restricted for Tourism $ 1,052,546 Restricted for Future projects 2,714,662 Restricted for Debt Service 22,657 Restricted for Education 758,127 Restricted for Economic Development 178,384 Total $ 4,726,376 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 $20,715,004 difference are as follows: (continued) 39 II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Assets (Continued) Certificates of obligation bonds $ 22,182,556 Notes payable 34,075 Deferred charges for issuance costs(to be amortized over life of debt) (1,839,657) Compensated absences 81,905 Accrued interest payable 256,125 Net adjustment to reduce fund balance- total governmental funds to arrive at net assets- governmental activities $ 20,715,004 Explanation of Certain Differences Between the Governmental Fund Statement of Revenue, Expenditures and Changes 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 $647,738 difference are as follows: Capital outlay($45,680 reclassified to expense repairs $ 1,464,417 and$369,746 capitalized from public safety and $29,875 capitalized from public works) Depreciation expense (816,679) Net adjustment to decrease net changes in fund balances- total governmental funds to arrive at changes in net assets ofgovernmental activities $ 647,738 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 $710,963 difference are as follows: (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 Changes in Fund Balances and the Government-wide Statement of Activities (Continued) Principal repayments: General obligation debt $ 7,453,000 Note payments 15,925 Deferred rebates 27,038 Debt issuance: General obligation debt (7,375,000) Bond issuance costs 148,891 Deferred loss on refunding 865,305 Premium on bonds (424,196) Net adjustment to increase net changes in fund balances- total governmental funds to arrive at changes in net assets of governmental activities $ 710,963 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 $47,783 difference are as follows: Accrued interest $ 135,434 Compensated absences (6,670) Amoritization of premium 13,258 Amortization of deferred charge on refunding (71,381) Amortization of issuance costs (22,858) Net adjustment to decrease net changes in fund balances- total governmental funds to arrive at changes in net assets of governmental activities $ 47,783 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. (continued) 41 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) During the year ended September 30, 2012, 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 71St 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. 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, 2012, 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: (continued) 42 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) Minimum Rating Carrying Fair Legal as of Primary government Amount Value Rating Year-end Investments: TexPool $ 350 $ 350 N/A AAA-m Cash 12,956,930 12,956,930 N/A N/A Total cash and investments $ 12,957,280 $ 12,957,280 Reconciliation of total cash and investments at September 30, 2012, are as follows: Cash and cash equivalents $ 12,543,531 Restricted cash and investments 413,749 Total cash and investments $ 12,957,280 The Town's entire cash deposits in the bank of $13,587,597 on September 30, 2012, were covered by federal depository insurance or by collateral. Carrying Weighted Average Component units Amount Fair Value Maturity(Days) Investments: Cash and cash equivalents $ 10,822,074 $ 10,822,074 N/A Total $ 10,822,074 $ 10,822,074 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. (continued) 43 III. DETAILED NOTES ON ALL FUNDS (Continued) 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. Capital Assets Capital asset activity for the year ended September 30, 2012, was as follows: Primary Government Beginning Ending Balance Increases Decreases Balance Governmental activities: Capital assets,not being depreciated: Land $ 11,896,663 $ - $ - $ 11,896,663 Construction in progress 647,940 904,064 - 1,552,004 Total assets not being depreciated 12,544,603 904,064 - 13,448,667 Capital assets,being depreciated: Capital improvements 5,222,819 185,031 - 5,407,850 Buildings 21,398,468 - - 21,398,468 Machinery and equipment 2,416,422 375,322 - 2,791,744 Information systems and software 52,430 - - 52,430 Total capital assets being depreciated 299090,139 560,353 - 29,650,492 Less accumulated depreciation: Capital improvements 2,861,131 159,817 - 39020,948 Buildings 3,200,276 430,849 - 3,631,125 Machinery and equipment 1,855,028 2269013 - 2,081,041 Information systems and software 52,430 - - 52,430 Total accumulated depreciation 7,968,865 816,679 - 8,785,544 Total capital assets beinc depreciated,net 21,121,274 ( 256,326) - 20,864,948 Governmental activities capital assets,net $ 33,665,877 $ 647,738 $ - $ 34,313,615 (continued) 44 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Beginning Ending Balance Increases Decreases Balance Business-type activities: Capital assets,not being depreciated: Construction in progress $ 35,468 $ 138,742 $ - $ 174,210 Total assets not being depreciated 35,468 138,742 - 174,210 Capital assets,being depreciated: Capital improvements 13,099,180 234,381 - 13,333,561 Wastewater treatment rights 635,199 - - 635,199 Machinery and equipment 3,459,821 6,225 - 3,466,046 Total capital assets being depreciated 17,194,200 240,606 - 17,434,806 Less accumulated depreciation: Capital improvements 3,143,638 306,086 - 3,449,724 Wastewater treatment rights 354,653 31,760 - 386,413 Machinery and equipment 1,275,966 120,690 - 1,396,656 Total accumulated depreciation 4,774,257 458,536 - 5,232,793 Total capital assets beine depreciated,net 12,419,943 217,930 - 12,202,013 Business-type activities capital assets,net $ 12,455,411 $( 79,188) $ - $ 12,376,223 Depreciation was charged to departments of the primary government as follows: Governmental activities: General government $ 635,136 Public safety 42,758 Public works 138,785 Total depreciation expense -governmental activities $ 816,679 (continued) 45 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) A summary of discretely presented component units' capital assets at September 30, 2012, 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 6,877,931 711,510 - 7,589,441 Furniture and fixtures 3,960,018 149,166 - 4,109,184 Total accumulated depreciation 10,837,949 860,676 - 11,698,625 Total capital assets, being depreciated,net 17,500,419 ( 860,676) - 16,639,743 Capital assets,net $ 22,288,684 $L8 60,676 $ - $ 21,428,008 (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 6,477,733 856,833 ( 2,447,615) 9,782,181 Furniture and fixtures 3,603,449 8,529 2,447,615 1,164,363 Total accumulated depreciation 10,081,182 865,362 - 10,946,544 Total capital assets, being depreciated,net 16,877,659 ( 865,362) - 16,012,297 Capital assets,net $ 19,077,659 $( 865,362) $ - $ 18,212,297 (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 4,236,208 627,487 - 4,863,695 Capitalized purchase costs 227,872 28,484 - 256,356 Land improvements 374,212 - - 374,212 Unit appliances 168,648 - - 168,648 Furniture and fixtures 523,266 - - 523,266 Total accumulated depreciation 5,530,206 655,971 - 6,186,177 Total capital assets, being depreciated,net 12,644,720 ( 655,971) - 11,988,749 Capital assets,net $ 14,827,536 $( 655,971) $ - $ 14,171,565 (continued) 48 HI. 