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Res 18-11 Approving Comprehensive Annual Financial Report for the year ended September 30, 2017 TOWN OF WESTLAKE RESOLUTION NO. 18-11 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS, ACCEPTING THE COMPREHENSIVE ANNUAL FINANCIAL REPORT PRESENTED BY WEAVER AND TIDWELL, L.L.P., FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2017. WHEREAS, Section 103.001 of the Local Government Code requires that a municipality shall have its records and accounts audited annually and shall have an annual financial statement prepared based on the audit; and WHEREAS, Section 103.002 of the Local Government Code requires that a municipality shall employ at its own expense a certified public accountant who is licensed in this state or a public accountant who holds a permit to practice from the Texas State Board of Public Accountancy to conduct the audit and to prepare the annual financial statements; and WHEREAS, the Town Council finds that the passage of this Resolution is in the best interest of the citizens of Westlake. 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 Comprehensive Annual Financial Report from Weaver and Tidwell, L.L.P., for the fiscal year ended September 30, 2017, 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 18-11 Page 1 of 2 SECTION 4: That this resolution shall become effective from and after its date of passage. PASSED AND APPROVED ON THIS;Mh DAY OF MARCH, 2018. ATTEST: Kell Edwafds, Town Secretary Laura Wheat, Mayor Thomas E. Brymer, Manager Resolution 18-11 Page 2 of 2 Town of Westlake Town of Westlake, Texas Comprehensive Annual Financial Report Fiscal Year Ended September 30, 2017 Prepared by: Town of Westlake Finance Department 1500 Solana Blvd, Suite 7200 Westlake, Texas 76262 Town of Westlake Town of Westlake Consolidated Annual Financial Report For the Fiscal Year Ended September 30, 2017 Table of Contents i Page Exhibit Introductory Section Letter of Transmittal iii GFOA Certificate of Achievement xii Organization Chart xiii Town Officials xv Financial Section Independent Auditor’s Report 4 Management's Discussion and Analysis 10 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 24 A-1 Statement of Activities 25 A-2 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet 27 A-3 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 29 A-4 Statement of Revenues, Expenditures, and Changes in Fund Balance 31 A-5 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 33 A-6 Proprietary Funds Financial Statements Statement of Net Position 34 A-7 Statement of Revenues, Expenses, and Changes in Net Position 35 A-8 Statement of Cash Flows 36 A-9 Fiduciary Funds Financial Statements Statement of Fiduciary Net Position 37 A-10 Discretely Presented Component Units Financial Statements Combining Statement of Net Position 38 A-11 Combining Statement of Activities 39 A-12 Notes to the Basic Financial Statements 42 Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 81 B-1 Schedule of Revenues, Expentitures and Changes in Fund Balance - Budget and Actual - Westlake Academy 82 B-2 Notes to Budgetary Comparison Schedules 83 Schedule of Net Pension Liability and Related Ratios - TMRS 84 B-3 Schedule of Contributions - TMRS 85 B-4 Notes to TMRS Required Supplementary Information 86 Schedule of Academy's Proportionate Share of Net Pension Liability - TRS 87 B-5 Schedule of Contributions - TRS 88 B-6 Town of Westlake Consolidated Annual Financial Report For the Fiscal Year Ended September 30, 2017 Table of Contents – Continued ii Page Exhibit Combining and Individual Fund Statements and Schedules Major Governmental Funds Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Debt Service Fund 91 C-1 Nonmajor Governmental Funds Combining Balance Sheet 93 C-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance 94 C-3 Nonmajor Special Revenue Funds Budgetary Comparison Schedules Visitors Association Fund 95 C-4 Lone Star Public Facilities Corporation Fund 96 C-5 Economic Development Fund 97 C-6 4B Economic Development Corporation Fund 98 C-7 Agency Funds Statement of Changes in Assets and Liabilities - PID Agency Fund 100 C-8 Statistical Section Net Position By Component 104 S-1 Changes in Net Position 105 S-2 Fund Balances, Governmental Funds 107 S-3 Changes in Fund Balances, Governmental Funds 108 S-4 Assessed Value and Estimated Actual Value of Taxable Property 110 S-5 Principal Property Tax Payers 111 S-6 Property Tax Levies and Collections 112 S-7 Direct and Overlapping Property Tax Rates 113 S-8 Taxable Sales by Industry Type 114 S-9 Ratios of General Bonded Debt Outstanding 115 S-10 Ratios of Outstanding Debt by Type 116 S-11 Direct and Overlapping Governmental Activities Debt 117 S-12 Demographic and Economic Statistics 118 S-13 Principal Employers 119 S-14 Full-Time Equivalent City Government Employees by Function/Program 120 S-15 Operating Indicators by Function/Program 121 S-16 Capital Asset Statistics by Function/Program 122 S-17 1500 Solana Blvd., Suite 7200 Westlake, Texas 76262 Metro: 817-430-0941  Fax: 817-430-1812  www.westlake-tx.org iii Town of Westlake March 23, 2018 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, 2017, 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 Weaver and Tidwell, L.L.P. 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, 2017, 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 unmodified opinion that the Town's financial statements for the fiscal year ended September 30, 2017, 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 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. iv Profile of the Town Westlake is an oasis of natural beauty that maintains open spaces in balance with distinctive development, trails, and quality of life amenities amidst an ever-expanding urban landscape. Nestled in the DFW Metroplex, Westlake is a Gold Level Scenic City and home to many small independent businesses and several corporate campuses Distinctive developments and architecturally vibrant corporate campuses find harmony among our meandering roads and trails, lined with native oaks and stone walls. We are leaders in education, known for our innovative partnerships between the Town-operated Charter school and our corporate neighbors. We strive to maintain strong aesthetic standards and preserve the natural beauty in our town. Hospitality finds its home in Westlake, as a community, we are family friendly, welcoming, fully involved and invested in our rich heritage, vibrant present and exciting, sustainable future. Westlake is conveniently located between DFW Airport and Alliance Airport, on the south side of State Highway 114, providing quick, easy access to all areas of the Dallas-Ft. Worth Metroplex. The unique location of Westlake is ideal for many of its major corporate campuses and residential communities. A common ideal shared by our corporate and individual residents is their support of the existing character and charm of the community as well as a commitment to excellence in new development. Minutes from downtown Fort Worth, Texas and DFW International Airport, the Town of Westlake is home to several upscale residential communities and Fortune 500 companies, all of which share a unique character and charm, along with a commitment to excellence. The Town is located in northeast Tarrant County and may be conveniently accessed by several major thoroughfares, including SH 114 and US 377. The Town occupies approximately 7 square miles and serves a population of approximately 1,310. In 2017, the average size of new home construction was 9,693 square feet with an average estimated construction cost of $1.82 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 for a two-year staggered term each May. The financial reporting entity (the government) includes all funds of the primary government (i.e. the Town of Westlake), as well as all its component units. Component units are legally separate entities for The financial reporting entity (the government) includes all funds of the primary government (i.e. the Town of Westlake), as well as all 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 its 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. v 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 to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by developing , implementing, financing, and providing one or more projects defined and permitted under Section 4B of the Act. The board of directors is composed of seven persons appointed by the members of the Town’s governing board. Four of the members of the board of directors are members of the Town’s governing board. Westlake Academy (Academy) is an open-enrollment charter school, as provided by Subchapter D, Chapter 12, of the Texas Education Code. The Town of Westlake (“Charter Holder”) applied for and became the first municipality in Texas to ever receive this special charter designation. The Academy had 825 students in FY 15-16 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 Corporation- Denton Project, Texas Student Housing Corporation-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 Local Challenges Involving Residential Growth 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. 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. Over the previous fiscal year, the Town has achieved and/or is continuing to work toward important initiatives and projects that will allow us to balance our “distinctive development, trails, and quality of life amenities amidst an ever-expanding urban landscape.” Because of the current and potential development within our community, it is both an exciting and challenging time in Westlake! Adhering to the Town’s Vision is the key to Westlake’s success for managing the significant growth. While growth is occurring, it also presents very clear challenges for our community if we wish to continue to maintain the elements of Westlake that make it so unique. These community attributes include our beautiful neighborhoods with top quality residences, strong aesthetic standards, a top-tier Town owned K-12 charter school, open space preservation, streetscaping, emphasis on proactive planning, and maintaining our view corridors. The “sea of change” that surrounds Westlake involves not only our current internal development but also the current growth opportunities planned for the State vi Highway (SH 114) corridor in northeast Tarrant County and into southern Denton County. The communities that surround us are undergoing significant development as well, which adds to the “sea of change” affecting Westlake. The impact of anticipated growth along the SH 114 corridor is described by Mr. Robin McCaffrey (AIA and APA) of MESA Planning, the firm that was engaged to update the Town’s latest Comprehensive Plan, Forging Westlake. According to Mr. McCaffrey: Westlake, with the arrival of the Charles Schwab Corporation project, is crossing through a portal into the future suggested by the Town’s 2015 Comprehensive Plan. In conjunction with Fidelity and other financial services in and around Westlake, Westlake hosts nearly 4 million square feet of an industry type (i.e. financial services), constituting a significant Industry Cluster. At this scale, the aggregation of a single industrial code activity is important enough to attract vertical and horizontal expansion, which further substantiates Westlake’s importance as a financial services center in the D allas/ Fort Worth Metroplex. Bringing the above described importance to the Town’s other advantages of proximity, makes Westlake a singularly important center for growth and development going forward. Westlake’s Permanent Population Growth: This is the portion of our population considered to be our permanent residents. From the 1990 population of 185 to 2017’s population of 1,310 represents an increase of 608% equal to 1,125 additional residents. We will need to continue to monitor and plan for the continued increase in these numbers considering our Comprehensive Plan’s (Forging Westlake) forecast of approximately 7.21% annual population growth between now and 2040. This would bring us to around 7,000 residents. Traffic Demands Due to Growth in Westlake and Surrounding Areas: The four (4) municipalities surrounding Westlake (Keller, Southlake, Trophy Club, and Roanoke) are projected to have a combined population of 215,000 people by 2040. The growth in these communities will generate additional traffic that commutes through our Town. With our projected level of residents (7,000) and the existing zoning entitlements (if executed) we would expect an estimated 300,000 vehicle trips per day. Local impacts associated with this level of growth affect our street infrastructure, water and sewer system capital investment requirements, as well as demand for daily municipal services. Policies established in Forging Westlake will be essential for addressing this issue via the Town’s thoroughfare plan as it pertains to development which occurs in the community. Balanced Growth to Impact Cost of Municipal Services: Likewise, the ability to fund municipal services utilizing a cost-effective revenue format requires balanced growth that provides for commercial development and a diversified tax base, while maintaining the community’s open space and bucolic atmosphere. At the same time, we must continue to ensure the policy direction of the Town is focused on growth paying for the infrastructure for which it creates the demand. Housing Start Increases and Maintaining Westlake’s High Quality Residential Housing: We continue to see strong single family residential construction demand. This has been demonstrated in Granada Phase 1 as well as in existing subdivisions such as Vaquero, Paigebrooke, and Terra Bella. Additionally, the infrastructure for three (3) new single family residential developments, Carlyle Court, Granada Phase 2 and Quail Hollow, has been completed, accepted by the Town and building permits issuance in those developments is underway. Also, the mixed-use development called Entrada continues to progress with infrastructure construction making significant headway. Entrada’s infrastructure is being financed with a Town approved Public Improvement District (PID), the bonds for which are paid back by assessments on development within Entrada. When the infrastructure is complete, it will add (over time) a wide variety of 322 residential units to Westlake - ranging from single family homes, to villas, to town homes. Once complete, these four (4) developments will add approximately 463 new lots to our residential inventory. vii Our residential construction activity shows a steady increase in building permits for housing which has occurred since we have emerged from the 2008-09 recession. Housing starts in Westlake, due to the high value of our homes, add taxable value to our taxing base; however, this also i mpacts the demand for municipal services, especially the Town’s charter school, Westlake Academy. As the area economy continues to perform well, and Westlake and our surrounding communities continue to experience commercial development, this will further attract individuals who work for and own these businesses. In turn, these individuals will need housing. As our housing stock expands in response to these forces, we will need to manage our distinctive developments to ensure we maintain our community as an ‘oasis of natural beauty’ and achieve high-end housing options as identified in the Housing element of Forging Westlake. Local Challenges Involving Commercial Growth Commercial Development, Economic Development, and Daytime Population Growth: Because Westlake is the home to major corporate office campuses, its Monday-Friday daytime population is growing and is conservatively estimated to be approximately 10,000 - 12,000 individuals. These office complexes are comprised of notable corporate clients that include Deloitte, LLP and Fidelity Investments. Currently, Fidelity has almost 6,000 employees at their Westlake campus, with expansion room for two (2) more office buildings in addition to their two (2) existing office buildings. New Charles Schwab Corporate Campus: The announcement of their regional corporate campus in 2016 is beginning to come to fruition. Phase 1 will consist of a 500,000-sq. ft. office building and parking garage. Adjacent to the Schwab campus will be a mixed-use development, which Hillwood Properties will develop near the intersection of SH170 and SH114. The campus will initially have approximately 1,500- 1,900 employees and should round out with an estimated 5,000 employees when all phases are complete. Presently, Schwab is well underway in the process of hiring 500 employees for its temporary Roanoke Road location in Westlake. Commercial Development in Entrada: The mixed-use development called Entrada, located at FM1938/Davis Blvd. and SH114, will also create growth in our commercial tax base. During the past budget year, commercial buildings totaling 55,000 sq. ft. have been approved by the Town for the development. A CVS Pharmacy is open for business as well as a Primrose Private School. Other commercial uses include various retail, restaurants, amphitheater and hotels. Solana Redevelopment/Reinvestment: The Solana Office Complex, acquired by Equity Office (Blackstone) approximately two (2) years ago, has seen a resurgence in occupancy. Equity’s multi-million- dollar investment in the complex to improve its parking, landscaping and buildings has been a strong positive path for Westlake. The investment is boosting office occupancy levels with Sabre Corporation expanding their presence into Westlake by leasing significant office space in Solana. They are also hiring up to 500 new employees. The municipality has assisted in this revitalization effort by leasing 20,000 sq. ft. of office space for the next 10 years. The new location in Solana allows the staff to be in one office suite and better serve the Westlake community. Economic Development: The Town has also pursued the ideas advanced in the Economic Development element of Forging Westlake. That is, where appropriate, to pursue businesses that ultimately expand the Town’s tax base with high quality office buildings, and at the same time, compliments our financial services business cluster, which has already been created through our corporate residents of Fidelity and Deloitte. Further, we pursue the types of businesses interested in high quality office campus development and creating well-paying positions for employees. With the Schwab announcement (and the start of construction of the TD AmeriTrade’s complex in Southlake) we are well on our way to becoming a financial services corridor within the DFW Metroplex. viii While offering economic development incentives for the Schwab project, the tax abatement provided is in-line with incentives offered in our region, plus the company is providing one -time funding for Westlake Academy. Staff will continue to monitor our corporate stakeholders and attempt to identify avenues to strengthen these relationships and assist in attracting new corporations to Westlake . The expansion of commercial development will continue to grow Westlake’s daytime population. Local Challenges – Other There are other local challenges involving both financial and physical site planning, strategic forecasting, residential feedback through our survey instruments and the Town’s public charter school, Westlake Academy. Westlake’s residential growth impact on the Academy: The number of Westlake residents who are selecting Westlake Academy as the educational choice for their students has doubled in the past five years. Resident surveys continually indicate that the Academy is a strong motivator for our residents to live in Westlake, and one of the top three (3) reasons why they plan to remain in our community. For example, the 2017 municipal services survey results indicate 75% of the new residents say enrollment at Westlake Academy was extremely important/important to their decision to live in the community. With the majority of those residents then listing this as the number one (1) reason they will remain in Westlake over the next five (5) years. Planning for Academy growth in the face of residential development continues to be a challenge. Wherever possible, the Town has entered economic development agreements with residential developers to provide funding for Westlake Academy facilities to lessen the impact of their residential development on the school’s enrollment. Westlake Academy has experienced steady enrollment growth from 491 students in SY 2009-10 to a projected 856 in SY 2017-18. The current increase of student population is a result of the Phase I expansion efforts on the Academy campus and our development. Our growth requires that we carefully manage our student admissions processes to provide adequate space for children of Westlake residents. Approximately 39,000 sq. ft. of new facilities space was opened on campus in SY 14/15. It was comprised of a secondary classroom building, field house, and a primary years’ multi-use hall. These buildings increased our capacity and allowed for decompression of our current school facilities. The lottery waiting list for student admissions from our secondary boundaries continues to grow from 705 in 2011 to over approximately 2,411 students for this coming school year. Continued Public Education Funding Shortfall: State funding of public education was decreased by the State Legislature in 2011. While it has increased somewhat since then, the allocation has not kept pace with basic cost increases. And, in the Legislature’s most recent 2017 session, the per student funding for public education was not increased for the next biennium. This negatively impacts Westlake since it owns and operates our public charter school, Westlake Academy, which receives approximately 80% of its operational funding from the State. The municipal government continues to allocate significant resources to the school to deal with State funding limitations, maintain high quality educational services, provide for the Academy’s facilities and support services, as well as preserve space for the children of Westlake residents. Additionally, the Westlake Academy Foundation (WAF) raises significant operating funds for the Academy, without which the school could not operate. Pursuit of Infrastructure and Services Reinvestment While Combating Certain Cost Increases: We must also reinvest in maintaining our infrastructure. However, with growth comes the need to allocate capital spending in new public buildings and our water and sewer utility. An example of a key project needed to deal with the Town’s growth, is a Phase 2 water transmission line to our wholesale water provider. This is a costly project which will require us to significantly invest in our water system. ix Staffing Levels, Insurance Costs, and Retention: Our infrastructure investment must be monitored in tandem with the staffing needs to maintain our current service delivery levels. This includes keeping our compensation/benefit package competitive to attract and retain excellent employees, so we can continue delivering exceptional service. We have found this to be especially true as it relates to having adequate staffing to deal with development review and construction. We have balanced all these components in light of maximizing staff efficiencies and processes to help contain large expenditure drivers such as employee health insurance. Customer interactions and our methodology to deliver services remains of interest to our residents and we continue to receive high marks for our personalized approach. In early 2017, our consultant, Chris Tathum with ETC presented Council with positive feedback indicating that our staff team is “setting the standard for service delivery compared to other communities”. Since 2009, our composite index score for overall satisfaction has increased 21 points. 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 2017-18 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, 2016. This was the tenth year the Town has received this prestigious award. 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 tenth GFOA Distinguished Budget Presentation Award for the fiscal year beginning October 1, 2016 for our municipal budget and the 8th year for our educational services budget for Westlake Academy, a component unit of the Town. 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. 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 seven years. The Finance Department received its fifth Popular Annual Financial Report (PAFR) converting much of the FY 2015-2016 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.” x 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. Tom Brymer Debbie Piper, CPA Town Manager Finance Director xi Town of Westlake xii xiii xiv xv Town of Westlake Elected and Appointed Officials Laura Wheat Alesa Belvedere Michael Barrett Rick Rennhack Carol Langdon Wayne Stoltenberg Elected Officials Mayor Laura Wheat Mayor Pro-Tem Carol Langdon Council Member Alesa Belvedere Council Member Michael Barrett Council Member Rick Rennhack Council Member Wayne Stoltenberg Appointed Officials TOM BRYMER Town Manager AMANDA DEGAN GINGER AWTRY Assistant Town Manager Director of Communications and Community Affairs DEBBIE PIPER KELLY EDWARDS Director of Finance Town Secretary RON RUTHVEN TODD WOOD Director of Planning and Development Director of Human Resources and Administrative Services JARROD GREENWOOD RICHARD WHITTEN Director of Public Works Fire Chief TROY MEYER JASON POWER Director of Facilities Maintenance and Parks and Recreation Director of Information Technology 1 Town of Westlake 2 Financial Section 3 Town of Westlake AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL WEAVER AND TIDWELL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS 12221 MERIT DRIVE, SUITE 1400, DALLAS, TX 75251 P: 972.490.1970 F: 972.702.8321 4 Independent Auditor’s Report To the Honorable Mayor and Members of Town Council Town of Westlake, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Westlake (the Town) as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Town of Westlake, Texas 5 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, each major fund, and the aggregate remaining fund information of the Town, as of September 30, 2017, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter Regarding Going Concern The accompanying financial statements have been prepared assuming the discretely presented component units will continue as going concerns. As discussed in Note 17 to the financial statements, the discretely presented component units are in default on their bonds due to failure to meet certain bond covenants. This gives bond holders the right to accelerate and demand payment on the bonds in full. This condition raises substantial doubt about the discretely presented component units’ ability to continue as going concerns. Management’s plans regarding these matters are also described in Note 17. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 10 through 20 and budgetary comparison information and pension schedules on pages 81 through 88 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. Town of Westlake, Texas 6 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 23, 2018 on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance. WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 23, 2018 7 Town of Westlake 8 Management’s Discussion and Analysis 9 Town of Westlake 10 Management’s Discussion and Analysis Management of the Town of Westlake offers the readers of the Town’s financial statements this narrative overview and analysis of the financial activities and financial position of the Town for the fiscal year ended September 30, 2017. Financial reporting is limited in its ability to provide the “big picture” but rather focuses on financial position and changes in financial position. In other words, are revenues and/or expenditures higher or lower than the previous year? Has the net position (containing both short- term and long-term assets and liabilities) or fund balances (the current “spendable” assets less current liabilities) of the government been maintained? Readers are encouraged to consider the information presented here in conjunction with the additional information furnished in the letter of transmittal (pages iii - x of this report) and the statistical section (pages 103 - 122 of this report) as well as information in the annual operating budget, along with other community information found on the Town’s website at www.westlake-tx.org. It should be noted that the Independent Auditor’s Report describes the auditors’ association with the various sections of this report and that all the additional information from the website and other Town sources are unaudited. FINANCIAL HIGHLIGHTS  The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $59,885,306 (Net position). This number must be viewed within the context that the vast majority of the Town's net position of $52,083,443 (87.0%) is its investment in 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. The net position restricted for specific purposes totaled $2,034,916 (3.4%). The remaining amount, $5,766,947 (9.6%), represents unrestricted net position.  As of the close of the current fiscal year, the Town of Westlake's governmental funds reported combined ending fund balances of $27,808,118, which is an increase of $7,412,296 in comparison with the prior year. Within this total, $17,444,416 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 $10,937,492 an increase of $1,258,019 in comparison with the prior year. Of this total fund balance, $10,363,702 is unassigned. This represents 125% of the total general fund expenditures and is equivalent to 489 operating days.  The Town's capital assets (net of accumulated depreciation) increased by $5,042,014. This is due in large part to an increase of $6,503,931 in construction in progress accounts. This increase is primarily due to the infrastructure construction expenditures related to the Public Improvement District (PID), E. Dove Road and Drainage project and the Fire/EMS Complex.  The Town's long-term debt increased by $9,547,067 in total, due to the issuance of $9,180,000 Combination Tax & Revenue Bonds and $1,530,000 Tax Notes. 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: 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. 11 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 position presents information on all the Town's assets and deferred outflows of resources and liabilities and deferred inflows of resources with the difference between the two reported as net position. Over time, increases or decreases in the Town's net position serves 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 position changed during the most recent fiscal year. All 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 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 the Texas Student Housing entities. Financial information for these component units is reported separately from the financial information presented for the primary government itself. In addition, the Town has the following blended component units: Lone Star Public Facilities Corporation, 4B Economic Development Corporation, and Westlake Academy, an open enrollment charter school owned and operated by the Town of Westlake. See pages 42 – 43 of the "Financial Section" for detail on these entities. 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. Governmental funds - Governmental funds are used to account for essentially the same functions reported as government activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. 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. 12 The Town maintains ten individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General, Westlake Academy, Debt Service, Capital Projects, Solana PID Capital Project, and Westlake Academy Expansion funds, all of which are presented as major funds. Data from the other funds (Visitors Association, Economic Development, Lone Star Public Facilities Corporation and Westlake 4B Economic Development Corporation) are combined into a single, aggregate presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The Town adopts an annual appropriated budget for all funds, except the Capital Projects, Solana PID Capital Project, and Westlake Academy Expansion funds which are project-length based budgets. 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 27 - 33 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 the 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 34 - 36 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 maintains one fiduciary fund, the PID Agency (Debt Service) Fund. 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 42 - 79 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents schedules that further support the information in the financial statements. The schedules are presented immediately following the notes to the financial statements and can be found on pages 81 - 88. 13 Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of the government’s financial position. In the case of the Town, assets exceeded liabilities by $59,885,306 at the close of the most recent fiscal year. The Town’s combined net position changed from a year ago, increasing $2,833,346 from $57,051,960 to $59,885,306. Our analysis below focuses on the net position (Table 1) and changes in net position (Table 2) of the Town’s governmental and business-type activities. The largest portion of the Town’s net position, 52,083,443 (87%), 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 position, $2,034,916 (3.4%), represents resources that are subject to external or internal restrictions on how they may be used. The remaining balance of $5,766,947 (9.6%) represents unrestricted net position which is available for the Town’s ongoing expenses. Table 1 Condensed Statement of Net Position At September 30, 2017 and 2016 2017 2016 2017 2016 2017 2016 Current and other assets 30,062,328$ 23,271,426$ 5,254,725$ 4,197,173$ 35,317,053$ 27,468,599$ Capital assets 67,940,280 62,414,763 11,690,171 12,173,674 79,630,451 74,588,437 Total Assets 98,002,608$ 85,686,189$ 16,944,896$ 16,370,847$ 114,947,504$ 102,057,036$ Deferred outflows of resources 2,446,574 2,546,463 94,162 84,021 2,540,736 2,630,484 Noncurrent liabilities 39,936,334 30,117,478 6,333,158 6,308,304 46,269,492$ 36,425,782$ Other liabilities 2,402,774 2,984,891 8,869,026 8,143,561 11,271,800 11,128,452 Total Liabilities 42,339,108 33,102,369 15,202,184 14,451,865 57,541,292$ 47,554,234$ Deferred inflows of resources 61,642 81,326 - - 61,642 81,326 Net investments in capital assets 46,499,873 38,299,337 5,583,570 6,044,363 52,083,443$ 44,343,700$ Restricted 2,034,916 7,489,048 - - 2,034,916 7,489,048 Unrestricted 9,513,643 9,260,572 (3,746,696)(4,041,360)5,766,947 5,219,212 Total Net Position 58,048,432$ 55,048,957$ 1,836,874$ 2,003,003$ 59,885,306$ 57,051,960$ Net Position Governmental Activities Business-type Activities Total Assets Liabilities 14 Table 2 Changes in Net Position For the Years Ended September 30, 2017 and 2016 2017 2016 2017 2016 2017 2016 Program revenues Fees, fines and charges for services 4,471,161$ 3,794,327$ 4,825,599$ 3,979,201$ 9,296,760$ 7,773,528$ Operating grant and contributions 8,047,113 7,863,168 - - 8,047,113 7,863,168 Capital grants and contributions 3,485,255 269,185 - - 3,485,255 269,185 General revenues Taxes Sales taxes 4,650,744 4,609,523 - - 4,650,744 4,609,523 Property taxes 1,576,750 1,476,355 - - 1,576,750 1,476,355 Hotel occupancy taxes 751,601 822,490 - - 751,601 822,490 Mixed beverage taxes 68,432 61,476 - - 68,432 61,476 Franchise taxes 818,423 930,043 - - 818,423 930,043 Interest on investments 182,095 55,600 28,684 13,095 210,779 68,695 Miscellaneous 278,071 241,501 50,000 - 328,071 241,501 Total revenues 24,329,645 20,123,668 4,904,283 3,992,296 29,233,928$ 24,115,964$ General governmental 5,716,302 4,491,557 - - 5,716,302 4,491,557 Public