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 6,163,885 896,177 - 7,060,062 Furniture and fixtures 2,595,383 88,561 - 2,683,944 Total accumulated depreciation 8,759,268 984,738 - 9,744,006 Total capital assets, being depreciated,net 21,563,182 ( 984,738) - 20,578,444 Capital assets,net $ 24,462,779 $( 984,738) $ - $ 23,478,041 Restricted Cash General Fund Within the governmental funds, $264,709 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, $149,040 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, $4,818,871 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 (23,000) Total $ - General Long-term Debt Long-term liability activity for the year ended September 30, 2012,was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Combination tax and limited Pledge Revenue Certificates of Obligation,Series 2002 $ 4,600,000 $ - $ 3,955,000 $ 645,000 $ 315,000 Combination tax and limited Pledge Revenue Certificates of Obligation,Series 2003 5,515,000 - 3,290,000 2,225,000 170,000 General Obligation Refunding Bonds,Series 2007 7,285,000 - 25,000 7,260,000 25,000 Less deferred amounts on refunding ( 552,344) - ( 44,336) ( 508,008) - General Obligation Bonds,Series 2008 2,230,000 - 95,000 2,135,000 100,000 Combination tax and Revenue Certificates of Obligation,Series 2011 2,095,000 - 88,000 2,007,000 90,000 General Obligation Refunding Bonds,Series 2011 - 7,375,000 7,375,000 100,000 General Obligation Refunding Bonds,Series 2011 Premium - 424,196 13,258 410,938 - Less deferred amounts on refunding - ( 865,305) ( 27,045) ( 838,260) - Notes payable 50,000 - 15,925 34,075 16,655 Compensated absences 75,235 48,364 41,694 81,905 8,191 Fidelity Tax Reimbursement 151,656 - 27,038 124,618 28,593 $ 21,449,547 $ 6,982,255 $ 7,479,534 $ 20,952,268 $ 853,439 (continued) 50 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. During the fiscal year ended September 30, 2011, the Town issued Certificates of Obligation in the amount of$2,095,000 for various street projects. Advance Refunding The government issued $7,375,000 in general obligation bonds with interest rates ranging from 2.0% to 4.0%. The proceeds were used to advance refund $6,785,000 of outstanding 2002 and 2003 general obligation bonds which had interest rates ranging from 3.65% to 6.50%. The net proceeds of $7,650,305 (including a $424,196 premium and after payment of $148,891 in underwriting fees and other issuance costs) were deposited in an irrevocable trust with an escrow agent to provide funds for the future debt service payment on the refunded bonds. As a result, this portion of the 2002 and 2003 general obligation bonds are considered defeased and the liability for those bonds has been removed from the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $865,305. This amount is being netted against the new debt and amortized over the life of the refunding debt. The government advance refunded this portion of the 2002 and 2003 general obligation bonds to reduce its total debt service payments over 17 years by $893,302 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $704,497. (continued) 51 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 2013 $ 800,000 $ 813,828 $ 1,613,828 2014 833,000 777,232 1,610,232 2015 862,000 735,281 1,597,281 2016 910,000 713,851 1,623,851 2017 890,000 706,032 1,596,032 2018-2022 4,981,000 3,004,793 7,985,793 2023-2027 5,883,000 2,089,868 7,972,868 2028-2032 6,488,000 847,528 7,335,528 Total $ 21,647,000 $ 9,688,413 $ 31,335,413 During the fiscal year ended September 30, 2011, the Town entered into a note payable in the amount of$50,000 for the purchase of two heart monitors for the EMS/Fire Department. Debt service requirements for the note payable to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2013 $ 16,655 $ 1,565 $ 18,220 2014 17,420 800 18,220 Total $ 34,075 $ 2,365 $ 36,440 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. (continued) 52 III. DETAILED NOTES ON ALL FUNDS (Continued) General Long-term Debt(Continued) Debt service requirements for deferred rebates to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2013 $ 28,593 $ 7,165 $ 35,758 2014 30,237 5,521 35,758 2015 31,975 3,783 35,758 2016 33,814 1,944 35,758 Total $ 124,619 $ 18,413 $ 143,032 Compensated absences are typically liquidated by the fund to which they relate. Proprietary Long-term Debt Proprietary long-term debt as of September 30, 2012, is as follows: Outstanding Outstanding Current Description 9/30/2011 Issued Retired 9/30/2012 Portion Contractual obligations: Elevated water storage $ 900,436 $ - $ 81,712 $ 818,724 $ 86,519 Limited pledge contractual obligation: Dove Road Water Line and West Pump Station 4,679,944 - - 4,679,944 - Compensated absences 9,449 4,680 2,701 11,428 1,143 $ 5,589,829 $ 4,680 $ 84,413 $ 5,510,096 $ 87,662 (continued) 53 III. DETAILED NOTES ON ALL FUNDS (Continued) Proprietary Long-term Debt (Continued) The schedule of future payments by the Town under these agreements is as follows: Year Ending Total September 30, Principal Interest Requirements 2013 $ 86,519 $ 627,225 $ 713,744 2014 91,325 718,334 809,659 2015 94,530 763,362 857,892 2016 99,336 813,910 913,246 2017 104,143 863,557 967,700 2018-2022 342,871 3,767,983 4,110,854 2023-2027 4,679,944 - 4,679,944 Total $ 5,498,668 $ 7,554,371 $ 13,053,039 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) 54 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt Texas Student Housing Authority- College Station Project The Project's installment note payable is summarized as follows: 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% $ 30,720,000 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, 2012: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year $ 31,095,000 $ - $ 375,000 $ 30,720,000 $ 4t0,000 The Project's original developer refinanced the installment 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 $ 16,530,000 B 3,990,000 C 4,820,000 D 5,380,000 Total $ 30,720,000 Class C and D bonds are in default and the property does not generate enough revenue to pay the debt obligations so the maturity schedules are not included. All of the Class C and D bonds issued remain outstanding as of August 31, 2012. 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. (continued) 55 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt(Continued) Texas Student Housing Authority- College Station Project(Continued) At August 31, 2012, the Project was 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. 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 $ 15,797,516 $ - $ 279,275 $ 15,518,241 $ 307,159 2002 A-2 Bonds 5,089,241 - - 5,089,241 - Total $ 20,886,757 $ - $ 279,275 $ 20,607,482 $ 307,159 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 on 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 2013 $ 307,159 $ 1,587,954 $ 1,895,113 2014 328,105 1,563,532 1,891,637 2015 354,491 1,537,146 1,891,637 2016 382,998 1,508,639 1,891,637 2017 413,797 1,477,840 1,891,637 2018-2022 2,624,986 6,833,199 9,458,185 2023-2027 3,864,419 5,593,766 9,458,185 2028-2032 5,689,073 3,769,112 9,458,185 2033-2036 6,642,454 466,006 7,108,460 Totals $ 20,607,482 $ 24,337,194 $ 44,944,676 (continued) 56 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt(Continued) 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 $ 29,510,000 $ - $ 670,000 $ 28,840,000 $ 705,000 2001B Bonds 2,365,000 - - 2,365,000 280,000 2001C Bonds 3,000,000 - - 3,000,000 - Deferred purchase price 1,460,000 - - 1,460,000 - Less discounts ( 1,221,736) - ( 60,084) ( 1,161,652) - Total $ 35,113,264 $ - $ 609,916 $ 34,503,348 $ 985,000 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 2013 $ 985,000 $ 2,047,544 $ 3,032,544 2014 795,000 2,006,275 2,801,275 2015 840,000 1,962,856 2,802,856 2016 885,000 1,916,950 2,801,950 2017 935,000 