safety 3,063,003 2,737,084 - - 3,063,003 2,737,084 Culture and recreation 217,489 187,274 - - 217,489 187,274 Economic development 163,578 141,779 - - 163,578 141,779 Public works 1,634,549 1,102,636 - - 1,634,549 1,102,636 Visitor services 737,071 740,835 - - 737,071 740,835 Education 8,566,295 9,516,287 - - 8,566,295 9,516,287 Interest on long-term debt 1,401,199 990,413 - - 1,401,199 990,413 Water and sewer - - 4,893,075 5,519,116 4,893,075 5,519,116 Cemetery - - 8,021 7,831 8,021 7,831 Total expenses 21,499,486 19,907,865 4,901,096 5,526,947 26,400,582 25,434,812 Increase (decrease) in net position before transfers 2,830,159 215,803 3,187 (1,534,651) 2,833,346 (1,318,848) Transfers 169,316 264,578 (169,316)(264,578)- - Change in net position 2,999,475 480,381 (166,129) (1,799,229) 2,833,346 (1,318,848) Net position, beginning 55,048,957 54,568,576 2,003,003 3,802,232 57,051,960 58,370,808 Net position, ending 58,048,432$ 55,048,957$ 1,836,874$ 2,003,003$ 59,885,306$ 57,051,960$ Expenses Governmental Activities Business-type Activities Total Revenues 15 Governmental activities: Governmental activities increased the Town's net position by $2,999,475 (5.45%), increasing net position from $55,048,957 to $58,048,432. Unrestricted net position, the part of net position 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 $816,934. Total revenues for governmental activities increased by $4,205,977 when compared to the prior year. General revenue had an increase of $129,128, while program revenues had an increase of $4,076,849. Program revenues Fees, fines and charges for services increased $676,834. The permit and review fees received from Charles Schwab & Co. were the major contributor to this increase Operating Grants and Contributions increased by $293,945 mostly due the contribution of funds to Westlake Academy for the purchase of a school bus as well as additional state funding. Capital Grants and Contributions increased by $3,106,070 with the major portion being attributed to the donation of land for the Fire/EMS station and revenues restricted for the benefit of Westlake Academy based on economic development agreements. General revenues Interest on Investments increased by $182,095 due to the addition of bond and tax note funds. Sales tax increased by $41,201 in addition to an increase of $98,364 in property tax. Hotel occupancy taxes decreased by $70,889. There have been several new hotels in the area that are competing with the Marriott. Efforts are being made to retain and attract additional meetings and tourist stays. Franchise fees decreased by $111,620 primarily due to AT&T and Verizon receipts. Expenses Total expenses for governmental activities increased by $1,062,685 or approximately 5%. General Government expenditures reflected a 40% increase of $1.3M; Payroll and related taxes/retirement increased with the addition of staff; increase in consultant fees was related to local PID expenditures with the majority of the increase due to the relocation of Town Hall including additional furniture, network equipment transfer and replacements. Education expenditures decreased by 5% ($426K) which was created by an accounting entry made in the prior years to recognize a capital lease. This amount was offset with lease proceeds in Other Resources. Public Safety saw a 9% increase of $230K primarily due to payroll and related taxes/ retirement increases based on market adjustments. 16 Business-type Activities: The net position of our business-type activities ended fiscal year 2017 at $1,836,874 compared with $2,003,003 in 2016. This represents a decrease in net position of $166,129 , or 8% less than the prior fiscal year. Revenues (Charges for Services) for business-type activities for the fiscal year ending September 30, 2017 were $4,825,599; an increase of $846,398 or 21%. Operating expenses for the business-type activities for the fiscal year ending September 30, 2017 were $4,023,410; a decrease of $684,148 or 15%. This decrease was primarily attributed to a payment to the City of Fort Worth for the Town’s proportionate share of water system upgrades to provide Westlake with future capacity needs in the prior year offset by a settle-up with the City of Southlake related to wastewater treatment. 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, unassigned 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 $27,808,118; an increase of $7,412,296 in comparison with the prior year. Approximately 35% of this total ($10,363,702) constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of fund balance is non-spendable, restricted, committed or assigned to indicate that it is not available for new spending because it has already been committed. The following tables present a summary of general, special revenue, capital project, and debt service fund revenues and expenditures for the fiscal year ended September 30, 2017, and the amount and percentage of increases and decreases in relation to the prior year. Table 3 Summary of Governmental Funds Revenues Increase Percent 2016-17 Percent (Decrease)Increase Amount Of Total From 2015-16 (Decrease) Taxes Sales taxes 4,650,744$ 20.6%41,221$ 0.9% Property taxes 1,577,815 7.0%98,364 6.7% Mixed beverage taxes 68,432 0.3%6,956 11.3% Hotel occupancy taxes 751,601 3.3%(70,889)-8.6% Franchise taxes 818,423 3.6%(111,620)-12.0% Subtotal - Taxes 7,867,015 34.8%(35,968)-0.5% State program 6,603,358 29.2%54,996 0.8% Federal program 140,152 0.6%41,588 42.2% Interest income 182,095 0.8%138,076 313.7% Building permits and fees 3,521,686 15.6%806,450 29.7% Fines and penalties 673,716 3.0%(122,298) -15.4% Intergovernmental - 0.0%- 0.0% Contributions 728,887 3.2%(18,502,269) -100.5% Miscellaneous 2,863,801 12.8%1,325,546 86.2% Total Revenues 22,580,710$ 100.0%(16,293,879)$ -42.8% Revenues 17 Table 4 Summary of Governmental Funds Expenditures Increase Percent 2016-17 Percent (Decrease)Increase Amount Of Total From 2015-16 (Decrease) General government 4,596,827$ 16.6%1,316,320$ 40.1% Public safety 2,684,244 9.7%230,387 9.4% Culture and recreation 164,720 0.6%(21,203) -11.4% Economic development 163,578 0.6%21,799 15.4% Public works 784,279 2.8%10,528 1.4% Visitor services 717,055 2.6%(8,916) -1.2% Education 8,819,174 31.9%(426,418) -4.6% Capital outlay 7,082,844 25.7%(2,479,110) -25.9% Debt services 2,598,351 9.3%500,450 23.9% Total Expenditures 27,611,072$ 100.0%(856,163)$ -3.0% Expenditures Below are summaries and explanations of the changes in fund balances from fiscal year 2016 to fiscal year 2017 of the Governmental Funds that are contained in the above totals. General Fund - Fund balance increased $1,258,019 (13%). At the end of the current fiscal year, fund balance for the general fund was $10,937,492, an increase of $1,258,019 in comparison with the prior year. Of this total, $10,363,702 is unassigned. This represents 125% of the total general fund expenditures and is equivalent to 489 operating days.  Revenues increased $1.1M - The Planning and Development department realized the biggest increase in revenues with the majority ($1.7M) coming from inspection/plan review fees, reforestation, building permit fees and PID inspection fees. Other permits and fees decreased $900K due to the PID reimbursement fund receiving one-time revenue of $743K in the prior year.  Expenditures increased 1.9M - Payroll and related taxes, insurance and retirement increased $567K due to the addition of employees and market adjustments. Maintenance and replacement projects increased $685K due to the relocation of the Town Hall and subsequent purchases of furniture and equipment. Westlake Academy - Fund balance decreased by $193,514 primarily due to the reduction of state revenue because the student enrollment was less than originally anticipated. In addition, there were additional transportation costs for the rental of buses for field trips and athletic activities due to the small size of the Academy’s current two buses (16 and 18 passenger). A new bus was purchased for fiscal year 2017-2018 with a 71 passenger capacity. Visitors Association Fund - Fund balance decreased by $212,781 largely due to the debt service payment transferred out for the Arts and Sciences Center. Capital Projects Fund - Fund balance increased by $10,708,715 largely due the proceeds of the bond issuance and tax notes for the construction of the Fire/EMS complex Westlake Academy Expansion Fund - Fund balance increased by $1,016,218 (from $397,127 to $1,413,345). This fund was created to account for proceeds from long-term financing and revenue and expenditures related to authorized construction related to the expansion of Westlake Academy facilities. The original project for this fund was completed in FY 2015. Transfers in will be recorded for lot fee revenue based on an economic development agreement related to lot sales in several residential sub-division in future years. 18 Solana Public Improvement District (PID) Capital Project Fund - Fund balance decreased by $5,145,966 due to infrastructure construction on the project. This fund was created in FY 2015 to detail the funds contributed based on bond proceeds for the construction of infrastructure for the Entrada development. All infrastructure will be conveyed to the Town upon completion. 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 position of the Proprietary Funds amounted to $1,836,874, a decrease of $166,129. General Fund Budgetary Highlights The General Fund budget for fiscal year 2017 was amended in total to increase the net change in fund balance from ($214,923) to $207,481, a total increase of $422,404. The amended budget for net revenues was increased by $515K (6%) based on anticipated increases in building permits and fees. The amended budget for net expenditures was increased by $210K (2%). This was primarily due to additional needs related to the relocation of the Town Hall. The General Fund actual revenue collections/other sources were more than the amended budget by $603K primarily due to the receipt of building permits and fees that were not anticipated until the FY 17-18. Actual expenditure costs/other uses were less than the amended budget by $447K due mostly to less than anticipated service expenditures. 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, 2017, totaled $79,630,451 (net of accumulated depreciation). The investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure, and construction in progress. The net increase in the Town's investment in capital assets for the current fiscal year was $5,042,014 or 7% mostly due to additional construction in progress related to the Public Improvement District, the Fire/EMS Complex, and the E. Dove Road Reconstruction/Drainage Project totaling $6.6M. This increase was offset by the sale of land in the amount of $1.2M. Table 5 Town’s Capital Assets (Net of Accumulated Depreciation) 2017 2016 2017 2016 2017 2016 Land 12,446,059$ 11,896,664$ -$ -$ 12,446,059$ 11,896,664$ Capital improvements 9,865,482 10,335,819 9,734,945 10,097,620 19,600,427 20,433,439 Building 25,699,186 26,351,151 25,699,186 26,351,151 Machinery and equipment 1,252,399 1,614,268 1,536,311 1,669,017 2,788,710 3,283,285 W/W treatments rights 89,885 121,645 89,885 121,645 Construction in progress 18,677,154 12,216,861 329,030 285,392 19,006,184 12,502,253 Total capital assets 67,940,280$ 62,414,763$ 11,690,171$ 12,173,674$ 79,630,451$ 74,588,437$ Governmental Activities Business-type Activities Total Additional information on the Town's capital assets can be found in Note 4 on pages 56 - 57 of this report. 19 Long-term liabilities - At the end of the current fiscal year, the Town had total long-term debt outstanding of $43,741,665. Of this amount, $36,207,000 represents bonded indebtedness, $162,004 capital leases, $238,404 in loans and $5,126,958 contractual obligations. During the fiscal year 2016-2017, the Town's total debt payable increased by $9,625,356. This increase was mainly due to the sale of bonds and tax notes for the Fire/EMS complex as well as the scheduled repayment of principal and interest on outstanding bonded debt and offset by a savings due to the refunding on the Town’s Series 2007 CO’s. Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc. has recently increased the Town's rate from AA+/stable to AAA/stable. Additional information about the rating agency or the significance of the rating provided may be obtained from Standard & Poor's web site. Additional information on the Town's long-term debt can be found in Note 5 on pages 58 – 65. Table 6 Outstanding Debt at Year-End 2017 2016 2017 2016 2017 2016 General obligation bonds 15,267,000$ 16,685,000$ -$ -$ 15,267,000$ 16,685,000$ Certificates of obligation 19,990,700 9,485,700 949,300 971,300 20,940,000 10,457,000 Contractual obligations - - 5,126,958 5,126,958 5,126,958 5,126,958 Capital leases 162,004 563,045 - - 162,004 563,045 Premium on bonds 1,578,909 657,912 29,881 31,053 1,608,790 688,965 Notes payable 238,404 275,101 238,404 275,101 Compensated absences 333,005 274,216 65,504 46,024 398,509 320,240 Total long-term debt 37,570,022$ 27,940,974$ 6,171,643$ 6,175,335$ 43,741,665$ 34,116,309$ Governmental Activities Business-type Activities Total The Town’s net pension liability relative to its participation in Texas Municipal Retirement System (TMRS) increased from $1,215,618 as of September 30, 2016 to $1,476,481 as of September 30, 2017. The Academy’s proportionate share of the Teacher Retirement System (TRS) net pension liability decreased from $1,093,865 as of August 31, 2016 to $1,051,346 as of August 31, 2017. Economic Factors and Next Year's Budgets In the FY 2017-18 adopted budget, the General Fund balance is anticipated to decrease by $1.4M. Adopted revenue collections are budgeted to be less than the 2017 actuals by $1.0.M (10%) primarily due to prior year one-time building fees and permits offset by additional general sales tax revenues due to a negotiated development agreement and additional property taxes. Anticipated expenditures will be approximately $600K more than the prior year. Payroll increases create most of this increase with approximately $500K (market adjustments, two additional employees, increased insurance and benefits. Transfers out are estimated to increase by $1.3M. The FY 17-18 budgeted amounts include transfers of one-time revenues from various commercial projects to the Capital Projects Fund for future use. The transfer to the Debt Service Fund increased to cover additional debt service requirements. As stated in the Transmittal Letter, the Town’s budget continues to be impacted by encouraging economic signs. Growth in Westlake, along the SH 114 corridor and with the progress of our new mixed- use development, Entrada, should continue to increase the commercial revenue sources. Additionally, increases are expected in residential-related revenues due to new housing developments. 20 Contacting the Town's Finance Department This financial report is designed to provide our citizens, customers, and investors and creditors with a general overview of the Town's finances and to demonstrate the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Debbie Piper, Town of Westlake Finance Director, at 817-490-5712 or email at dpiper@westlake-tx.org. 21 Town of Westlake 22 Basic Financial Statements 23 Town of Westlake Town of Westlake Exhibit A-1 Statement of Net Position September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 24 Primary Government Discretely Governmental Business-type Presented Activities Activities Total Component Units Cash and cash equivalents 26,295,605$ 3,722,146$ 30,017,751$ 6,171,501$ Receivables (net of allowance)1,848,083 1,154,947 3,003,030 410,969 Inventories - 95,197 95,197 - Other assets 262,106 - 262,106 161,211 Restricted cash and cash equivalents 1,656,534 282,435 1,938,969 3,132,602 Capital assets: Land and construction in progress 31,123,213 329,030 31,452,243 5,099,597 Buildings and improvements 47,342,288 14,899,416 62,241,704 52,590,312 Wastewater treatment rights - 635,199 635,199 - Machinery and equipment 4,652,500 3,560,780 8,213,280 4,690,979 Less accumulated depreciation (15,177,721) (7,734,254) (22,911,975) (29,929,128) Total capital assets 67,940,280 11,690,171 79,630,451 32,451,760 Total assets 98,002,608 16,944,896 114,947,504 42,328,043 Deferred outflows of resources - TRS pension 672,957 - 672,957 - Deferred outflows of resources - TMRS 766,614 94,162 860,776 - Deferred loss on refunding 1,007,003 - 1,007,003 - Total deferred outflows of resources 2,446,574 94,162 2,540,736 - Accounts payable 2,247,373 440,488 2,687,861 324,020 Customer deposit payable - 232,435 232,435 - Unearned revenue 1,850 406,350 408,200 946,645 Accrued interest payable 153,551 7,789,753 7,943,304 26,401,717 Noncurrent liabilities: Due within one year Long-term debt 1,717,681 235,093 1,952,774 3,420,000 Compensated absences 33,301 6,550 39,851 - Due in more than one year Long-term debt 35,519,336 5,871,046 41,390,382 48,949,301 Compensated absences 299,704 58,954 358,658 - TRS pension liability 1,051,346 - 1,051,346 - TMRS pension liability 1,314,966 161,515 1,476,481 - Total liabilities 42,339,108 15,202,184 57,541,292 80,041,683 Deferred inflows - TRS pension 61,642 - 61,642 - Total deferred inflows of resources 61,642 - 61,642 - Net investment in capital assets 46,499,873 5,583,570 52,083,443 (19,917,541) Restricted for: Tourism 799,170 - 799,170 - Construction 797,234 - 797,234 - Court security and technology 219,693 - 219,693 - Future projects 13,789 - 13,789 - Debt service - - - - Education 205,030 - 205,030 - Unrestricted 9,513,643 (3,746,696) 5,766,947 (17,796,099) Total net position 58,048,432$ 1,836,874$ 59,885,306$ (37,713,640)$ NET POSITION ASSETS LIABILITIES DEFERRED INFLOWS OF RESOURCES DEFERRED OUTFLOWS OF RESOURCES Town of Westlake Statement of Activities For the Year Ended September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 25 Program Revenues Primary Government Charges for Operating Grants Capital Grants Expenses Services and Contributions and Contributions PRIMARY GOVERNMENT Governmental activities: General government 5,716,302$ 73,180$ -$ 5,956$ Public safety 3,063,003 783,681 532 - Cultural and recreation 217,489 - 3,100 - Public works 1,634,549 3,338,541 - 2,359,299 Economic development 163,578 - - 1,010,000 Visitor services 737,071 - - - Education 8,566,295 275,759 8,043,481 110,000 Interest on long-term debt 1,401,199 - - - Total governmental activities 21,499,486 4,471,161 8,047,113 3,485,255 Business-type activities: Water and sewer 4,893,075 4,815,635 - - Cemetery 8,021 9,964 - 50,000 Total business-type activities 4,901,096 4,825,599 - 50,000 Total primary government 26,400,582$ 9,296,760$ 8,047,113$ 3,535,255$ Reported Discretely Presented Component Units 13,366,606$ 11,235,925$ -$ -$ GENERAL REVENUES AND TRANSFERS Taxes: Sales taxes Property taxes Hotel occupancy taxes Mixed beverage taxes Franchise taxes Interest Income Miscellaneous Transfers Total general revenues and transfers Change in net position NET POSITION, beginning of year NET POSITION, end of year Functions/Programs Exhibit A-2 26 Primary Government Discretely Governmental Business - Type Presented Activities Activities Total Component Units (5,637,166)$ -$ (5,637,166)$ -$ (2,278,790) - (2,278,790) - (214,389) - (214,389) - 4,063,291 - 4,063,291 - 846,422 - 846,422 - (737,071) - (737,071) - (137,055) - (137,055) - (1,401,199) - (1,401,199) - (5,495,957) - (5,495,957) - - (77,440) (77,440) - - 51,943 51,943 - (25,497) (25,497) - (5,495,957)$ (25,497)$ (5,521,454)$ - -$ -$ -$ (2,130,681)$ 4,650,744 - 4,650,744 - 1,576,750 - 1,576,750 - 751,601 - 751,601 - 68,432 - 68,432 - 818,423 - 818,423 - 182,095 28,684 210,779 33,164 278,071 - 278,071 - 169,316 (169,316) - - 8,495,432 (140,632) 8,354,800 33,164 2,999,475 (166,129) 2,833,346 (2,097,517) 55,048,957 2,003,003 57,051,960 (35,616,123) 58,048,432$ 1,836,874$ 59,885,306$ (37,713,640)$ Net (Expense) Revenue and Changes in Net Position Town of Westlake Balance Sheet Governmental Funds September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 27 Debt Westlake Service General Academy Fund ASSETS Cash and cash equivalents 10,551,515$ 410,804$ 12,013$ Receivables : Property taxes 5,216 - 433 Accounts receivable 1,021,417 446,291 - Due from other funds 201,723 - - Prepaid items 18,705 235,539 - Restricted cash and cash equivalents - - - TOTAL ASSETS 11,798,576$ 1,092,634$ 12,446$ LIABILITIES, DEFFERED INFLOWS OF RESOURCES AND FUND BALANCE: Liabilities: Accounts payable 856,482$ 126,856$ 98$ Unearned revenue - 530 - Due to other funds - - - Total liabilities 856,482 127,386 98 DEFERRED INFLOWS OF RESOURCES Unavailable grant funds - - - Unavailable resources - property taxes 4,602 - 385 Total deferred inflows of resources 4,602 - 385 FUND BALANCES Nonspendable: Prepaid items 18,705 235,539 - Restricted for: Tourism - - - Capital items - - - Court security, technology, and Bonds 219,693 - - Debt service - - 11,963 Future projects - - - Education - 729,709 - Committed for: Street and tree improvements 335,392 - - Unassigned 10,363,702 - - Total fund balances 10,937,492 965,248 11,963 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 11,798,576$ 1,092,634$ 12,446$ Exhibit A-3 28 Solana PID Nonmajor Total Capital Capital Governmental Governmental Projects Projects Funds Funds 13,124,934$ -$ 2,196,339$ 26,295,605$ - - - 5,649 - - 374,726 1,842,434 - - - 201,723 - - 7,862 262,106 - 1,656,534 - 1,656,534 13,124,934$ 1,656,534$ 2,578,927$ 30,264,051$ 255,057$ 859,300$ 149,580$ 2,247,373$ - - 1,320 1,850 - - 201,723 201,723 255,057 859,300 352,623 2,450,946 - - - - - - - 4,987 - - - 4,987 - - 7,862 262,106 - - 791,308 791,308 12,869,877 797,234 1,413,345 15,080,456 - - - 219,693 - - - 11,963 - - 13,789 13,789 - - - 729,709 - - - 335,392 - - - 10,363,702 12,869,877 797,234 2,226,304 27,808,118 13,124,934$ 1,656,534$ 2,578,927$ 30,264,051$ Town of Westlake Exhibit A-4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 29 Total fund balance-governmental funds balance sheet 27,808,118$ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance sheet.67,940,280 Deferred losses on refunding are reported as deferred outlfows of resources in the government-wide statement of net position.1,007,003 Revenues earned but not available within sixty days of the fiscal year-end are not recognized as revenue in the fund financial statements.4,987 Deferred outflows of resources related to the Town's and Academy's net pension liability increase net position by $766,614 and $672,957, respectively; while the Academy's deferred resource inflows related to the net pension liability decreases net position by $61,642. This amount is the net effect.1,377,929 Interest payable on long-term debt does not require current financial resources, therefore interest payable is not reported as a liability in the governmental funds balance sheet.(153,551) Long-term liabilities, including bonds payable, are not due and payable in the current period, and therefore are not reported in the fund financial statements.(39,936,334) NET POSITION OF GOVERNMENTAL ACTIVITIES - statement of net position 58,048,432$ 30 Town of Westlake Town of Westlake Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 31 Westlake Debt General Academy Service Fund REVENUES Taxes Sales 3,353,658$ -$ -$ Property 1,482,625 - 95,190 Mixed beverage 68,432 - - Hotel occupancy - - - Franchise 818,423 - - State program revenues - 6,603,358 - Federal program revenues - 140,152 - Interest income 67,680 5,371 - Building permits and fees 3,521,686 - - Fines and penalties 673,716 - - Contributions 110,532 - - Miscellaneous 275,404 1,575,730 - Total revenues 10,372,156 8,324,611 95,190 EXPENDITURES Current General government 4,596,827 - - Public safety 2,684,244 - - Cultural and recreation 164,720 - - Public works 784,279 - - Economic development - - - Visitor services - - - Education - 8,819,174 - Capital outlay 29,612 - - Debt service Principal retirement 36,697 - 1,088,000 Interest and other fiscal charges - 13,951 1,091,425 Bond issuance costs - - 116,592 Total expenditures 8,296,379 8,833,125 2,296,017 Excess (deficiency) of revenues Over (Under) Expenditures 2,075,777 (508,514) (2,200,827) OTHER FINANCING SOURCES (USES) Transfers in 230,336 315,000 2,065,730 Transfers out (1,048,094) - - Proceeds from sale of assets - - - Refunding bonds issued - - 5,795,000 Payment to refunding bond escrow agent - - (6,452,467) Premium on bonds and certificates issued - - 774,059 Cerificates of obligation issued - - - Net other financing sources (uses)(817,758) 315,000 2,182,322 NET CHANGE IN FUND BALANCES 1,258,019 (193,514) (18,505) FUND BALANCES, AT BEGINNING OF YEAR 9,679,473 1,158,762 30,468 FUND BALANCES AT END OF YEAR 10,937,492$ 965,248$ 11,963$ Exhibit A-5 32 Solana PID Nonmajor Total Capital Capital Governmental Governmental Projects Projects Funds Funds -$ -$ 1,297,086$ 4,650,744$ - - - 1,577,815 - - - 68,432 - - 751,601 751,601 - - - 818,423 - - - 6,603,358 - - - 140,152 72,428 23,234 13,382 182,095 - - - 3,521,686 - - - 673,716 609,299 5,956 1,013,100 1,738,887 - - 2,667 1,853,801 681,727 29,190 3,077,836 22,580,710 - - - 4,596,827 - - - 2,684,244 - - - 164,720 - - - 784,279 - - 163,578 163,578 - - 717,055 717,055 - - - 8,819,174 1,878,076 5,175,156 - 7,082,844 - - - 1,124,697 - - - 1,105,376 251,686 - - 368,278 2,129,762 5,175,156 880,633 27,611,072 (1,448,035) (5,145,966) 2,197,203 (5,030,362) - - 1,010,000 3,621,066 - - (2,403,656) (3,451,750) 1,200,000 - - 1,200,000 - - - 5,795,000 - - - (6,452,467) 246,750 - - 1,020,809 10,710,000 - - 10,710,000 12,156,750 - (1,393,656) 12,442,658 10,708,715 (5,145,966) 803,547 7,412,296 2,161,162 5,943,200 1,422,757 20,395,822 12,869,877$ 797,234$ 2,226,304$ 27,808,118$ Town of Westlake Exhibit A-6 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, 2017 The Notes to the Financial Statements are an integral part of this statement. 33 Net change in fund balances- total governmental funds.7,412,296$ Amounts reported for governmental activities in the statement of activities are different because: 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.6,771,224 Developers contributions that are not reported at the fund level but reported as revenue for the governmental activities.1,750,000 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds.(1,795,102) Loss on sale of capital assets decreases net position in the government-wide financial statements, but only proceeds from the sale are recorded in the governmental funds financial statements. This amount represents the reduction in capital assets.(1,200,605) The repayment of the principal of long term debt consumes the current financial resources of governmental funds, but has no effect on net position. The amortization of bond premiums and deferred gain/loss on refunding of long term debt is reported in the statement of activities but does not require the use of current financial resources. Therefore, the effect of the amortization of these various items are not reported in the statement of revenues, expenditures, and changes in fund balance. This amount represents the net effect of the following items: Bonds and certificates issued (16,505,000) Bonds repaid through escrow agent 6,330,000 Capital lease payments 401,041 Bond premiums (1,020,809) Repayments 1,124,697 Deferred loss on refunding 122,467 Amortization of deferred loss on refunding (108,507) Amortization of premium on bonds 99,812 (9,556,299) Current year changes in accrued interest payable does not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds.(41,308) Implementation of GASB 68 requires certain expenditures to be de-expended and recorded as deferred outflows of resources. The changes in deferred outflows from pension activity for TMRS increased net position $82,565. The changes of net pension liability decreased net position by $232,327. This amount is the net effect.(149,762) Implementation of GASB 68 also affected the Academy. Contributions made to TRS after the measurement date caused the change in net position to increase by $84,783. Contributions made before the measurement period caused a decrease in the change in net position of $88,399. The net share of the Academy's amount of deferred inflows and outflows of resources decreased the change in net position by $130,595. This amount is the net effect.(134,211) Current year changes in the long-term liability for compensated absences do not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds.(58,789) Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds.2,031 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES - statement of activities 2,999,475$ Town of Westlake Exhibit A-7 Statement of Net Position Proprietary Funds September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 34 Utility Cemetery Fund Fund Total ASSETS Current assets Cash and cash equivalents 3,655,996$ 66,150$ 3,722,146$ Accounts receivable 1,154,947 - 1,154,947 Inventories - 95,197 95,197 Restricted cash and investments 232,435 50,000 282,435 Total current assets 5,043,378 211,347 5,254,725 Noncurrent assets Capital assets Construction in progress 329,030 - 329,030 Buildings and improvements 14,899,416 - 14,899,416 Wastewater treatment rights 635,199 - 635,199 Machinery and equipment 3,560,780 - 3,560,780 Less: accumulated depreciation (7,734,254) - (7,734,254) Total capital assets 11,690,171 - 11,690,171 Total noncurrent assets 11,690,171 - 11,690,171 TOTAL ASSETS 16,733,549 211,347 16,944,896 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows - TMRS pension 94,162 - 94,162 TOTAL DEFERRED OUTFLOWS OF RESOURCES 94,162 - 94,162 LIABILITIES Current liabilities Accounts payable 440,488 - 440,488 Customer deposits payable 232,435 - 232,435 Accrued interest payable 7,789,753 - 7,789,753 Unearned revenue 406,350 - 406,350 Compensated absences - current portion 6,550 6,550 Current portion of bonds payable 22,000 - 22,000 Contractual obligations 213,093 - 213,093 Total current liabilities 9,110,669 - 9,110,669 Long-term liabilities: Bonds payable 927,300 - 927,300 Compensated absences 58,954 - 58,954 Contractual obligations 4,943,746 - 4,943,746 Net pension liability 161,515 - 161,515 Total long-term liabilities 6,091,515 - 6,091,515 TOTAL LIABILITIES 15,202,184 - 15,202,184 NET POSITION Net investment in capital assets 5,583,570 - 5,583,570 Unrestricted (3,958,043) 211,347 (3,746,696) TOTAL NET POSITION 1,625,527$ 211,347$ 1,836,874$ Town of Westlake Exhibit A-8 Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 35 Utility Cemetery Fund Fund Total OPERATING REVENUES Charges for services $4,636,861 9,964$ 4,646,825$ Miscellaneous revenue 178,774 - 178,774 Total operating revenues 4,815,635 9,964 4,825,599 OPERATING EXPENSES Payroll costs 497,740 - 497,740 Professional and contract services 87,632 7,325 94,957 Depreciation 495,381 - 495,381 Amortization of wastewater treatment rights 31,760 - 31,760 Water purchases 1,215,465 - 1,215,465 Cost of cemetary lots sold - 696 696 Other operating costs 1,687,411 - 1,687,411 Total operating expenses 4,015,389 8,021 4,023,410 Net operating income 800,246 1,943 802,189 NON-OPERATING REVENUES (EXPENSES) Interest income 27,517 1,167 28,684 Interest expense (877,686) - (877,686) Total non-operating revenues (expenses)(850,169) 1,167 (849,002) INCOME (LOSS) BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS (49,923) 3,110 (46,813) Capital contributions - 50,000 50,000 Transfer out (169,316) - (169,316) Total transfers and capital contributions (169,316) 50,000 (119,316) Change in net position (219,239) 53,110 (166,129) Total net position, beginning of year 1,844,766 158,237 2,003,003 Total net position, end of year $1,625,527 211,347$ 1,836,874$ Town of Westlake Exhibit A-9 Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 36 Utility Cemetery Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 4,855,577$ 9,964$ 4,865,541$ Payments to employees (459,855) - (459,855) Payments to suppliers (3,116,398) (7,325) (3,123,723) Net cash provided by operating activities 1,279,324 2,639 1,281,963 CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (169,316) - (169,316) - Net cash used in noncapital financing activities (169,316) - (169,316) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on debt (22,000) - (22,000) Interest paid on debt (144,556) - (144,556) Capital contributions - 50,000 50,000 Investment earnings 27,517 1,167 28,684 Purchase of property and equipment (43,638) - (43,638) Net cash provided by (used in) capital and related financing activities (182,677) 51,167 (131,510) Net increase in cash 927,331 53,806 981,137 Cash and cash equivalents at the beginning of the year 2,961,100 62,344 3,023,444 Cash and cash equivalents at the end of the year 3,888,431$ 116,150$ 4,004,581$ RECONCILIATION OF TOTAL CASH AND CASH EQUIVALENTS Cash and cash equivalents 3,655,996$ 66,150$ 3,722,146$ Restricted cash and cash equivalents 232,435 50,000 282,435 Total cash and cash equivalents 3,888,431$ 116,150$ 4,004,581$ RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income 800,246$ 1,943$ 802,189$ Adjustments to reconcile operating income to net cash provided by (used in) operating activities: Depreciation and amortization 527,141 - 527,141 Pension expense 18,395 - 18,395 Changes in operating assets and liabilities: Receivables (106,939) - (106,939) Prepaid Items 29,828 - 29,828 Inventory - 696 696 Compensated absences 19,490 - 19,490 Accounts payable (155,718) - (155,718) Customer deposits payable (4,750) - (4,750) Unearned revenue 151,631 - 151,631 Net cash provided by operating activities 1,279,324$ 2,639$ 1,281,963$ Exhibit A-10 Town of Westlake Statement of Fiduciary Net Position Agency Fund September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 37 PID Agency Fund ASSETS Restricted cash and cash equivalents 2,085,576$ Total Assets 2,085,576$ LIABILITIES Liability to bond holders 2,085,576$ Total Liabilities 2,085,576$ Town of Westlake Exhibit A-11 Discretely Presented Component Units Combining Statement of Net Position September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 38 Texas Student Texas Student Housing Housing Corporation Texas Student Corporation College Station Housing Denton Project Project Authority Total Cash and cash equivalents 451,726$ 2,817,751$ 2,902,024$ 6,171,501$ Accounts receivable (net of allowance)38,297 371,976 696 410,969 Prepaid rent 109,298 51,913 - 161,211 Restricted assets: Cash and cash equivalents 2,198,245 934,357 - 3,132,602 Capital assets: Land 2,200,000 2,899,597 - 5,099,597 Buildings and improvements 25,705,000 26,885,312 - 52,590,312 Machinery and equipment 1,253,841 3,437,138 - 4,690,979 Less: accumulated depreciation (15,273,006) (14,656,122) - (29,929,128) Total assets 16,683,401 22,741,922 2,902,720 42,328,043 LIABILITIES Accounts payable and accrued expenses 254,737 66,692 2,591 324,020 Unearned revenue 169,130 740,058 37,457 946,645 Accrued interest payable 8,464,293 17,937,424 - 26,401,717 Bonds payable 23,950,101 28,419,200 - 52,369,301 Total liabilities 32,838,261 47,163,374 40,048 80,041,683 NET POSITION Net investment in capital assets (10,064,266) (9,853,275) - (19,917,541) Unrestricted (6,090,594) (14,568,177) 2,862,672 (17,796,099) Total net position (16,154,860)$ (24,421,452)$ 2,862,672$ (37,713,640)$ LIABILITIES AND NET POSITION ASSETS Town of Westlake Discretely Presented Component Units Combining Statement of Activities For the Fiscal Year Ended September 30, 2017 The Notes to the Financial Statements are an integral part of this statement. 