1,868,556 2,803,556 2018-2022 5,485,000 8,518,463 14,003,463 2032-2027 7,175,000 6,832,888 14,007,888 2028-2032 9,420,000 4,589,488 14,009,488 2033-2036 7,685,000 589,925 8,274,925 Totals $ 34,205,000 $ 30,332,945 $ 64,537,945 At August 31, 2012, 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. (continued) 57 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt(Continued) 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 $ 25,775,000 $ - $ 645,000 $ 25,130,000 $ 685,000 2001B Bonds 3,240,000 - - 3,240,000 - Less discounts ( 709,809) - ( 37,485) ( 672,324) ( 37,485) Total $ 28,305,191 $ - $ 607,515 $ 27,697,676 $ 647,515 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, 2012, are as follows and have not been adjusted for the default of the bonds. Under the original terms of the Indenture, a total of $645,000 in principal and $1,976,793 in interest is due in fiscal 2012. The total interest to be paid will depend on the ultimate maturities of the bonds. Year Ending August 31, Principal Interest Total 2012 $ 28,370,000 $ 23,542,340 $ 51,912,340 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 $385,217 relates to the collection of the entire amount due on eight Ductbank leases as follows: One 25-year lease with AT&T local network services, five 20, 25 and 30-year leases with Verizon Southwest, one 5-year lease with MCI Metro and one 5-year lease with L3 Communications for use of the Town's Ductbank. (continued) 58 M. DETAILED NOTES ON ALL FUNDS (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, 2012, were as follows: Source Academy Total Federal program revenues: U. S.Department of Education-Passed through State Department of Education $ 152,351 $ 152,351 Total federal program revenues: $ 152,351 $ 152,351 State program revenues: State Department of Education $ 4,369,635 $ 4,369,635 (continued) 59 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions Interfund receivables and payables at September 30, 2012, were as follows: Due from Due to Other Funds Other Funds General fund: 4B Economic Development Corporation fund $ 149,641 $ - 4B Economic Development Corporation fund: General Fund - 149,641 Utility fund 178,384 - Utility fund: 4B Economic Development Corporation fund - 178,384 $ 328,025 $ 328,025 The 4B Economic Development Corporation fund (4B) amount of $149,641 payable to the General Fund is related to debt service payment reimbursement. The amount payable to the 4B fund from the Utility fund (UF) 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. Interfund transfers between the primary government's funds consisted of. Transfers Transfers To Funds From Funds Primary Government General fund: Visitors Association fund $ - $ 8,350 Economic Development fund 35,758 - Capital Projects fund 36,398 Debt Service fund 278,330 - Utility fund - 45,507 General maintenance 530,000 530,000 Visitors Association fund: General fund 8,350 - Debt service fund 182,396 - Debt Service fund: General fund - 278,330 Visitors Association fund - 182,396 4B Economic Development Corporation fund - 1,004,360 Capital Projects fund: General fund - 36,398 Economic Development fund: General fund - 35,758 4B Economic Development Corporation fund: Debt Service fund 1,004,360 - Utility fund: General fund 45,507 - Utility PCM fund 50,000 50,000 Totals $ 2,171,099 $ 2,171,099 (continued) 60 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions (Continued) 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. 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, (4) move unrestricted General fund revenues to Capital Project fund as determined by the Council for capital projects, and (5) transfer payment for economic development agreements to the Economic Development fund. Receivables Enterprise Governmental Funds Funds Debt Economic Westlake Visitors Westlake Service Development 4B Utility General Association Academy Fund Fund Corporation Fund Total Receivables: Sales tax $ 344,692 $ - $ $ - $ 104,230 $ 149,641 $ $ 598,563 Property tax 2,395 320 - - 2,715 Othertaxes 10,234 88,164 - 98,398 Franchise fees 146,608 - 146,608 Accounts - 847,608 847,608 Other 56,045 - 225,459 - - - - 281,504 Gross receivables 559,974 88,164 225,459 320 104,230 149,641 847,608 1,975,396 Less:Allowance for uncollectibles 599 - - 80 - - - 679 Net total receivables $ 559,375 $ 88,164 $ 225,459 $ 240 $ 104,230 $ 149,641 $ 847,608 $ 1,974,717 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, 2012 was $980,212. (continued) 61 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. 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 from 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 2011 Plan Year 2012 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. 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. (continued) 62 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) Accounting Annual Actual Percentage Net Year Pension Contribution of APC Pension Ending Cost(APC) Made Contributed Obligation 09/30/10 130,590 130,590 100% $ - 09/30/11 151,868 151,868 100% - 09/30/12 132,882 132,882 100% - The required contribution rates for fiscal year 2012 were determined as part of the December 31, 2009 and 2010 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2011, also follows: Valuation Date 12/31/09 12/31/10 12/31/11 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 23.4 years; 21.6 years; 21.3 years; Amortization Period closed period closed period closed period Amortization Period for new 25 years 25 years 25 years Gains/Losses Asset Valuation Method 10-year Smoothed 10-year Smoothed 10-year Smoothed Market Market Market Actuarial Assumptions: Investment Rate of Return* 7.5% 7.0% 7.0% 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% The funded status as of December 31, 2011, under the two separate actuarial valuations, is presented as follows: Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Actuarial Accrued Liability Valuation Value of Accrued Funded Accrued Covered as a Percentage Date Assets Liability Ratio Liability Payroll of Covered Payroll 12/31/2011 $ 2,226,028 $ 2,631,416 84.6% $ 405,388 $ 1,759,432 23.0% (continued) 63 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations are based on the benefits provided under the terms of the substantive plan in effect at the time of each valuation, and reflect a long-term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, present 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. Contributions 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) Contributions (Continued) The city's contributions to the TMRS SDBF for the years ended 2012 and 2011 were $2,240 and $2,582, respectively. Schedule of Contribution Rates (RETIREE-only portion of the rate) Annual Actual Plan/ Required Contribution Percentage Calendar Contribution Made of ARC Year (Rate) (Rate) Contributed 2010 0.00% 0.00% 100% 2011 0.00% 0.00% 100% 2012 0.00% 0.00% 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 was 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. The Town obtained a favorable judgment from the Court. The lawsuit is over and non-appealable. 