39 Charges for Operating Grants Capital Grants Functions/Programs Expenses Services and Contributions and Contributions Business-type activities: Texas Student Housing Authority 365,777$ 1,920,229$ -$ -$ Texas Student Housing Authority College Station Project 7,364,984 3,944,039 - - Denton Project 5,635,845 5,371,657 - - Total business-type activities 13,366,606 11,235,925 - - Total component units 13,366,606$ 11,235,925$ -$ -$ GENERAL REVENUES Interest Income Total general revenues Change in net position NET POSITION, beginning of year NET POSITION, end of year Program Revenues Exhibit A-12 40 Texas Student Texas Student Housing Housing Corporation Texas Student Corporation College Station Housing Denton Project Project Authority Total -$ -$ 1,554,452$ 1,554,452$ - (3,420,945) - (3,420,945) (264,188) - - (264,188) (264,188) (3,420,945) 1,554,452 (2,130,681) (264,188)$ (3,420,945)$ 1,554,452$ (2,130,681)$ 12,844 - 20,320 33,164 12,844 - 20,320 33,164 (251,344) (3,420,945) 1,574,772 (2,097,517) (15,903,516) (21,000,507) 1,287,900 (35,616,123) (16,154,860)$ (24,421,452)$ 2,862,672$ (37,713,640)$ Net (Expense) Revenues and Changes in Net Positions 41 Town of Westlake Town of Westlake Notes to the Financial Statements 42 Note 1. 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. The accounting and reporting policies of the Town conform to accounting principles generally accepted in the United States of America for local governments. Generally accepted accounting principles (GAAP) for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant accounting and reporting policies: Financial Reporting Entity The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town's operations and are appropriately presented as funds of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize it is legally separate from the Town. Based on these criteria, the financial information of the following entities have been blended or discretely presented within the financial statements: Lone Star Public Facilities Corporation, 4B Economic Development Corporation, Westlake Academy, Texas Student Housing Authority, Texas Student Housing Corporation – College Station Project and Texas Student Housing Corporation – Denton Project. The Texas Student Housing Authority, Texas Student Housing Authority – Jefferson Commons at Town Lake Project, Texas Student Housing Corporation – College Station Project, and Texas Student Housing Corporation – Denton Project (collectively, Texas Student Housing Entities) 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 Entities' 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. However, the board is not substantively the same as the Town’s governing body; therefore, the Texas Student Housing Entities are reported as discretely presented component units (enterprise funds). The Town is not responsible for the long-term debt of the Texas Student Housing Entities. The Texas Student Housing Entities’ year-end is August 31. Component Units Discretely Presented Separately issued financial reports are available for the all the Texas Student Housing Entities. These reports may be obtained by contacting the following office. Texas Student Housing Authority 99 Trophy Club Drive Trophy Club, Texas 76262 Town of Westlake Notes to the Financial Statements 43 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 its 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 the board of directors is substantively the same as the Town's governing body, and a financial benefit relationship exists, the entity has been reported as a blended component unit of the Town. 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 the board of directors is substantively the same as the Town's governing body, and a financial benefit relationship exists, the entity has been reported as a blended component unit of the Town. 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 the board of directors is substantively the same as the Town's governing body, and a financial benefit relationship exists, the entity has been reported as a blended component unit of the Town. The Academy's year-end is August 31. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position 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 include 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. Town of Westlake Notes to the Financial Statements 44 Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town. The Town uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental Funds are those through which most governmental functions of the Town are financed. The acquisition, use, and balances of the Town's expendable financial resources and the related liabilities (except those accounted for in the proprietary fund type) are accounted for through governmental funds. The measurement focus is upon determination of changes in financial position, rather than upon income determination. The Town reports the following major governmental funds: General Fund – to account for all financial resources except those required to be accounted for in another fund. The General Fund balance is available for any purpose, provided it is expended or transferred in accordance with the legally adopted budget of the Town. The General Fund includes the Town’s Major Maintenance and Replacement Fund, Vehicle Replacement Fund, and PID (local) Fund. Westlake Academy Fund – to account for all local, state and federal revenue and related educational expenditures of the Academy. Debt Service Fund – to account for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. Capital Projects Fund – to account for proceeds from long-term financing and revenue and expenditures related to authorized construction and other capital asset acquisitions other than those related to the expansion of Westlake Academy facilities. Town of Westlake Notes to the Financial Statements 45 Solana Public Improvement District (PID) Capital Projects Fund – to account for the acquisition or construction of capital facilities and improvements relating to the Solana public improvement district. In addition, the Town reports the following nonmajor governmental funds: Visitors Association Fund - to account for municipal hotel occupancy taxes collected and expenditures to promote tourism and the convention and hotel industry. Lone Star Public Facilities Corporation – to account for investment activity relating to the Lone Star Public Facilities Corporation. 4B Economic Development Corporation – to account for sales tax collected to fund the activities of the 4B Economic Development Corporation. Economic Development Fund – to account for sales tax and hotel occupancy tax collected to fund activity relating to Economic Development agreements. Westlake Academy Expansion Capital Projects Fund – to account for proceeds from long-term financing and revenue and expenditures related to authorized construction related to the expansion of Westlake Academy facilities. The Town adopts an annual appropriated budget for all governmental funds except capital projects, Solana PID capital projects, and Westlake Academy Expansion funds, which are project-length based budgets. A budgetary comparison schedule has been provided for all appropriate funds to demonstrate compliance with the budget. 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. The Town reports the following fiduciary fund: Solana PID Agency Fund – to account for bond proceeds, assessments, and related debt associated with bonds issued by the Town as an agent for the Solana public improvement district. 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, Town of Westlake Notes to the Financial Statements 46 including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenue. Likewise, general revenue includes all taxes. Assets, Liabilities, and Net Position 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 statutes 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 (2) 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 nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 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. All property tax receivables are shown net of an allowance for uncollectibles. The net property tax receivable allowance is equal to management’s estimate of uncollectible outstanding property taxes at September 30, 2017. 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. Town of Westlake Notes to the Financial Statements 47 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 transfers in and out and are included as other financing sources (uses) 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 acquisition value on the date donated. Assets capitalized have an original cost of $5,000 or more and three years or more 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. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Years Water and sewer system 10-50 Buildings 20-50 Machinery and equipment 3-30 Improvements 5-30 Information systems and software 3 Assets Town of Westlake Notes to the Financial Statements 48 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 only payable upon retirement, death of the employee, or other circumstances when authorized by the Town Manager. 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 position. Bond premiums and discounts 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. 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. Fund Equity and Net Position 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. In the General Fund, assigned amounts represent intended uses established by the Town Council or the Town Finance Director who has been delegated that authority. Town of Westlake Notes to the Financial Statements 49 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 position represents the difference between assets and liabilities. Net investment in capital assets 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 position is reported as restricted when there are limitations imposed on its 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. 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 Town'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 Town considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. Summary of Significant Accounting Policies Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS’s Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Estimates The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and 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. Subsequent Events The Town has evaluated all events or transactions that occurred after September 30, 2017 up through March 23, 2018, the date the financial statements were issued. Note 2. Cash 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 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. Town of Westlake Notes to the Financial Statements 50 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 Maximum Percentage Investment Maturity of Portfolio In One Issuer Obligations of the U.S. Government, its agencies and instrumentalities 2 years None None Certificates of deposit 1 year None None Mutual funds 2 years 80%None Investment pools -None None Authorized Investment Type The Town did not engage in repurchase or reverse repurchase agreement transactions during the current year. At year end, the carrying amount of the Town’s deposits was $30,499,986 and the bank balance was $30,966,219. The bank balance was completely covered by federal deposit insurance and collateral held by the pledging financial institution in the Town’s name. At year end, the carrying amount of the component units’ deposits was $9,304,103 and the bank balance was $9,376,153. The bank balance was completely covered by federal deposit insurance and collateral held by the pledging financial institution in the component units’ names. The carrying amount consists of $6,171,501 in cash and cash equivalents and $3,132,602 in restricted cash and cash equivalents. Town of Westlake Notes to the Financial Statements 51 At September 30, 2017, the Town's cash and cash equivalents consist of and are classified in the accompanying financial statements are follows: Primary government: Cash and cash equivalents 30,017,751$ Restricted cash and investments 1,938,969 Total primary government 31,956,720 Fiduciary funds: Restricted cash and cash equivalents 2,085,576 Total cash and investments 34,042,296$ Deposits with financial institutions 30,499,986$ Investments 3,542,310 Total cash and investments 34,042,296$ Disclosures Relating to 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 37 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. As of September 30, 2017, the Town's investments were as follows: Weighted Carrying Average Amount Fair Value Maturity (days) TexPool 200$ 200$ 37 days Mutual funds 3,542,110 3,542,110 1 day Total 3,542,310$ 3,542,310$ Investment Type Town of Westlake Notes to the Financial Statements 52 Disclosures Relating to 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 below 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. Minimum Rating Carrying Fair Legal as of Primary government Amount Value Rating Year-end Investments: TexPool 200$ 200$ N/A AAA-m Mutual funds 3,542,110 3,542,110 N/A A-1 Total 3,542,310$ 3,542,310$ Disclosures Relating to Concentration of Credit Risk The Town’s investment policy is to avoid a concentration of assets in a specific maturity, a specific issue, or a specific class of investments. Disclosures Relating to Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balance less the FDIC insurance at all times. The Town requires all deposits to be covered by Federal Depository Insurance Corporation (FDIC) insurance and/or collateralized by qualified securities pledged by the Town’s depository in the Town’s name and held by the depository’s agent. As of September 30, 2017, the Town's entire cash deposits with financial institutions in excess of federal depository insurance were fully collateralized. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. GASB Statement No. 72, Fair Value Measurement and Application, provides a framework for measuring fair value which establishes a three-level fair value hierarchy that describes the inputs that are used to measure assets and liabilities. Town of Westlake Notes to the Financial Statements 53 Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that a government can access at the measurement date. Level 2 inputs are inputs – other than quoted prices included within Level 1 – that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. If a price for an identical asset or liability is not observable, a government should measure fair value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset or a liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. The Town has recurring fair value measurements as presented in the table below. The Town’s investment balances and weighted average maturity of such investments are as follows: Quoted Prices in Active Significant Markets for Other Significant Weighted Value at Identical Observable Unobservable Percent of Average September 30,Assets Inputs Inputs Total Maturity 2017 (Level 1)(Level 2)(Level 3)Investments (Days) Investments not Subject to Fair Value: Investment Pools: TexPool 200$ -$ -$ -$ 0.01%37 Investments by Fair Value Level: Mutual Funds 3,542,110 3,542,110 - - 99.99%NA Total Value 3,542,310$ 3,542,110$ -$ -$ Fair Value Measurements Using Mutual funds reported as Level 1 consist of shares of a money market funds government portfolio and are valued at net asset value (NAV) of the assets held by the Town. The NAV is a quoted price in an active market. Investment in State Investment Pools 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. Town of Westlake Notes to the Financial Statements 54 During the year ended September 30, 2017, 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. Restricted Cash Proprietary Fund Within the proprietary funds, $282,435 of restricted cash represents customer deposits received for water and sewer usage that are refundable upon termination of service and $50,000 of restricted cash represents a contribution restricted for cemetery improvements. Discretely Presented Component Units Within the discretely presented component units, the $3,132,602 in restricted cash and cash equivalents represents funds held for debt service. Note 3. Receivables Governmental activities receivable balance consists of the following as of September 30, 2017: Debt Total Westlake Service Nonmajor Governmental General Academy Fund Fund Funds Receivables: Sales tax 496,421$ -$ -$ 310,471$ 806,892$ Property tax 6,751 - 433 - 7,184 Other taxes 19,191 - - 64,255 83,446 Franchise tax 189,780 - - - 189,780 Accounts 42,473 - - - 42,473 Other 302,565 446,291 - - 748,856 Gross receivables 1,057,181 446,291 433 374,726 1,878,631 Less: allowance for uncollectibles (30,548) - - - (30,548) Net total receivables 1,026,633$ 446,291$ 433$ 374,726$ 1,848,083$ Governmental Funds Town of Westlake Notes to the Financial Statements 55 Business-type receivables balance consists of the following as of September 30, 2017: Utility Cemetery Fund Fund Total Receivables: Sales tax -$ -$ -$ Property tax - - - Other taxes - - - Franchise tax - - - Accounts 1,162,249 - 1,162,249 Other - - - Gross receivables 1,162,249 - 1,162,249 Less: allowance for uncollectibles (7,302)- (7,302) Net total receivables 1,154,947$ -$ 1,154,947$ Business-Type Activities Town of Westlake Notes to the Financial Statements 56 Note 4. Capital Assets Capital asset activity for the year ended September 30, 2017, was as follows: Primary Government Beginning Ending Balance Increases Decreases Transfers Balance Governmental activities: Capital assets, not being depreciated: Land 11,896,664$ 1,750,000$ (1,200,605)$ -$ 12,446,059$ Construction in progress 12,216,861 6,567,395 - (107,102) 18,677,154 Total assets not being depreciated 24,113,525 8,317,395 (1,200,605) (107,102) 31,123,213 Capital assets, being depreciated: Capital improvements 14,907,536 118,323 - 53,843 15,079,702 Buildings 32,262,586 - - - 32,262,586 Machinery and equipment 4,349,680 51,543 (41,108) - 4,360,115 Information systems and software 205,163 33,963 - 53,259 292,385 Total capital assets being depreciated 51,724,965 203,829 (41,108) 107,102 51,994,788 Less accumulated depreciation: Capital improvements (4,571,717) (544,561) - - (5,116,278) Buildings (5,911,435) (657,915) - - (6,569,350) Machinery and equipments (2,828,371) (523,930) 41,108 - (3,311,193) Information systems and software (112,204) (68,696) - - (180,900) Total accumulated depreciation (13,423,727) (1,795,102) 41,108 - (15,177,721) Total capital assets being depreciated 38,301,238 (1,591,273) - 107,102 36,817,067 Governmental activities capital assets, net 62,414,763$ 6,726,122$ (1,200,605)$ -$ 67,940,280$ Beginning Ending Balance Increases Decreases Transfers Balance Business-type activities: Capital assets, not being depreciated: Construction in progress 285,392$ 43,638$ -$ -$ 329,030$ Total assets not being depreciated 285,392 43,638 - - 329,030 Capital assets, being depreciated: Capital improvements 14,899,416 - - - 14,899,416 Wastewater treatment rights 635,199 - - - 635,199 Machinery and equipment 3,560,780 - - - 3,560,780 Total capital assets being depreciated 19,095,395 - - - 19,095,395 Less accumulated depreciation: Capital improvements (4,801,796) (362,675) - - (5,164,471) Wastewater treatment rights (513,554) (31,760) - - (545,314) Machinery and equipment (1,891,763) (132,706) - - (2,024,469) Total accumulated depreciation (7,207,113) (527,141) - - (7,734,254) Total capital assets being depreciated 11,888,282 (527,141) - - 11,361,141 Business-type activities capital assets, net 12,173,674$ (483,503)$ -$ -$ 11,690,171$ Town of Westlake Notes to the Financial Statements 57 Depreciation was charged to departments of the primary government as follows: Governmental activities: General government 879,694$ Public safety 431,939 Public works 483,469 Total depreciation expense - governmental activities 1,795,102$ Business-type activities: Water and sewer 527,141$ A summary of discretely presented component units' capital assets at September 30, 2017 follows: Texas Student Housing Corporation – Denton Project Beginning Ending Balance Increases Decreases Balance Capital assets, not being depreciated: Land 2,200,000$ -$ -$ 2,200,000$ Total assets not being depreciated 2,200,000 - - 2,200,000 Capital assets, being depreciated: Buildings 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: Buildings (13,209,513) (856,833) - (14,066,346) Furniture and fixtures (1,198,210) (8,450) - (1,206,660) Total accumulated depreciation (14,407,723) (865,283) - (15,273,006) Total capital assets being depreciated 12,551,118 (865,283) - 11,685,835 Capital assets, net 14,751,118$ (865,283)$ -$ 13,885,835$ Town of Westlake Notes to the Financial Statements 58 Texas Student Housing Corporation – College Station Project Beginning Ending Balance Increases Decreases Balance Capital assets, not being depreciated: Land 2,899,597$ -$ -$ 2,899,597$ Total assets not being depreciated 2,899,597 - - 2,899,597 Capital assets, being depreciated: Buildings 26,885,312 - - 26,885,312 Furniture and fixtures 3,437,138 - - 3,437,138 Total capital assets being depreciated 30,322,450 - - 30,322,450 Less accumulated depreciation: Buildings (10,645,528) (896,177) - (11,541,705) Furniture and fixtures (3,029,646) (84,771) - (3,114,417) Total accumulated depreciation (13,675,174) (980,948) - (14,656,122) Total capital assets being depreciated 16,647,276 (980,948) - 15,666,328 Capital assets, net 19,546,873$ (980,948)$ -$ 18,565,925$ Note 5. Long-Term Debt The Town issues general obligation bonds, certificates of obligation and tax notes to provide for the acquisition and construction of major capital facilities and infrastructure. Combination tax and revenue certificates of obligation are issued for both governmental and business-type activities. General obligation bonds, governmental revenue bonds and tax notes pledge the full faith and credit of the Town. In December 2016, the Town issued $9,180,000 Combination Tax and Revenue Certificates of Obligations, Series 2016. Proceeds from the sale of the Certificates will be used for (i) acquiring, construction, installing and equipping fire-fighting facilities; and (ii) legal, fiscal and engineering fees in connection with such project. In January 2017, the Town issued $5,795,000 of General Obligation Refunding Bonds, Series 2017. The debt was issued to refund $6,330,000 of the Town’s Series 2007 General Obligation Refunding Bonds to achieve a present value debt service savings. Net proceeds from the sale of the bonds totaled $6,452,467 which was placed with an escrow agent to provide for all future debt service payments on the refunded bonds. This refunding resulted in a decrease in the Town’s debt service payments of $979,756, which resulted in an economic gain (difference between the present value of the debt service payments of the old and new debt) of $766,362. In August 2017, the Town also issued a Tax Note for $1,530,000 at a net interest rate of 1.81%. The note was issued for the purpose of paying all or a portion of the Town's contractual obligations incurred in connection with (i) acquiring, constructing, installing and equipping fire- fighting facilities, with any surplus proceeds to be used for (1) equipping Town Hall, including related parking, landscaping, and signage; and (2) constructing and improving streets, roads and sidewalks in the Town, including related drainage, signalization, landscaping, lighting, signage and utility relocation (collectively, the " Project") and (ii) payment of costs of issuance of the Notes. Town of Westlake Notes to the Financial Statements 59 A summary of long-term debt transactions for the year ended September 30, 2017, was as follows: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds other obligations 26,170,700$ 16,505,000$ (7,418,000)$ 35,257,700$ 1,519,000$ Unamortized bond premium 657,912 1,020,809 (99,812) 1,578,909 - Notes payable 275,101 - (36,697) 238,404 36,677 Capital leases 563,045 - (401,041) 162,004 162,004 Fidelity tax reimbursement - - - - - Compensated absences 274,216 193,893 (135,104) 333,005 33,301 Net pension liability- TMRS 1,082,639 232,327 - 1,314,966 - Net pension liability - TRS 1,093,865 - (42,519) 1,051,346 - Total governmental activities 30,117,478$ 17,952,029$ (8,133,173)$ 39,936,334$ 1,750,982$ Amount Beginning Ending Due within Balance Additions Reductions Balance One year Business-type activities: Certificates of obligation 971,300$ -$ (22,000)$ 949,300$ 22,000$ Contractual obligations 5,126,958 - - 5,126,958 213,093 Unamortized bond premium 31,053 - (1,172) 29,881 - Compensated absences 46,014 25,865 (6,375) 65,504 6,550 Net pension liability - TMRS 132,979 28,536 - 161,515 - Total business-type activities 6,308,304$ 54,401$ (29,547)$ 6,333,158$ 241,643$ General Obligation Bonds and Certificates of Obligation General obligation bonds and certificates of obligation are as follows as of September 30, 2017: Final Business- Maturity Interest Rates Governmental Type $2,095,000 Combination Tax and Revenue Certificates of Obligation, Series 2011 2031 3.25%1,552,000$ -$ $7,375,000 General Obligation Refunding Bonds, Series 2011 2028 2.0-4.0%6,360,000 - $9,320,000 Certificates of Obligation, Series 2013 2043 2.0-4.0%7,728,700 949,300 $2,200,000 General Obligation Refunding Bonds, Series 2013 2028 2.0-2.5%1,577,000 - $9,180,000 Certificate of Obligation Bonds, Series 2016 2046 2.0-5.0%9,180,000 - $5,795,000 General Obligation Refunding Bonds, Series 2017 2032 2.0-5.0%5,795,000 - $1,530,000 Tax Notes, Series 2017 2024 2.0-5.0%1,530,000 - $1,910,000 General Obligation Refunding Bonds, Series 2014 2032 2.0-5.0%1,535,000 - 35,257,700$ 949,300$ General Obligations Bonds, Tax Notes, and Certificates of Obligation Town of Westlake Notes to the Financial Statements 60 Debt service requirements of certificates of obligation and general obligations to be retired from governmental funds are as follows: Total Principal Interest Requirements 1,519,000$ 1,169,160$ 2,688,160$ 1,567,450 1,122,540 2,689,990 1,613,350 1,080,730 2,694,080 1,651,350 1,037,343 2,688,693 1,699,250 992,212 2,691,462 8,482,250 4,197,912 12,680,162 9,434,750 2,671,880 12,106,630 3,180,800 1,488,057 4,668,857 3,811,200 850,431 4,661,631 2,298,300 162,766 2,461,066 35,257,700$ 14,773,031$ 50,030,731$ Total 2021 2023-2027 2028-2032 2022 2033-2037 2038-2042 2043-2046 Year Ending September 30, 2018 2019 2020 Debt service requirements of certificates of obligation to be retired from proprietary funds are as follows: Total Principal Interest Requirements 22,000$ 33,021$ 55,021$ 22,550 32,576 55,126 23,650 32,114 55,764 23,650 31,582 55,232 24,750 30,977 55,727 134,750 143,442 278,192 228,250 115,564 343,814 189,200 73,330 262,530 228,800 33,597 262,397 51,700 1,034 52,734 949,300$ 527,237$ 1,476,537$ 2023-2027 2028-2032 2021 2033-2037 2038-2042 2043-2046 September 30, 2019 Total 2020 2022 Year Ending 2018 Town of Westlake Notes to the Financial Statements 61 Notes Payable In March 2014, the Town received a $366,774 loan from Bennett Benner Pettit, the proceeds of which were used to fund a portion of the Westlake Academy expansion project. The terms of the note call for ten annual payments at 0% interest. Note September 30,Payments 36,677$ 36,677 36,677 36,677 36,677 55,019 238,404$ Year Ending 2023-2024 Total 2018 2021 2022 2019 2020 Capital Leases The Westlake Academy has entered into lease agreements as lessee for financing the acquisition of computer equipment and software. The lease agreements qualify as capital leases for accounting purposes, and therefore, have been recorded at the present value of its future minimum lease payments as of the inception date. Equipment and software with a historical cost of $730,049 was under capital lease at August 31, 2017. Because the cost of the individual items was below the Town’s capitalization threshold, the entire cost was recorded as expense during the year ended August 31, 2017. The following schedule shows the future minimum lease payments under the capitalized lease together with the present value of the net minimum lease payments as of August 31, 2017: Annual Lease Payments 166,038$ Total minimum lease payments 166,038 Less: Amounts representing interest (4,034) Present value of net minimum lease payments 162,004$ Year Ending August 31, 2018 Town of Westlake Notes to the Financial Statements 62 Contractual Obligations Proprietary funds contractual obligations as of September 30, 2017 are as follows: Business- Maturity Interest Rate Type Elevated Water Storage Facility 2020 5.0-5.65%447,014$ Limited pledge contractual obligation: Dove Road Water Line and West Pump Station 2028 6.75%4,679,944 5,126,958$ Contractual Obligations 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 $4,679,944 for the project cost based upon the terms of the agreement, which requires 239 monthly principal and interest payments to Hillwood, at an interest rate of 6.75%. If the Town collects insufficient funds to pay current interest on the debt, the interest payment may be deferred. No portion of debt payments will be applied to the principal component, until all current and deferred interest is fully paid. The obligation of the Town to pay the purchase price and interest thereon is not a general obligation of the Town but is a limited recourse obligation payable solely from debt service revenue. Town of Westlake Notes to the Financial Statements 63 The schedule of future payments by the Town under these agreements is as follows: Total Principal Interest Requirements -$ 7,789,753$ 7,789,753$ 213,093 912,628 1,125,721 113,756 956,584 1,070,340 120,165 1,016,363 1,136,528 4,679,944 717,581 5,397,525 5,126,958$ 11,392,909$ 16,519,867$ 2020 2021 September 30, Year Ending Past Due 2018 2019 Total Prior Year Defeasance of Debt In prior years, the government defeased general obligations bonds by placing proceeds of the new bonds in an irrevocable trust account to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the government's financial statements. At September 30, 2017, there were no prior year defeased bonds outstanding. Compensated Absences Although compensated absences are liquidated by the fund to which they relate, the significant portion of the governmental activities compensated absences has typically been liquidated by the general fund. Discretely Presented Component Units – Long-Term Debt Texas Student Housing Corporation –Denton Project The long-term debt activity of the Denton Project is as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Bonds: 2001 A Bonds 22,090,000$ -$ (895,000)$ 21,195,000$ 955,000$ 2001 B Bonds 3,240,000 - - 3,240,000 1,360,000 Less discount on bonds (522,384) - 37,485 (484,899) - Total 24,807,616$ -$ (857,515)$ 23,950,101$ 2,315,000$ The Bonds are payable solely from the revenues generated by the Denton Property and are secured by the revenues pledged and assigned under the terms of the Trust Indenture. The Town of Westlake does not have any liability for the payment of the bonds as the bonds are non-recourse to both the Town of Westlake and Texas Student Housing Authority. Interest rates on the bonds range from 5.00% to 11.00% and are payable semi-annually on July 1 and January 1 of each year thereafter. Town of Westlake Notes to the Financial Statements 64 At August 31, 2017, the Project was not in compliance with certain covenants of the Indenture including insufficient funds in some of the required funds and a fixed charges ratio less than 1.25. In addition, all required principal payments on the Series B bonds had not been made as of August 31, 2017. Upon certain events of default either the trustee, or owners of not less than 25% in aggregate principal of the bonds then outstanding, may declare the principal and all interest then due to be immediately due and payable. The debt service requirements of the bonds are as follows: Total Principal Interest Requirements 1,295,000$ 8,187,361$ 9,482,361$ 1,020,000 1,661,593 2,681,593 1,085,000 1,589,980 2,674,980 1,165,000 1,513,768 2,678,768 1,250,000 1,431,730 2,681,730 1,330,000 1,343,530 2,673,530 8,265,000 5,138,253 13,403,253 9,025,000 1,693,338 10,718,338 24,435,000$ 22,559,553$ 46,994,553$ 2023-2027 2022 August 31, Past Due 2019 2021 2020 2018 2028-2031 Year Ending Texas Student Housing Corporation – College Station Project The Project's installment note payable is summarized as follows: Rate Balance Cambridge Student Housing Financing Company, L.P.; substantially all assets and assignment of rents: due November 1, 2039 8.00%28,419,200$ Lender/Security/Due/Date The following is a summary of long-term debt transactions of the Project for the year ended August 31, 2017: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Certificates 28,944,200$ -$ (525,000)$ 28,419,200$ 1,105,000$ Town of Westlake Notes to the Financial Statements 65 The debt is to be amortized through 2040 with varying payments. The annual requirements to amortize the Project’s outstanding installment notes payable as of August 31, 2017 are as follows: Year Ending August 31,Principal Interest Total Past Due 460,000$ 17,433,363$ 17,893,363$ 2018 645,000 1,703,325 2,348,325 2019 720,000 1,650,637 2,370,637 2020 775,000 1,592,890 2,367,890 2021 830,000 1,530,858 2,360,858 2022 895,000 1,464,122 2,359,122 2023-2027 2,875,000 6,639,508 9,514,508 2028-2032 4,130,000 5,330,167 9,460,167 2033-2037 5,975,000 3,427,523 9,402,523 2038-2040 11,114,200 759,710 11,873,910 Total 28,419,200$ 41,532,103$ 69,951,303$ Class C and D bonds are in default and the property does not generate enough revenue to pay the debt obligations. All of the Class C and D bonds issued remain outstanding as of August 31, 2017. Each class has certain rights and privileges, as contained in the private placement memorandum. As a part of the offering, the Project entered into a trust agreement with J. P. Morgan Trust Company, N.A. (the Trustee) for the purpose of determining that each class is paid in accordance with the private placement memorandum. At August 31, 2017, the Project was not in compliance with the fixed charge coverage ratio. As a result, 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. 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. Note 6. Unearned Revenue / Deferred Inflows of Resources Unearned revenue in the proprietary fund of $406,350 relates to the collection of the entire amount due on twelve Ductbank leases as follows: three leases with AT&T local network services ranging from 5 – 30 years; six leases with Verizon Southwest ranging from 5-30 years; one five-year lease with MCI Metro; one five-year lease with L3 Communications for use of the Town's Ductbank; and one five-year lease with Charter. Governmental funds report deferred inflows of resources in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, deferred inflows of resources reported in the governmental funds consist of $4,602 and $385 of unavailable property taxes in the general fund and debt service fund, respectively. Town of Westlake Notes to the Financial Statements 66 Note 7. Interlocal Agreement with the Town of Westlake In August 1995, the Town entered into an agreement with the City of Southlake to allow the Town to utilize capacity in a sewer line and to set forth their respective rights and obligations with respect to the sewer line owned by the City of Southlake. The Town is obligated to share in the cost of construction, operation and maintenance of the water sewer line. The sewer line was constructed in 2000. Additionally, the Town must pay the City of Southlake all transportation, treatment and related costs allocable to the metered flow of sewage from the Town into the sewer line. Note 8. Federal and State Program Revenues The Town received financial assistance from various federal and state governmental agencies in the form of grants for Westlake Academy. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any unallowed disbursement resulting from such audits becomes a liability of the Town. In the opinion of the Town management, no material refunds will be required as a result of unallowed disbursements (if any) by the grantor agencies. Sources of federal and state program revenues for the year ended September 30, 2017, were as follows: Westlake Academy Federal program revenues: U.S. Department of Eduation - Passed through State Department of Education Total federal program revenues 140,152$ State program revenues: State Department of Education 6,603,358$ Source Note 9. Interfund Balances and Transactions Interfund receivables and payables at September 30, 2017, were as follows: Due from Due to Other Funds Other Funds General fund 201,723$ -$ Nonmajor governmental funds: 4B Economic Development Fund - 201,723 201,723$ 201,723$ The 4B Economic Development Corporation Fund amount of $201,723 payable to the General Fund is related to debt service payment reimbursement. Inter-fund transfers are reported in the governmental funds and proprietary fund financial statements. In the government-wide statements, inter-fund transfers are eliminated within the governmental activities column and business-type column, as appropriate. Town of Westlake Notes to the Financial Statements 67 Individual fund transfers for fiscal year 2017 were as follows: Transfer out Transfer in Amount Purpose General Fund Debt Service Fund 733,094$ Debt service payments General Fund Westlake Academy 315,000 For student reserve fund Nonmajor Governmental General Fund 61,020 For operating expenditures in the Communications Dept. Nonmajor Governmental Nonmajor Governmental 1,010,000 Economic development payments for benefit of Westlake Academy Nonmajor Governmental Debt Service 1,332,636 Debt service payments Utility Fund General Fund 169,316 Fort Worth impact revenue 3,621,066$ Note 10. 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, 2017 was $1,215,465. Note 11. Defined Benefit Pension Plan - TMRS Plan Description The Town participates as one of 860 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS’s defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the city, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee’s contributions, with interest, and the city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member’s deposits and interest. Town of Westlake Notes to the Financial Statements 68 Employees Covered By Benefit Terms At the December 31, 2016 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees of beneficiaries currently receiving benefits 9 Inactive employees entitled to but not yet receiving benefits 21 Active employees 36 66 Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the Town were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the Town were 11.38% and 12.05% in calendar years 2016 and 2017, respectively. The Town’s contributions to TMRS for the year ended September 30, 2017, were $382,427, and were equal to the required contributions. Net Pension Liability The Town’s Net Pension Liability (NPL) was measured as of December 31, 2016, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial Assumptions The Total Pension Liability in the December 31, 2016 actuarial valuation was determined using the following actuarial assumptions:  Inflation 2.5% per year  Overall payroll growth 3.0% per year  Investment Rate of Return 6.75%, net of pension plan investment expense, including inflation Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Table, with male rates multiplied by 109% and female rates multiplied by 103%. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with males rates multiplied by 109% and female rates multiplied by 103% with a 3-year set-forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor. Town of Westlake Notes to the Financial Statements 69 Actuarial assumptions used in the December 31, 2016, valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period December 31, 2010 through December 31, 2014. Healthy post-retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. After the Asset Allocation Study analysis and experience investigation study, the Board amended the long-term expected rate of return on pension plan investments from 7% to 6.75%. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long- term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). At its meeting on July 30, 2015, the TMRS Board approved a new portfolio target allocation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Real Asset Class Target Allocation Rate of Return (Arithmetic) Domestic Equity 17.5%4.55% International Equity 17.5%6.10% Core Fixed Income 10.0%1.00% Non-Core Fixed Income 20.0%3.65% Real Return 10.0%4.03% Real Estate 10.0%5.00% Absolute Return 10.0%4.00% Private Equity 5.0%8.00% Total 100.0% Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan’s Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. Town of Westlake Notes to the Financial Statements 70 Allocations The Town’s net pension liability, pension expense, and deferred outflows of resources related to TMRS have been allocated between governmental activities and business-type activities using a contribution- based method. Changes in the Net Pension Liability Total Plan Net Pension Fiduciary Pension Liability Net Position Liability (a)(b)(a) - (b) Balance at 12/31/2015 5,294,817$ 4,079,199$ 1,215,618$ Changes for the year: Service Cost 483,414 - 483,414 Interest 371,753 - 371,753 Change of benefit terms - - - Difference between expected and actual experience 212,434 - 212,434 Changes of assumptions - - - Contributions - employer - 330,604 (330,604) Contributions - employee - 203,359 (203,359) Net investment income - 276,056 (276,056) Benefit payments, including refunds of employee contributions (58,144) (58,144) - Administrative expense (3,113) 3,113 Other changes - (168) 168 Net Changes 1,009,457 748,594 260,863 Balance at 12/31/16 6,304,274$ 4,827,793$ 1,476,481$ Increase (Decrease) Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Town, calculated using the discount rate of 6.75%, as well as what the Town’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1% Decrease in 1% Increase in Discount Rate Discount Rate Discount Rate (5.75%)(6.75%)(7.75%) Net pension liability 2,491,690$ 1,476,481$ 642,693$ Pension Plan Fiduciary Net Position Detailed information about the pension plan’s Fiduciary Net Position is available in a separately-issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. Town of Westlake Notes to the Financial Statements 71 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2017, the Town recognized pension expense of $550,584. At September 30, 2017, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and actual economic experience 315,779$ -$ Changes in actuarial assumptions 89,907 - Difference between projected and actual investment earnings 165,234 - Contributions subsequent to the measurement date 289,856 Total 860,776$ -$ $289,856 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending September 30, 2018. Amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended Net Deferred September 30,Outflows (Inflows) 2017 170,841$ 2018 170,842 2019 145,990 2020 64,638 2021 18,609 Total 570,920$ Town of Westlake Notes to the Financial Statements 72 Note 12. Defined Benefit Pension Plan – TRS Plan Description The Academy participates in a cost-sharing multiple-employer defined benefit pension that has a special funding situation. The plan is administered by the Teacher Retirement System of Texas (TRS). TRS’s defined benefit pension plan is established and administered in accordance with the Texas Constitution, Article XVI, Section 67 and Texas Government Code, Title 8, Subtitle C. The pension trust fund is a qualified pension trust under Section 401(a) of the Internal Revenue Code. The Texas Legislature establishes benefits and contribution rates within the guidelines of the Texas Constitution. The pension’s Board of Trustees does not have the authority to establish or amend benefit terms. All employees of public, state-supported educational institutions in Texas who are employed for one-half or more of the standard work load and who are not exempted from membership under Texas Government Code, Title 8, Section 822.002 are covered by the system. Pension Plan Fiduciary Net Position Detailed information about the Teacher Retirement System’s fiduciary net position is available in a separately issued Comprehensive Annual Financial Report that includes financial statements and required supplementary information. That report may be obtained on the Internet at http://www.trs.state.tx.us/about/documents/cafr.pdf#CAFR; by writing to TRS at 1000 Red River Street, Austin, TX, 78701-2698; or by calling (512) 542-6592. Benefits Provided TRS provides service and disability retirement, as well as death and survivor benefits, to eligible employees (and their beneficiaries) of public and higher education in Texas. The pension formula is calculated using 2.3 percent (multiplier) times the average of the five highest annual creditable salaries times years of credited service to arrive at the annual standard annuity except for members who are grandfathered, the three highest annual salaries are used. The normal service retirement is at age 65 with five years of credited service or when the sum of the member’s age and years of credited service equals 80 or more years. Early retirement is at age 55 with five years of service credit or earlier than 55 with 30 years of service credit. There are additional provisions for early retirement if the sum of the member’s age and years of service credit total at least 80, but the member is less than age 60 or 62 depending on date of employment, or if the member was grandfathered in under a previous rule. There are no automatic post- employment benefit changes; including automatic COLAs. Ad hoc post-employment benefit changes, including ad hoc COLAs can be granted by the Texas Legislature as noted in the Plan description in (A) above. Contributions Contribution requirements are established or amended pursuant to Article 16, section 67 of the Texas Constitution which requires the Texas legislature to establish a member contribution rate of not less than 6% of the member’s annual compensation and a state contribution rate of not less than 6% and not more than 10% of the aggregate annual compensation paid to members of the system during the fiscal year. Texas Government Code section 821.006 prohibits benefit improvements, if as a result of the particular action, the time required to amortize TRS’ unfunded actuarial liabilities would be increased to a period that exceeds 31 years, or, if the amortization period already exceeds 31 years, the period would be increased by such action. Town of Westlake Notes to the Financial Statements 73 Employee contribution rates are set in state statute, Texas Government Code 825.402. Senate Bill 1458 of the 83rd Texas Legislature amended Texas Government Code 825.402 for member contributions and established employee contribution rates for fiscal years 2014 thru 2017. The 83rd Texas Legislature, General Appropriations Act (GAA) established the employer contribution rates for fiscal years 2016 and 2017. 2016 2017 Member 7.20%7.20% Non-employer contributing entity (State)6.80%6.80% Employers 6.80%6.80% 2017 Employer contributions 84,783$ 2017 Member contributions 382,298 2016 NECE on-behalf contributions 340,001 Contribution rates Contributors to the plan include members, employers and the State of Texas as the only non-employer contributing entity. The State is the employer for senior colleges, medical schools and state agencies including TRS. In each respective role, the State contributes to the plan in accordance with state statutes and the General Appropriations Act (GAA). As the non-employer contributing entity for public education and junior colleges, the State of Texas contributes to the retirement system an amount equal to the current employer contribution rate times the aggregate annual compensation of all participating members of the pension trust fund during that fiscal year reduced by the amounts described below which are paid by the employers. Employers (public school, junior college, other entities or the State of Texas as the employer for senior universities and medical schools) are required to pay the employer contribution rate in the following instances:  On the portion of the member's salary that exceeds the statutory minimum for members entitled to the statutory minimum under Section 21.402 of the Texas Education Code.  During a new member’s first 90 days of employment.  When any part or all of an employee’s salary is paid by federal funding sources, a privately sponsored source, from non-educational and general, or local funds.  When the employing district is a public junior college or junior college district, the employer shall contribute to the retirement system an amount equal to 50% of the state contribution rate for certain instructional or administrative employees; and 100% of the state contribution rate for all other employees. In addition to the employer contributions listed above, there are two additional surcharges an employer is subject to:  When employing a retiree of the Teacher Retirement System the employer shall pay both the member contribution and the state contribution as an employment after retirement surcharge  When a school district or charter school does not contribute to the Federal Old-Age, Survivors and Disability Insurance (OASDI) Program for certain employees, they must contribute 1.5% of the state contribution rate for certain instructional or administrative employees; and 100% of the state contribution rate for all other employees. Town of Westlake Notes to the Financial Statements 74 Actuarial Assumptions The total pension liability in the August 31, 2016 actuarial valuation was determined using the following actuarial assumptions: Valuation Date August 31, 2016 Actuarial Cost Method Individual Entry Age Normal Asset Valuation Method Market Value Single Discount Rate 8.00% Long-term expected Investment Rate of Return* 8.00% Inflation 2.50% Salary Increases including inflation 3.50% to 9.50% Payroll Growth Rate 2.50% Benefit Changes during the year None Ad hoc post-employment benefit changes None The actuarial methods and assumptions are primarily based on a study of actual experience for the four-year period ending August 31, 2014 and adopted on September 24, 2015. Discount Rate The discount rate used to measure the total pension liability was 8.0%. There was no change in the discount rate since the previous year. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and those of the contributing employers and the non- employer contributing entity are made at the statutorily required rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The long-term rate of return on pension plan investments is 8%. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimates ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Town of Westlake Notes to the Financial Statements 75 These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric real rates of return for each major asset class included in the Systems target asset allocation as of August 31, 2016 are summarized below: Long-term Expected Portfolio Target Real Return Real Rate of Allocation Geometric Basis Return* Global Equity U.S.18%4.6%1.0% Non-U.S. Developed 13%5.1%0.8% Emerging Markets 9%5.9%0.7% Directional Hedge Funds 4%3.2%0.1% Private Equity 13%7.0%1.1% Stable Value U.S. Treasuries 11%0.7%0.1% Absolute Return 0%1.8%0.0% Stable Value Hedge Funds 4%3.0%0.1% Cash 1%-0.2%0.0% Real Return Global Inflation Linked Bonds 3%0.9%0.0% Real Assets 16%5.1%1.1% Energy and Natural Resources 3%6.6%0.2% Commodities 0%1.2%0.0% Risk Parity Risk Parity 5%6.7%0.3% Inflation Expectation 2.2% Alpha 1.0% Total 100.0%8.7% Asset Class *The Expected Contribution to Returns incorporates the volatility drag resulting from the conversion between Arithmetic and Geometric mean returns. Discount Rate Sensitivity Analysis The following schedule shows the impact of the Net Pension Liability if the discount rate used was 1% less than and 1% greater than the discount rate that was used (8%) in measuring the 2016 Net Pension Liability. 1% Decrease in Discount 1% Increase in Discount Rate (7.0%)Rate (8.0%)Discount Rate (9.0%) Academy's proportionate share of the TRS net pension liability 1,627,129$ 1,051,346$ 562,965$ Town of Westlake Notes to the Financial Statements 76 Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At August 31, 2017, the Academy reported a liability of $1,051,346 for its proportionate share of the TRS’s net pension liability. This liability reflects a reduction for State pension support provided to the Academy. The amount recognized by the Academy as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the Academy were as follows: Academy's proportionate share of the collective net pension liability 1,051,346$ State's proportionate share that is associated with Academy 4,035,754 5,087,100$ The net pension liability was measured as of August 31, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The employer’s proportion of the net pension liability was based on the employer’s contributions to the pension plan relative to the contributions of all employers to the plan for the period September 1, 2015 thru August 31, 2016. At August 31, 2016, the employer’s proportion of the collective net pension liability was 0.0027822% which was an decrease of 0.0003123% from its proportion measured as of August 31, 2015. Changes since the Prior Actuarial Valuation There were no changes of benefit terms that affected measurement of the total pension liability during the measurement period. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended August 31, 2017, the Academy recognized pension expense of $418,815 and revenue of $418,815 for support provided by the State. Town of Westlake Notes to the Financial Statements 77 At August 31, 2017, the Academy reported its proportionate share of the TRS’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual economic experience 16,485$ 31,393$ Changes in actuarial assumptions 32,043 29,142 Changes in proportionate share 450,620 1,107 Difference between projected and actual investment earnings 89,026 - Contributions paid to TRS subsequent to the measurement date 84,783 - Total 672,957$ 61,642$ The net amounts of the employer’s balances of deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended Net Deferred Aug. 31,Outflows (Inflows) 2018 99,970$ 2019 99,970 2020 156,755 2021 95,606 2022 73,187 Thereafter 1,044 Total 526,532$ Town of Westlake Notes to the Financial Statements 78 Note 13. 