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 affect the Town's financial position. (continued) 65 IV. OTHER INFORMATION (Continued) Contingent Liabilities (Continued) Circle T Municipal Utility Districts The Town and Hillwood are currently in discussions regarding the debt for 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, Hillwood 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. Subsequent Events At the Council meeting on January 28, 2013, the Council adopted a resolution authorizing the Town's consultants and staff to prepare for the issuance of certificates of obligation in the amount of $9.5 million. The Town would likely receive bond proceeds in April, 2013. The funds are to be used as follows: (1) $1,000,000 to fund a portion of a ground storage tank and (2) $8,500,000 for the expansion of Westlake Academy to include a cafetorium, classroom building and a field house. The Council also adopted an ordinance authorizing the issuance of general obligation refunding bonds at the January 28, 2013 meeting. Subsequent to year-end, the Town issued $2.2 million GO Refunding Bonds, Series 2013 for the purpose of refunding the Town's GO Bonds, Series 2008 which have a 3.92% interest rate and an outstanding principal balance of$2,135,000. Total savings over the next 15 years equals $255,176, or approximately $17,000 per year. The present value of such savings, using the yield on the 2013 Bonds, is $218,480, or 10.2% of the principal retired. 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 30,2012 General Fund Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 2,062,500 $ 2,645,000 $ 2,534,774 $( 110,226) Property 1,156,842 1,262,053 1,271,975 9,922 Mixed beverages 17,750 32,750 38,286 5,536 Franchise 582,550 664,925 664,991 66 Interest income 15,285 16,095 14,060 ( 2,035) Building permits and fees 480,890 476,150 598,394 122,244 Fines and penalties 536,611 640,000 622,338 ( 17,662) Contributions from others 304,100 325,550 325,520 ( 30) Other miscellaneous income 52,700 63,379 80,936 17,557 Total revenues 5,209,228 6,125,902 6,151,274 25,372 EXPENDITURES Current General government and administration 2,125,756 1,837,403 1,878,885 ( 41,482) Public safety 2,329,521 2,318,415 2,224,469 93,946 Cultural and recreational 162,281 150,334 111,765 38,569 Public works 610,626 420,371 391,115 29,256 Total expenditures 5,228,184 4,726,523 4,606,234 120,289 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 18,956) 1,399,379 1,545,040 145,661 OTHER FINANCING SOURCES(USES) Transfers in 1,075,383 575,850 583,857 8,007 Transfers out ( 1,166,936) ( 908,353) ( 880,486) 27,867 Total other financing sources(uses) ( 91,553) ( 332,503) ( 296,629) 35,874 NET CHANGE IN FUND BALANCE ( 110,509) 1,066,876 1,248,411 181,535 FUND BALANCE,BEGINNING 4,015,394 4,015,394 4,015,394 - FUND BALANCE,ENDING $ 3,904,885 $ 5,082,270 $ 5,263,805 $ 181,535 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 30,2012 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Hotel occupancy $ 535,000 $ 535,000 $ 590,853 $ 55,853 Interest income 2,900 2,900 3,438 538 Contributions 500 6,610 7,015 405 Other miscellaneous income 18,775 12,040 6,425 ( 5,615) Total revenues 557,175 556,550 607,731 51,181 EXPENDITURES Visitors services 221,102 479,766 475,719 4,047 Total expenditures 221,102 479,766 475,719 4,047 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 336,073 76,784 132,012 55,228 OTHER FINANCING SOURCES(USES) Transfers out (445,434) ( 190,746) ( 190,746) - Total other financing sources(uses) ( 445,434) ( 190,746) ( 190,746) - NET CHANGE IN FUND BALANCE ( 109,361) ( 113,962) ( 58,734) 55,228 FUND BALANCE,BEGINNING 1,111,280 1,111,280 1,111,280 - FUND BALANCE,ENDING $ 1,001,919 $ 997,318 $ 1,052,546 $ 55,228 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 31,2012 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES State program revenues $ 4,494,586 $ 4,380,317 $ 4,369,635 $( 10,682) Federal program revenues 150,844 163,919 152,351 ( 11,568) Interest income 1,500 1,278 2,417 1,139 Other miscellaneous income 837,912 1,237,407 1,227,872 ( 9,535) Total revenues 5,484,842 5,782,921 5,752,275 ( 30,646) EXPENDITURES Education 5,575,220 5,947,147 5,793,560 153,587 Total expenditures 5,575,220 5,947,147 5,793,560 153,587 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 90,378) ( 164,226) ( 41,285) 122,941 OTHER FINANCING SOURCES(USES) Extraordinary item - ( 124,464) ( 124,346) 118 Special item - - 67,760 67,760 Transfers in 36,967 104,844 26,124 ( 78,720) Transfers out ( 49,807) ( 49,807) ( 26,124) 23,683 Total other financing sources(uses) ( 12,840) ( 69,427) ( 56,586) 12,841 NET CHANGE IN FUND BALANCE ( 103,218) ( 233,653) ( 97,871) 135,782 FUND BALANCE,BEGINNING 916,961 916,961 916,961 - FUND BALANCE,ENDING $ 813,743 $ 683,308 $ 819,090 $ 135,782 69 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 30,2012 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 150,000 $ 205,000 $ 208,181 $ 3,181 Total revenues 150,000 205,000 208,181 3,181 EXPENDITURES Economic Development 185,758 240,758 243,939 ( 3,181) Total expenditures 185,758 240,758 243,939 ( 3,181) EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 35,758) ( 35,758) ( 35,758) - OTHER FINANCING SOURCES(USES) Transfers in 35,758 35,758 35,758 - Total other financing sources(uses) 35,758 35,758 35,758 - NET CHANGE IN FUND BALANCE - - - - FUND BALANCE,BEGINNING - - - - FUND BALANCE,ENDING $ - $ - $ - $ - 70 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 30,2012 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Interest income $ 30 $ 45 $ 45 $ - Total revenues 30 45 45 - EXPENDITURES General government - - - - Total expenditures - - - - EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 30 45 45 - OTHER FINANCING SOURCES(USES) Transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCE 30 45 45 - FUND BALANCE,BEGINNING 13,531 13,531 13,531 - FUND BALANCE,ENDING $ 13,561 $ 13,576 $ 13,576 $ - 71 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 30,2012 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 687,500 $ 950,000 $ 914,319 $( 35,681) Interest income 500 500 848 348 Total revenues 688,000 950,500 915,167 ( 35,333) EXPENDITURES General government - - - - Total expenditures - - - - EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 688,000 950,500 915,167 ( 35,333) OTHER FINANCING SOURCES(USES) Transfers out ( 717,730) ( 980,230) ( 1,004,360) ( 24,130) Total other financing sources(uses) ( 717,730) ( 980,230) ( 1,004,360) ( 24,130) NET CHANGE IN FUND BALANCE ( 29,730) ( 29,730) ( 89,193) ( 59,463) FUND BALANCE,BEGINNING 267,577 267,577 267,577 - FUND BALANCE,ENDING $ 237,847 $ 237,847 $ 178,384 $( 59,463) 72 TOWN OF WESTLAKE,TEXAS TEXAS MUNICIPAL RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2012 (unaudited) Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Actuarial Accrued Liability Valuation Value of Accrued Funded Accrued Covered as a Percentage Date Assets Liability Ratio Liability Payroll of Covered Payroll 12/31/2009 $ 1,337,183 $ 1,810,429 73.9% $ 473,246 $ 1,658,452 28.5% 12/31/2010 1,863,399 2,197,161 84.8% 333,762 1,534,927 21.7% 12/31/2011 2,226,028 2,631,416 84.6% 405,388 1,759,432 23.0% 73 TOWN OF WESTLAKE, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30,2012 (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 re-appropriated and honored during the subsequent year. 8. Expenditures exceeded appropriations in the general government and administration department of the General Fund and in the Economic Development Fund for the year. These deficits were covered by additional collections of revenue, unspent budget in other functions and available fund balance. In addition, transfers out exceeded appropriations in the 4B Economic Development Corporation Fund. This excess was covered by available fund balance. 74 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 30,2012 Variance Final Budgeted Favorable Amounts Actual (Unfavorable) REVENUES Taxes Property $ 172,098 $ 170,093 $( 2,005) Total revenues 172,098 170,093 ( 2,005) EXPENDITURES Debt service Principal retirement 668,000 668,000 - Interest and other fiscal charges 952,028 1,100,918 ( 148,890) Total expenditures 1,620,028 1,768,918 ( 148,890) EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES ( 1,447,930) ( 1,598,825) ( 150,895) OTHER FINANCING SOURCES(USES) Transfers in 1,470,222 1,465,086 ( 5,136) Bonds issued - 7,799,196 7,799,196 Payment to escrow agent - ( 7,650,305) ( 7,650,305) Total other financing sources(uses) 1,470,222 1,613,977 143,755 NET CHANGE IN FUND BALANCE 22,292 15,152 ( 7,140) FUND BALANCE,BEGINNING 7,505 7,505 - FUND BALANCE,ENDING $ 29,797 $ 22,657 $( 7,140) 75 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. 76 - 81 Revenue Capacity These schedules 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 9. 82 - 86 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. 87 - 89 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. 90 - 91 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. 92 - 94 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 NINE FISCAL YEARS (Accrual Basis of Accounting-unaudited) 2004 2005 2006 2007 2008 2009 2010 2011 2012 Governmental activities: Invested in capital assets,net of related debt $ 9,084,603 $ 7,975,910 $ 9,171,657 $ 9,646,644 $ 10,313,743 $ 13,244,690 $ 13,633,485 $ 14,188,516 $ 14,866,299 Restricted 124,185 - 1,406,756 1,719,771 2,004,763 1,761,067 1,564,868 5,607,767 4,726,376 Unrestricted 1,246,351 1,557,394 3,023,875 3,305,542 3,835,751 4,122,185 5,866,046 3,448,100 5,023,731 Total governmental activities net assets $ 10,455,139 $ 9,533,304 $ 13,602,288 $ 14,671,957 $ 16,154,257 $ 19,127,942 $ 21,064,399 $ 23,244,383 $ 24,616,406 Business-type activities: Invested in capital assets,net of related debt $ 8,118,139 $ 8,450,781 $ 8,436,729 $ 8,097,807 $ 7,726,576 $ 7,349,032 $ 7,033,831 $ 6,875,031 $ 6,877,555 Unrestricted ( 1,462,451) ( 1,621,273) (_ 1,846,851) ( 2,008,243) ( 1,997,281) ( 1,945,578) ( 2,003,600) ( 1,542,092) ( 1,636,249) Total business-type activities net assets $ 6,655,688 $ 6,829,508 $ 6,589,878 $ 6,089,564 $ 5,729,295 $ 5,403,454 $ 5,030,231 $ 5,332,939 $ 5,241,306 Primary government: Invested in capital assets,net of related debt $ 17,202,742 $ 16,426,691 $ 17,608,386 $ 17,744,451 $ 18,040,319 $ 20,593,722 $ 20,667,316 $ 21,063,547 $ 21,743,854 Restricted 124,185 - 1,406,756 1,719,771 2,004,763 1,761,067 1,564,868 5,607,767 4,726,376 Unrestricted ( 216,100) ( 63,879) 1,177,024 1,297,299 1,838,470 2,176,607 3,862,446 1,906,008 3,387,482 Total primary government net assets $ 17,110,827 $ 16,362,812 $ 20,192,166 $ 20,761,521 $ 21,883,552 $ 24,531,396 $ 26,094,630 $ 28,577,322 $ 29,857,712 Note: The Town of Westlake applied GASB Statement 34 in fiscal year ended 9/30/2004;government-wide financial information for years prior is not available. Source: Annual financial reports 76 Table 2 TOWN OF WESTLAKE,TEXAS CHANGES IN NET ASSETS LAST NINE FISCAL YEARS (Accrual Basis of Accounting-unaudited) Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 EXPENSES Governmental activities: General government $ 1,862,863 $ 2,162,365 $ 1,811,281 $ 1,941,289 $ 2,031,460 $ 2,203,882 $ 2,272,127 $ 2,478,826 $ 2,518,490 Public Safety 1,604,171 1,592,962 1,705,528 1,738,080 1,795,782 1,939,441 1,698,164 1,801,585 1,883,424 Cultural and Recreational 84,557 96,617 91,444 86,560 129,641 115,770 105,997 122,400 111,765 Public Works 533,290 342,500 613,956 455,481 1,013,804 1,028,934 594,705 470,054 216,901 Economic Development 53,006 349,208 35,759 120,753 473,451 207,044 309,653 680,823 546,039 Visitor Services 172,542 448,604 393,115 217,992 312,777 341,270 420,270 356,365 475,719 Education 1,655,212 2,166,256 2,249,998 2,672,698 3,305,220 3,722,705 4,138,875 4,884,985 6,193,560 Interest on long-term debt 1,012,982 1,028,104 1,021,779 869,327 991,184 1,068,935 1,026,026 1,127,913 897,573 Total governmental activities expenses 6,978,623 8,186,616 7,922;860 8,102,180 10,053,319 10,627,981 10,565,817 11,922,951 12,843,471 Business-type activities: Water and Sewer 1,702,081 1,888,064 2,137,831 2,206,618 2,410,765 2,694,407 2,567,675 2,794,235 3,098,466 Cemetery - - - - 13,299 473 27,822 5,604 6,282 Total business-type activities expenses 1,702,081 1,888,064 2,137,831 2,206,618 2,424,064 2,694,880 2,595,497 2,799,839 3,104,748 Total primary government program expens$ 8,680,704 $ 10,074,680 $ 10,060,691 $ 10,308,798 $ 12,477,383 $ 13,322,861 $ 13,161,314 $ 14,722,790 $ 15,948,219 PROGRAM REVENUES Governmental activities: Fees,fines,and charges for services: General Government $ 713,000 $ 1,039,214 $ 742,176 $ 785,771 $ 522,215 $ 677,948 $ 716,624 $ 721,157 $ 673,090 Public Safety 20,752 45,213 136,870 165,255 113,755 107,634 80,665 140,600 142,402 Public Works 784,546 711,655 699,753 625,340 902,875 594,338 1,597,655 292,572 407,328 Education 38,947 39,430 98,357 85,925 42,839 98,314 102,406 99,638 195,059 Operating grants and contributions 1,605,091 1,646,438 3,686,964 1,257,058 1,296,378 1,522,935 853,151 728,242 5,269,841 Capital grants and contributions 263,941 141,139 1,455,626 - - 2,059,624 83,250 425,900 - Total governmental activities program reve 3,426,277 3,623,089 6,819,746 2,919,349 2,878,062 5,060,793 3,433,751 2,408,109 6,687,720 Business-type activities: Charges for services: Water and Sewer 1,200,660 1,722,659 1,842,238 1,657,186 2,037,306 2,345,236 2,101,510 3,078,868 2,934,842 Cemetery 2,100 - 5,550 13,300 4,500 Operating grants and contributions - 370,551 19,653 - - 46,810 - 24,423 Capital grants and contributions - - - - 169,034 - - - - Total business-type activities program reve 1,200,660 2,093,210 1,861,891 1,657,186 2,208,440 2,345,236 2,153,870 3,092,168 2,963,765 Total primary government program revenu,$ 4,626,937 $ 5,716,299 $ 8,681,637 $ 4,576,535 $ 5,086,502 $ 7,406,029 $ 5,587,621 $ 5,500,277 $ 9,651,485 (Continued) 77 Table 2 TOWN OF WESTLAKE,TEXAS CHANGES IN NET ASSETS LAST NINE FISCAL YEARS (Accrual Basis of Accounting-unaudited) Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 NET(EXPENSE)REVENUES Governmental activities $( 3,552,346) $( 4,563,527) $( 1,103,114) $( 5,182,831) $( 7,175,257) $( 5,567,188) $( 7,132,066) $( 9,514,842) $( 6,155,751) Business-type activities ( 501,421) 205,146 ( 275,940) ( 549,432) ( 215,624) ( 349,644) ( 441,627) 292,329 ( 140,983) Total primary government net expense ( 4,053,767) ( 4,358,381) ( 1,379,054) ( 5,732,263) ( 7,390,881) ( 5,916,832) ( 7,573,693) ( 9,222,513) ( 6,296,734) GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental activities: Taxes Sales $ 868,046 $ 994,606 $ 1,810,706 $ 2,197,756 $ 3,590,575 $ 3,664,409 $ 3,790,533 $ 4,609,626 $ 3,657,274 Property 1,260,112 1,441,238 Hotel Occupancy 440,849 381,221 415,544 458,471 527,662 497,769 457,693 527,261 590,853 Mixed Beverage 10,511 13,846 13,674 14,066 16,177 17,869 17,902 19,721 38,286 Franchise 337,222 352,115 457,004 560,312 649,108 624,401 603,233 586,836 664,991 Unrestricted grants and contributions 937,187 1,722,198 1,822,200 2,259,643 2,500,817 2,960,590 3,484,141 3,744,757 - Investment earnings 33,180 41,802 98,824 261,622 188,459 61,224 38,383 46,248 33,353 Miscellaneous 134,717 64,047 448,827 466,654 564,973 568,782 676,638 691,345 1,112,858 Transfers - 71,857 45,319 33,976 220,819 61,321 - 145,216 45,507 Extraordinary item-proceeds from insurance,net 56,704 ( 124,346) Special item - 67,760 Gain on sale of capital assets - - - - - - - 7,000 - Total governmental activities 2,761,712 3,641,692 5,112,098 6,252,500 8,258,590 8,456,365 9,068,523 11,694,826 7,527,774 Business-type activities: Investment earnings 3,245 2,416 25,604 46,158 32,103 7,858 8,334 9,929 10,077 Miscellaneous - - 56,025 36,936 44,071 77,266 60,070 145,666 84,780 Transfers - ( 71,857) ( 45,319) ( 33,976) ( 220,819) ( 61,321) - ( 145,216) ( 45,507) Total business-type activities 3,245 ( 69,441) 36,310 49,118 ( 144,645) 23,803 68,404 10,379 49,350 Total primary government 2,764,957 3,572,251 5,148,408 6,301,618 8,113,945 8,480,168 9,136,927 11,705,205 7,577,124 CHANGE IN NET ASSETS Governmental activities ( 790,634) ( 921,835) 4,008,984 1,069,669 1,083,333 2,889,177 1,936,457 2,179,984 1,372,023 Business-type activities ( 498,176) 135,705 ( 239,630) ( 500,314) ( 360,269) ( 325,841) ( 373,223) 302,708 ( 91,633) Total primary government $( 1,288,810) $( 786,130) $ 3,769,354 $ 569,355 $ 723,064 $ 2,563,336 $ 1,563,234 $ 2,482,692 $ 1,280,390 Note: The Town of Westlake applied GASB Statement 34 in fiscal year ended 9/30/2004;government-wide financial information for years prior is not available. Source: Annual financial reports (Concluded) 78 Table 3 TOWN OF WESTLAKE,TEXAS FUND BALANCES GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General fund Reserved $ - $ 329,608 $ 131,657 $ 434,375 $ 563,176 $ 303,639 $ 193,105 $ 214,750 $ - $ Unreserved 1,608,248 670,465 805,769 2,850,789 2,533,123 2,503,099 2,532,207 3,578,235 Nonspendable: Prepaid items 62,020 6,856 Restricted for: Future projects 219,687 49,941 Committed for: Court security and technology 186,776 192,768 Assigned for: Future equipment 22,000 22,000 Unassigned - - - - - - - 3,524,911 4,992,240 Total general fund $ 1,608,248 $ 1,000,073 $ 937,426 $ 3,285,164 $ 3,096,299 $ 2,806,738 $ 2,725,312 $ 3,792,985 $ 4,015,394 $ 5,263,805 All other governmental funds Reserved Special revenue funds $ 539,019 $ 818,525 $ 779,244 $ 869,694 $ 1,183,020 $ 1,527,724 $ 1,256,954 $ 1,112,941 $ $ Unreserved,reported in: Special revenue funds - 12,391 181,960 427,720 846,214 1,666,371 1,933,564 2,693,846 - - Nonspendable: Prepaid items 33,511 60,963 Restricted for: Tourism 1,109,365 1,052,546 Future projects 4,647,863 3,594;379 Debt service 7,505 22,657 Education 885,365 758,127 Economic development 267,577 178,384 Capital projects funds 2,748,579 213,297 102,687 102,376 3,233,471 323,009 237,177 - - Total all other governmental funds $ 3,287,598 $ 1,044,213 $ 961,204 $ 1,400,101 $ 2,131,610 $ 6,427,566 $ 3,513,527 $ 4,043,964 $ 6,951,186 $ 5,667,056 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 79 Table 4 TOWN OF WESTLAKE,TEXAS CHANGES IN FUND BALANCE,GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 REVENUES Taxes $ 1,874,312 $ 1,656,628 $ 1,741,788 $ 2,696,928 $ 3,230,605 $ 4,783,522 $ 4,804,448 $ 4,869,361 $ 7,000,690 $ 6,393,472 Licenses,fees and permits 508,154 802,060 740,027 748,016 900,121 1,108,083 860,697 1,746,954 530,646 598,394 Fines and penalties 548,375 680,794 1,007,142 751,036 651,090 554,376 523,515 647,170 605,705 622,338 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 3,945,658 4,369,635 Federal program revenues 311,298 462,315 285,392 75,662 49,200 75,207 56,134 199,436 337,508 152,351 Investment earnings 151,591 33,180 41,786 98,824 261,622 188,459 61,224 38,383 46,248 33,353 Contributions 1,286,611 1,324,264 4,964,085 1,079,768 1,048,308 1,264,262 533,400 - 732,535 Otherrevenues 16,099 184,221 292,690 547,184 552,579 607,812 673,400 779,044 980,816 1,323,237 Total revenues 3,463,138 6,101,593 7,030,451 11,806,778 9,112,718 11,039,447 11,406,809 12,501,454 13,447,271 14,225,315 EXPENDITURES General government 1,087,368 1,725,211 2,243,162 2,542,295 1,385,492 1,516,346 1,519,600 1,644,587 1,733,324 1,878,885 Public safety 1,282,112 1,547,857 1,554,115 1,627,641 1,665,879 1,731,317 1,890,469 1,634,936 1,842,751 2,224,469 Cultural and recreational 14,043 9,099 96,617 91,444 86,560 129,641 115,770 105,997 122,400 111,765 Public works 68,979 125,499 112,764 434,716 276,789 846,604 841,822 333,831 326,749 391,115 Economic development 56,832 53,006 35,758 35,759 141,197 495,071 229,907 401,879 706,391 243,939 Protective inspection 187,922 80,935 - - - - - - Visitor services 131,395 172,542 448,604 393,115 226,992 312,777 341,270 420,270 356,365 475,719 Education 156,870 1,368,113 1,877,398 2,249,998 2,672,698 3,305,220 3,722,705 4,138,875 4,884,985 6,193,560 Capital Outlay 14,096,533 2,917,185 263,681 371,860 836,787 463,918 4,335,114 682,103 1,023,772 1,110,476 Debt service Principal 1,475,400 - - 350,000 470,000 395,000 593,937 563,703 555,000 668,000 Interest 836,533 986,534 1,028,104 1,028,634 1,240,950 923,944 990,641 977,163 1,083,377 952,027 Bond issuance cost - - - - - 33,000 - 36,446 148,891 Total expenditures 19,393,987 8,985,981 7,660,203 9,125,462 9,003,344 10,152,838 14,581,235 10,903,344 12,671,560 14,398,846 EXCESS(DEFICIENCY) OF REVENUES OVER (UNDER)EXPENDITURES $( 15,930,849) $( 2,884,388] $( 629,752) $ 2,681,316 $ 109,374 $ 886,609 $( 3,174,426) $ 1,598,110 $ 775,711 $( 173,531) (Continued) 80 Table 4 TOWN OF WESTLAKE,TEXAS CHANGES IN FUND BALANCE,GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 OTHER FINANCING SOURCES(USES): Proceeds from sale of land $ $ $ 412,239 $ $ $ $ $ $ - $ Sale of assets - 7,000 Issuance of debt 6,351,613 2,500,000 117,640 2,095,000 - Refunding bonds issued 7,465,000 - - - 7,799,196 Payments to bond escrow agent ( 7,088,706) - ( 7,650,305) Cost to issue debt ( 451,613) Proceeds from capital lease 23,000 - Notes payable issued 50,000 Transfer in from comp.unit 1,155,912 - - - - - - Special item - 67,760 Extraordinary item 56,704 ( 124,346) Transfers in 225,000 - 172,010 704,577 1,212,558 2,160,174 2,435,486 1,804,577 7,082,163 2,121,099 Transfers out ( 225,000) ( 100,153) ( 659,258) ( 1,178,582) ( 1,939,355) ( 2,374,165) ( 1,804,577) ( 6,936,947) ( 2,075,592) Total other financing sources(uses) 7,055,912 484,096 45,319 433,270 2,720,819 178,961 - 2,353,920 137,812 Prior period adjustment 32,828 60,000 - - - - - Correction of an error NET CHANGES IN FUND BALANCES $( 8,874,937) $( 2,851,560) $( 145,656) $ 2,786,635 $ 542,644 $ 3,607,428 $( 2,995,465) $ 1,598,110 $ 3,129,631 $( 35,719) DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES 43.6% 16.3% 13.9% 15.7% 20.9% 13.6% 15.4% 15.0% 14.1% 12.5% 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) 81 Table 5 TOWN OF WESTLAKE,TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TWO FISCAL YEARS (Modified Accrual Basis of Accounting-unaudited) Appraised Value Less: Total Taxable Total Fiscal Real Personal Tax-Exempt Assessed Direct Year Property Property Property Value Tax Rate 2011 $ 953,568,803 $ 73,601,266 $ 146,497,994 $ 880,672,075 0.1601 2012 1,016,142,945 90,060,445 158,124,036 948,079,354 0.15684 Note: Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an ad valorem tax. Source: Tarrant County Appraisal District Denton Central Appraisal District 82 Table 6 TOWN OF WESTLAKE,TEXAS PRINCIPAL PROPERTY TAX PAYERS CURRENT AND PRIOR FISCAL YEAR (Unaudited) 2012 2011 Percentage Percentage Taxable of Total Town Taxable of Total Town Assessed Taxable Assessed Taxable Taxpayer Value Rank Assessed Value Taxpayer Value Rank Assessed Value Maguire Thomas Partners,etal $ 150,235,546 1 15.85% Maguire Thomas Partners,etal $ 116,839,380 1 13.27% FMR Texas,LLC/LTD Partnership 77,754,274 2 8.20% FMR Texas,LLC/LTD Partnership 154,220,911 2 17.51% DCLI,LLC 76,847,119 5 8.11% Maguire Partners 39,117,985 3 4.44% Corelogic Real Estate 18,050,838 1.90% Lexington TNI Westlake LP 18,249,200 4 2.07% Lexington TNI Westlake LP 16,560,450 3 1.75% First American Leasing/Real Estate 17,636,457 5 2.00% Marsh USA,Inc. 10,030,377 6 1.06% DCLI,LLC 13,234,691 6 1.50% First American Leasing 8,804,230 4 0.93% Fidelity Investments 12,277,810 7 1.39% Levi Strauss&Co. 8,637,483 7 0.91% Levi Strauss&Co. 8,215,271 8 0.93% Westlake Terra,LLC 6,808,002 8 0.72% Westlake Terra,LLC 7,400,002 9 0.84% Louco Investment Partners LP 6,467,500 10 0.68% EMC Corp 6,418,484 10 0.73% Total $ 380,195,819 40.10% Total $ 393,610,191 44.69% Source: Tarrant County Appraisal District Note: (1)Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an ad valorem tax. (2)Total Taxable Assessed Value including real and personal property for tax year 2010(fiscal year 2011)is$880,672,075 (3)Total Taxable Assessed Value including real and personal property for tax year 2011(fiscal year 2012)is$948,079,354 83 Table 7 TOWN OF WESTLAKE,TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TWO FISCAL YEARS (Unaudited) Collected within the Fiscal Year Total Collections Taxes Levied Adjusted of the Levy Collections to Date Fiscal for the Adjustments Taxes Levied Percent in Subsequent Percentage Year Fiscal Year to Levy for Fiscal Year Amount of Levy Years Amount of Levy 2011 $ 1,409,956 $ 47,560 $ 1,362,396 $ 1,356,050 99.53% 4,930 $ 1,360,980 99.90% 2012 1,486,968 47,220 1,439,748 1,437,908 99.87% 1,437,908 99.87% Note: Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an ad valorem tax. Source: Tarrant County Appraisal District Denton Central Appraisal District 84 Tabie 8 TOWN OF WESTLAKE,TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES (PER$100 OF ASSESSED VALUE) LAST TWO FISCAL YEARS (Unaudited) City Direct Rates Overlapping Rates Operating/ School Districts Counties Tarrant Tarrant Trophy Total Fiscal General Debt Service Total(A) Carroll Northwest Keller Denton Tarrant County County Club Direct and Year Fund Fund Direct ISD ISD ISD County County College Dist Hospital Dist. MUD#1 Overlapping 2011 0.15620 0.00390 0.16010 1.41500 1.37500 1.53060 0.27736 0.26400 0.13764 0.22790 0.19500 5.58259 2012 0.13835 0.01849 0.15684 1.41500 1.37500 1.54000 0.28287 0.26400 0.14897 0.22790 0.17500 5.58557 Notes: Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an advalorem tax. Overlapping rates are those of local and county governments that apply to property owners within the Town of Westlake. Not all overlapping rates apply to all Town's property owners(e.g.,the rates for the counties and school districts apply only to the proportion of the Town's property owners whose property is located within the geographic boundaries of the county and school district) Source: Tarrant County Appraisal District Denton Central Appraisal District 85 Table 9 TOWN OF WESTLAKE,TEXAS TAXABLE SALES BY INDUSTRY TYPE LAST SEVEN FISCAL YEARS (Unaudited) Fiscal Year NAICS Industry Type 2006 2007 2008 2009 2010 2011 2012 11 Agriculture,Forestry,Fishing and Hunting $ 31 $ 67 $ 54 $ 210 $ - $ 60 $ 38 21 Mining 2,321 - 1,012 20 400 4,420 3,050 22 Utilities 463,222 212,336 194,359 185,819 178,693 178,529 171,131 23 Construction 81,542 200,791 635,134 411,718 68,306 117,283 139,000 31-33 Manufacturing 1,120,328 360,010 186,128 95,395 386,492 322,085 526,755 42 Wholesale Trade 248,702 284,082 178,003 72,034 105,557 153,392 134,466 44-45 Retail 408,556 253,293 493,309 445,839 1,097,007 1,089,059 1,062,197 48-49 Transportation and Warehousing 63 491 - 2,784 556 680 1,156 51 Information 538,210 223,672 246,591 355,603 159,513 514,501 367,298 52 Financial and Insurance 10,162 343,446 120,187 64,994 87,188 73,529 27,857 53 Real Estate and Rental and Leasing 178,047 204,398 102,515 123,191 327,207 204,973 215,754 54 Professional,Scientific,and Technical Services 111,746 452,018 180,288 156,385 202,263 232,023 491,383 56 Admin and Support and Waste Mgmt&Rem Sry 245,562 45,809 105,811 15,102 39,539 90,473 39,027 61 Education Services 895 317 85 2,984 619,228 1,584,025 356,689 62 Health Care and Social Assistance 10 - 109 - - 167 106 71 Arts,Entertainment and Recreation 49,474 224,101 177,446 175,517 158,996 208,578 204,456 72 Accommodation and Food Services 34,021 57,084 65,779 54,416 140,996 182,903 93,123 81 Other Services(except Public Administration) 130,476 130,392 32,621 1,490 4,462 4,675 9,805 92 Public Administration 170 - - - 11 1 135 $ 3,623,538 $ 2,992,308 $ 2,719,431 $ 2,163,501 $ 3,576,414 $ 4,961,356 $ 3,843,426 Town direct sales tax rate 2.00% 2.00% 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 Source: Texas State Comptroller reports 86 Table 10 TOWN OF WESTLAKE,TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS General Bonded Debt Outstanding Percentage General Certificates of Actual Fiscal Obligation of Taxable Per Year Bonds Obligation Total Sales Capita 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% 25,791 2010 9,630,000 10,555,000 20,185,000 10.65% 23,831 2011 9,515,000 12,210,000 21,725,000 9.43% 21,900 2012 16,770,000 4,877,000 21,647,000 11.84% 21,348 Notes: 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 13 for population data. $25 $20 $15 o $10 $5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ■General Oblgation Bonds ■Certificates of Obligation 87 Table 11 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 Loans Obligations Government Income Capita 2003 6,410,000 $ 6,100,577 $ 12,510,577 92% $ 41,289 2004 12,400,000 6,027,387 18,427,387 123% 56,181 2005 18,810,000 5,980,921 24,790,921 150% 69,834 2006 - 18,460,000 - 5,878,381 24,338,381 73% 34,869 2007 7,365,000 11,755,000 23,000 5,822,299 24,965,299 73% 35,513 2008 9,850,000 11,375,000 15,264 5,763,022 27,003,286 70% 34,399 2009 9,735,000 10,975,000 46,559 5,734,191 26,490,750 65% 32,990 2010 9,630,000 10,555,000 - 5,658,888 25,843,888 59% 30,512 2011 9,515,000 12,210,000 50,000 5,580,380 27,355,380 49% 27,576 2012 16,770,000 4,877,000 34,075 5,498,668 27,179,743 47% 26,804 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 13 for personal income and population data. $30 $25 $20 $15 0 $10 $5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 88 Table 12 TOWN OF WESTLAKE,TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30,2012 (Unaudited) Overlapping Amount of Taxing Body Debt Outstanding As of Percent(1) Amount Carroll ISD $ 241,860,039 12/31/2012 5.72% $ 13,834,394 Denton County 553,915,000 12/31/2012 0.02% 110,783 Keller ISD 700,087,009 12/31/2012 4.57% 31,993,976 Northwest ISD 629,986,474 12/31/2012 0.50% 3,149,932 Tarrant County 317,725,000 12/31/2012 0.72% 2,287,620 Tarrant County College District 22,705,000 12/31/2012 0.72% 163,476 Tarrant County Hospital District 26,285,000 12/31/2012 0.72% 189,252 Trophy Club MUD#1 12,059,000 12/31/2012 18.35% 2,212,827 Total Overlapping Debt 53,942,260 Town of Westlake Outstanding Debt 21,647,000 Total Direct&Overlapping Debt $ 75,589,260 Source: Texas Municipal Report prepared by employees of the Municipal Advisory Council of Texas("MAC") Note: Overlapping governments are those that coincide,at least in part,with the geographic boundaries of the Town. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the Town of Westlake. This process recognized that,when considering the Town's ability to issue and repay long-term debt,the entire debt burden borne by the resident and businesses should be taken into account. However,this does not imply that every taxpayer is a resident,and therefore responsible for repaying the debt,of each overlapping government. (1) The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the entity's taxable assessed value that is within the Town's boundaries and dividing it by the entities'total taxable assessed value. 89 Table 13 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 2003 303 $ 13,581,139 $ 44,822 6.3% 2004 328 14,995,729 45,719 5.6% 2005 355 16,554,737 46,633 5.1% 2006 698 33,200,874 47,566 4.7% 2007 703 34,107,477 48,517 4.3% 2008 785 38,847,591 49,487 4.9% 2009 803 40,533,131 50,477 7.7% 2010 847 43,609,207 51,487 8.2% 2011 992 55,503,392 55,951 8.2% 2012 1,014 57,869,000 57,070 5.8% Sources: Population for 2000 is from the 2000 census. Fiscal Years 2001 through 2003 are estimated. 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. 2010 Census shows median household income at$250,000. Due to the influx of residents coming to Westlake Academy,surveys have shown that there is approximately 1.13 school-age children in each household;therefore,we will use a 3.13 average household size to calculate population. 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 2%annual increase in cost of living through 2010 and subsequent to the census. Census was used for 2011. Estimated Population 1500 992 1,014 1000 698 703 500303 328 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 90 Table 14 TOWN OF WESTLAKE,TEXAS PRINCIPAL EMPLOYERS CURRENT YEAR AND FIVE YEARS AGO (Unaudited) 2012 2007 Percentage Percentage of Estimated of Estimated Total Town Total Town Employer Employees Employment Employer Employees Employment Fidelity Investments 4,724 52.04% Fidelity Investments 3,100 37.15% First American/Core Logic 1,790 19.72% First American/Core Logic 3,000 35.95% Chrysler Financial/TD Auto Finance 595 6.55% Chrysler Financial/TD Auto Finance 325 3.89% Wells Fargo 580 6.39% Wells Fargo 790 9.47% McKesson Corporation 208 2.29% McKesson Corporation 215 2.58% Verizon 312 3.44% Sonitrol/World Factory 165 1.98% Sabre JLL Facilities 196 2.16% Walco 150 1.80% Vaquero Club 135 1.49% Vaquero Club 140 1.68% Marriott Solana Hotel 124 1.37% Marriott Solana Hotel 120 1.44% Pfizer,Inc 32 0.35% Pfizer,Inc. 115 1.38% Town of Westlake/Westlake Academy 94 1.04% Town of Westlake/Westlake Academy 73 0.87% Solera 50 0.55% Premier Academy 34 0.41% Levi Strauss 66 0.73% Solara Healthcare 28 0.34% Total 8,906 98% Total 8,255 99% Note: Information on the Principal Employers from 1999 is not available. Information will be accumulated over the next ten years. Comparisons will be made to the first available data until ten years can be compared. Source: Cassidy Turley tenant records and contact with employers of the Town 91 Table 15 TOWN OF WESTLAKE,TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 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 0.75 Administrative 1.50 0.50 0.50 0.50 0.00 0.00 0.75 0.50 0.75 0.75 Building official 0.00 1.00 1.00 1.00 1.00 1.00 1.33 1.33 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 maintenance 0.00 0.50 0.50 0.50 0.50 0.75 1.08 1.08 1.08 0.83 Municipal 2.00 3.50 3.75 3.75 4.00 4.00 4.25 4.50 4.50 3.75 Finance 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Payroll/Human Resources/IT 0.00 0.00 0.00 0.00 0.00 1.00 1.33 1.33 1.33 1.33 Public safety(EMS) 10.00 10.00 10.00 11.00 11.00 11.00 9.00 9.00 9.00 9.00 Culture and recreation 0.00 0.50 0.50 0.50 0.50 0.75 0.75 0.75 0.75 0.50 Public works 0.00 1.00 1.00 1.00 1.00 1.50 1.50 1.50 1.50 2.00 Marketing and public affairs 0.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00 1.00 Education 0.00 18.85 25.15 32.40 36.40 43.00 48.10 55.62 59.44 67.48 Total 19.50 42.85 49.40 57.65 60.40 69.00 74.09 81.61 85.68 93.72 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. 92 Table 16 TOWN OF WESTLAKE,TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General government Building permits issued 27 54 53 36 64 60 49 21 15 14 Building permit values $ 23,620,817 $ 46,698,935 $ 56,415,093 $ 42,910,780 $ 46,923,814 $ 180,707,159 $ 39,278,318 $ 27,575,445 $ 59,749,048 $ 29,031,556 Police(Contract with Keller PD) Motor vehicle stops 9,993 9,237 9,586 8,992 10,045 10,357 9,247 9,763 9,829 12,221 Traffic accident investigations 91 180 163 164 225 208 266 273 348 343 Part I crimes 46 19 26 30 25 26 23 19 30 39 DWI arrests 117 70 86 56 53 45 24 32 80 50 Fire/EMS Fire runs 108 78 148 136 153 169 118 172 191 181 Ambulance runs 150 115 135 207 251 159 184 187 264 266 Inspections N/A N/A 89 161 96 132 15 71 71 54 Public Works-General Street resurfacing(sq.footage) 1.65 1.30 0.00 1.35 1.01 0.00 0.00 0.00 3800.00 30,000.00 Potholes repaired 0.00 40.00 40.00 20.00 0.00 20.00 10.00 5.00 36.00 6.00 Public Works-Utility Number of water accounts 130 177 271 338 386 419 437 478 500 573 Water main breaks N/A 1 3 3 2 4 5 6 4 4 Avg daily consumption MG(water) 0.382 0.501 0.817 1.031 0.729 0.999 1.020 0.889 1.200 1.100 Peak daily consumption MG(water) 1.244 1.423 2.198 2.677 1.978 2.060 2.740 2.460 2.540 2.600 System capacity-MG(water) 0.685 1.685 1.685 1.685 1.685 1.685 1.685 1.685 1.685 1.685 Water purchased(in gallons x 000) 138,288 183,356 298,124 376,264 266,158 364,764 372,933 324,843 443,222 407,305 Water sold(in gallons x 1000) 127,998 150,869 230,657 338,085 246,280 340,743 313,495 290,000 385,320 376,496 Wastewater Number of new sewer connections 105 139 179 211 235 240 251 254 245 292 Avg daily sewage treatment 0.0710 0.0950 0.1270 0.1320 0.1370 0.124 0.101 0.063 0.163 0.136 (thousands of gallons) Source: Various Town departments Notes: N/A represents information that is unavailable. 93 Table 17 TOWN OF WESTLAKE,TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (Unaudited) Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Fire Stations 1 1 1 1 1 1 1 1 1 1 Public Works-Utility Pump station 1 1 1 1 1 1 1 1 1 1 Lift station 2 2 2 2 2 2 2 3 3 3 Telecommunications Duct Bank(LF) 24,073 36,703 38,303 38,303 38,303 43,703 49,103 51,803 57,783 57,783 Telecommunications Duct Bank Manholes 58 91 95 95 95 104 113 122 122 122 Water Water mains(LF) 48,000 52,000 57,500 58,300 59,200 64,600 70,000 79,000 130,000 137,891 Fire hydrants 55 76 95 119 119 130 130 154 188 191 Storage capacity MG 1,685 1,685 1,685 1,685 1,685 1,685 1,685 1,685 1,685 1,685 Wastewater Sanitary sewers(LF) 18,100 20,000 15,000 35,000 35,000 39,300 39,300 49,900 94,000 94,000 Manholes 115 160 200 250 250 267 284 304 304 304 Public Works-Utility Streets(miles) 10.80 10.80 10.80 10.80 10.80 10.80 10.80 10.80 10.80 10.25 Highways(miles) - - - - - - - - - - Streetlights - - - - - - - - - - Traffic signals(school zone flashers) 2 2 2 2 2 2 2 2 2 2 Parks and recreation Acreage 14 14 14 19 19 25 25 25 25 25 Playgrounds 2 2 2 2 2 2 2 2 2 2 Softball/soccer field 1 1 1 1 1 1 1 1 1 1 Football field - - - - 1 1 1 1 1 Source: Various Town departments Note: No capital asset indicators are available for the general government. The amount of roads decreased in FY 2011-2012 due to a portion of road being dedicated to TxDot 94 COMPLIANCE SECTION lvk�*Kl 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 To the Honorable Mayor and Members of the Town Council Town of Westlake, Texas 3 Village Circle, Suite 202 Westlake, Texas 76262 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, 2012, which collectively comprise the Town's basic financial statements and have issued our report thereon dated February 15, 2013. 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 deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, 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. 95 115 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 0 ALBUQUERQUE,NM(505)266-5904 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 the audit committee, management, others within the Town, and appropriate 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. PJ -a 9 Atipv,M, � � P J J February 15, 2013 96