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. Note 14. Contingent Liabilities Litigation Various 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. 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 MUDs at their inception. To date, three projects, Chrysler Financial, Deloitte University, and Charles Schwab, 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. Note 15. Solana Public Improvement District On February 24, 2014, the Town Council granted a petition by Maguire Partners-Solana Land, LP in resolution 14-07 to authorize and provide for the creation of a public improvement district, The Solana Public Improvement District (“the District”). The District encompasses approximately 85 acres currently being developed as a master-planned mixed-use development known as “Westlake Entrada” that is expected to include, among other things, condominiums, residential villas, hotels, office, retail, commercial, institutional and hospitality uses, and a wedding event center. The District was created in accordance with Chapter 372 of the Texas Local Government Code. Town of Westlake Notes to the Financial Statements 79 On February 5, 2015, the Town Council approved issuance of $26,175,000 of Special Assessment Revenue Bonds, Series 2015 related to the District. The Public Improvement District Bonds (The Bonds) are special and limited obligations of the Town payable solely from the pledged revenues and other funds comprising the Trust Estate, as and to the extent provided in the indenture. The bonds do not give rise to a charge against the general credit or taxing power of the Town and are payable solely from the sources identified in the indenture. The owners of the bonds shall never have the right to demand payment thereof out of money raised or to be raised by taxation, or out of any funds of the Town other than the Trust Estate, as and to the extent provided in the indenture; and, no owner of the bonds shall have the right to demand any exercise of the Town’s taxing power to pay the principal of the bonds or the interest or redemption premium, if any, thereon. The Town shall have no legal or moral obligation to pay the bonds out of any funds of the Town other than the Trust Estate in accordance with the Texas Local Government Code. The proceeds from the bond issue are being used as follows: payment of a portion of the costs of construction, acquisition, or purchase of certain water, wastewater and roadway public improvements for the special benefit of the District; funding a reserve fund; funding capitalized interest; payment of a portion of the costs incidental to the organization of the District; and payment of the cost of issuance of the bonds. The Town is not, and will not be obligated to provide any funds to finance construction of authorized improvements. All design and construction costs of the District’s authorized public improvements will be paid from the District assessments and from other sources of funds, if any, to the extent provided in the Trust Indenture. Note 16. Tax Abatements The Town enters into economic development agreements authorized under Chapter 380 of the Texas Local Government Code and Chapter 312 of the Texas Tax Code. These agreements are planning tools designed to stimulate economic activity, redevelopment, community improvement, and provide a return on investment for the community. These programs abate or rebate property and/or sales and hotel/motel taxes and may include other incentive payments such as fee reductions or construction costs reimbursements. Economic development agreements are considered on a case-by-case basis by the Town Council and generally contain recapture provisions, which may require repayment or termination if recipients do not meet the required provisions of the economic incentives. Other Economic Agreements Chapter 380 of the Texas Local Government Code allows the Town to provide grants for the purpose of promoting local economic development. These grants are based on a percentage of property and/or sales tax received by the Town. For the fiscal year ending September 30, 2017, the Town abated $209,341 in property taxes; $134,400 in sales taxes; and $159,178 in hotel/motel taxes. Note 17. Going Concern The 2017 financial statements were prepared assuming the Texas Student Housing entities will continue as going concerns. The Texas Student Housing entities’ bonds payable are considered to be in default due to not making full principal and interest payments and, therefore, are reported as current liabilities. This is considered an event of default by the Trustees, which gives the bondholders the right to accelerate and demand payment of the bonds in full. Management and the property managers are in the process of developing and implementing plans to increase occupancy and rental rates at the properties to improve their financial performance. Note 18. Expenditures In Excess of Appropriations For the year ended September 30, 2017, the Westlake Academy Fund expenditures exceeded appropriations by $60,706. The over-expenditure will be addressed through future appropriations. 80 Required Supplementary Information Town of Westlake Exhibit B-1 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual – General Fund For the Year Ended September 30, 2017 81 Variance Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales 3,310,500$ 3,310,500$ 3,353,658$ 43,158$ Property 1,437,050 1,479,500 1,482,625 3,125 Mixed beverages 62,500 62,500 68,432 5,932 Franchise 966,370 974,770 818,423 (156,347) Interest income 14,440 45,575 67,680 22,105 Building permits and fees 2,551,442 2,805,828 3,521,686 715,858 Fines and penalties 805,350 809,880 673,716 (136,164) Contributions - 110,535 110,532 (3) Miscellaneous 106,280 169,460 275,404 105,944 Total revenues 9,253,932 9,768,548 10,372,156 603,608 EXPENDITURES Current General government 4,182,287 4,822,665 4,596,827 225,838 Public safety 2,898,780 2,721,961 2,684,244 37,717 Cultural and recreation 148,603 210,763 164,720 46,043 Public works 1,033,235 857,756 784,279 73,477 Capital outlay 190,000 49,500 29,612 19,888 Debt service Principal retirement 36,680 36,697 36,697 - Total expenditures 8,489,585 8,699,342 8,296,379 402,963 Excess of revenues over expenditures 764,347 1,069,206 2,075,777 1,006,571 OTHER FINANCING SOURCES (USES) Transfers in 74,365 231,278 230,336 (942) Transfers out (1,053,635) (1,093,003) (1,048,094) 44,909 Net other financing sources (uses)(979,270) (861,725) (817,758) 43,967 NET CHANGE IN FUND BALANCE (214,923) 207,481 1,258,019 1,050,538 FUND BALANCE AT BEGINNING OF YEAR 9,679,473 9,679,473 9,679,473 - FUND BALANCE AT END OF YEAR 9,464,550$ 9,886,954$ 10,937,492$ 1,050,538$ General Fund Budgeted Amounts Town of Westlake Exhibit B-2 Schedule of Revenues, Expenditures And Changes in Fund Balances Budget and Actual – Westlake Academy For the Year Ended September 30, 2017 82 Variance Favorable Original Final Actual (Unfavorable) REVENUES State program revenues 6,760,431$ 6,276,996$ 6,603,358$ 326,362$ Federal program revenues 102,394 139,853 140,152 299 Interest income 4,500 4,500 5,371 871 Local and intermediate sources 1,808,862 1,880,592 1,575,730 (304,862) Total revenues 8,676,187 8,301,941 8,324,611 22,670 EXPENDITURES Education 8,627,066 8,758,468 8,819,174 (60,706) Interest and other fiscal charges 13,951 13,951 13,951 - Total expenditures 8,641,017 8,772,419 8,833,125 (60,706) Deficiency of revenues under expenditures 35,170 (470,478) (508,514) (38,036) OTHER FINANCING SOURCES Transfers in 315,000 315,000 315,000 - Total other financing sources 315,000 315,000 315,000 - NET CHANGE IN FUND BALANCE 350,170 (155,478) (193,514) (38,036) FUND BALANCE AT BEGINNING OF YEAR 1,158,762 1,158,762 1,158,762 - FUND BALANCE AT END OF YEAR 1,508,932$ 1,003,284$ 965,248$ (38,036)$ Westlake Academy Budgeted Amounts Town of Westlake Notes to Budgetary Comparison Schedules 83 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 accepted 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 recorded 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. Town Of Westlake Exhibit B-3 Schedule of Net Pension Liability and Related Ratios Texas Municipal Retirement System Last Three Measurement Years 84 2016 2015 2014 Total pension liability Service cost 483,414$ 435,146$ 288,923$ Interest 371,753 317,982 264,994 Change in benefit terms - - - Difference between expected and actual experience 212,434 96,226 176,965 Change in assumptions - 139,579 - Benefit payments (58,144) (38,289) (55,762) Net change in total pension liability 1,009,457 950,644 675,120 Total pension liability, beginning 5,294,817 4,344,173 3,669,053 Total pension liability, ending 6,304,274 5,294,817 4,344,173 Plan fiduciary net position Contributions, employer 330,604 290,278 172,064 Contributions, nonemployer 203,359 188,725 152,077 Net investment income 276,056 5,368 182,430 Benefit payments (58,144) (38,289) (55,762) Administrative income (3,113) (3,268) (1,904) Other (168) (191) (127) Net change in plan fiduciary net position 748,594 442,623 448,778 Plan fiduciary net position, beginning 4,079,199 3,636,576 3,187,798 Plan fiduciary net position, ending 4,827,793 4,079,199 3,636,576 Town's net pension liability, ending 1,476,481$ 1,215,618$ 707,597$ Plan fiduciary net position as a % of total pension liability 76.58%77.04%83.71% Covered payroll 2,905,134$ 2,696,072$ 2,172,525$ Town's net pension liability as a % of employee payroll 50.82%45.09%32.57% Note: Only two years of data is presented in accordance with GASB #68, paragraph 138. “The information for all period for the 10-year schedules that are required to be presented as required supplementary information may be available initially. In these cases, during the transition period, that information should be presented for as many periods as are available. The schedules should not include information that is not measured in accordance with the requirements of this statement. Additional years’ will be displayed as it becomes available.” Town of Westlake Exhibit B-4 Schedule of Contributions Texas Municipal Retirement System Last Three Measurement Years 85 2017 2016 2015 Actuarially determined contributions 382,427$ 316,618$ 277,651$ Contributions in relation to the actuarially determined contributions (382,427) (316,618) (277,651) Contribution deficiency (excess)-$ -$ -$ Covered employee payroll 3,218,899 2,821,349 2,778,776 Contributions as a percentage of covered employee payroll 11.88%11.22%9.99% Note: GASB #68, paragraph 81.2.b requires that the data in this schedule be presented as of the Town’s fiscal year as opposed to the time period covered by the measurement date. Note: Only three years of data is presented in accordance with GASB #68, paragraph 138. “The information for all period for the 10-year schedules that are required to be presented as required supplementary information may be available initially. In these cases, during the transition period, that information should be presented for as many periods as are available. The schedules should not include information that is not measured in accordance with the requirements of this statement. Additional years’ informa tion will be displayed as it becomes available.” Town of Westlake Notes to Texas Municipal Retirement System Required Supplementary Information For the Year Ended September 30, 2017 86 Valuation Date Actuarial determined contribution rates are calculated as of December 31 each year and become effective in January, 12 months and one day later. Methods and Assumptions used to Determine Contribution Rates Actuarial cost method Entry age normal Amortization method Level percentage of payroll, closed Remaining amortization period 27 years Asset valuation method 10 year smoothed market; 15% soft corridor Inflation 2.50% Salary increases 3.50% to 10.50% including inflation Investment rate of return 6.75% Retirement age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010 - 2014. Mortality RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB. Town of Westlake Exhibit B-5 Schedule of Academy’s Proportionate Share of Net Pension Liability – Teacher Retirement System Last Three Measurement Years 87 2016 2015 2014 Academy's proportion of the net pension liability 0.0027822%0.0030945%0.0007190% Academy's proportionate share of net pension liability 1,051,346$ 1,093,865$ 192,056$ State's proportionate share of net pension liability associated with the Westlake Academy 4,035,754 3,667,893 2,965,583 Total 5,087,100$ 4,761,758$ 3,157,639$ Academy's covered payroll 5,094,571$ 4,784,695$ 4,300,931$ Academy's proportionate share of net pension liability as a percentage of its covered payroll 20.64%22.86%4.47% Plan fiduciary net position as a percentage of total pension liability 78.00%78.43%83.25% Note: Only three years of data is presented in accordance with GASB #68, paragraph 138. "The information for all periods for the 10-year schedules that are required to be presented as required supplementary information may not be available initially. In these cases, during the transition period, that information should be presented for as many years as are available. The schedules should not include information that is not measured in accordance with the requirements of this Statement." Town of Westlake Exhibit B-6 Schedule of Contributions Teacher Retirement System Last Three Fiscal Years (Unaudited) 88 2017 2016 2015 Statutorially required contributions 131,436$ 88,399$ 92,325$ Actual contributions in relation to statutorially required contributions 131,436 88,399 92,325 Contribution deficiency (excess)-$ -$ -$ Academy's covered payroll 4,965,944$ 5,094,571$ 4,784,694$ Contributions as a percentage of Academy's covered payroll 2.65%1.74%1.93% Note: GASB 68, Paragraph 81.2.b requires that the data in this schedule be presented as of the Academy's current fiscal year as opposed to the time period covered by the measurement date. Note: Only three years of data is presented in accordance with GASB #68, paragraph 138. "The information for all periods for the 10-year schedules that are required to be presented as required supplementary information may not be available initially. In these cases, during the transition period, that information should be presented for as many years as are available. The schedules should not include information that is not measured in accordance with the requirements of this Statement." 89 Town of Westlake 90 Combining and Individual Fund Statements and Schedules Town of Westlake Exhibit C-1 Schedule of Revenues, Expenditures and Changes In Fund Balances Budget and Actual – Debt Service Fund For the Year Ended September 30, 2017 91 Variance Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Property 88,635$ 95,010$ 95,190$ 180$ Total revenues 88,635 95,010 95,190 180 EXPENDITURES Debt service Principal retirement 1,043,902 1,088,000 1,088,000 - Interest and other fiscal charges 1,108,094 1,098,126 1,091,425 6,701 Bond issuance costs - - 116,592 (116,592) Total expenditures 2,151,996 2,186,126 2,296,017 (109,891) Deficiency of revenues under expenditures (2,063,361) (2,091,116) (2,200,827) (109,711) OTHER FINANCING SOURCES (USES) Transfers in 2,033,385 2,066,128 2,065,730 (398) Refunding bonds issued - - 5,795,000 5,795,000 Payment to refunding bond escrow agent - - (6,452,467) (6,452,467) Premium on refunding bonds issued - - 774,059 774,059 Net other financing sources (uses)2,033,385 2,066,128 2,182,322 116,194 NET CHANGE IN FUND BALANCE (29,976) (24,988) (18,505) 6,483 FUND BALANCE AT BEGINNING OF YEAR 30,468 30,468 30,468 - FUND BALANCE AT END OF YEAR 492$ 5,480$ 11,963$ 6,483$ Debt Service Fund Budgeted Amounts Town of Westlake Nonmajor Governmental Funds 92 Visitors Association Fund To account for municipal hotel occupancy taxes collected and expenditures to promote tourism and the convention and hotel industry. Lone Star Public Facilities Corporation To account for investment activity relating to the Lone Star Public Facilities Corporation. Economic Development Fund To account for sales tax and hotel occupancy tax collected to fund activity relating to Economic Development agreements. 4B Economic Development Corporation To account for sales tax collected to fund the activities of the 4B Economic Development Corporation. Westlake Academy Expansion Fund To account for proceeds from long-term financing and revenue and expenditures related to authorized construction related to expansion of Westlake Academy facilities. Town of Westlake Exhibit C-2 Combining Balance Sheet Non Major Governmental Funds For the Year Ended September 30, 2017 93 Visitors Association Lone Star Public Facilities Corporation Fund Economic Development Fund 4B Economic Development Corporation Fund Westlake Academy Expansion Capital Projects Fund Total Nonmajor Governmental Funds ASSETS Cash and cash equivalents 746,998$ 13,789$ 22,207$ -$ 1,413,345$ 2,196,339$ Accounts receivable 62,424 - 110,579 201,723 - 374,726 Prepaid items 7,862 - - - - 7,862 Total assets 817,284$ 13,789$ 132,786$ 201,723$ 1,413,345$ 2,578,927$ LIABILITIES AND FUND BALANCES Accounts payable 16,794$ -$ 132,786$ -$ -$ 149,580$ Unearned revenue 1,320 - - - - 1,320 Due to other funds - - - 201,723 - 201,723 Total liabilities 18,114 - 132,786 201,723 - 352,623 FUND BALANCES Nonspendable: Prepaid items 7,862 - - - - 7,862 Restricted for: Capital items - - - - 1,413,345 1,413,345 Tourism 791,308 - - - - 791,308 Future projects - 13,789 - - - 13,789 Total fund balances 799,170 13,789 - - 1,413,345 2,226,304 Total liabilities and fund balances 817,284$ 13,789$ 132,786$ 201,723$ 1,413,345$ 2,578,927$ Special Revenue Funds Town of Westlake Exhibit C-3 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2017 94 Visitors Association Lone Star Public Facilities Corporation Fund Economic Development Fund 4B Economic Development Corporation Fund Westlake Academy Expansion Capital Projects Fund Total Nonmajor Governmental Funds REVENUES Sales -$ -$ 134,400$ 1,162,686$ -$ 1,297,086$ Hotel occupancy 722,423 - 29,178 - - 751,601 Interest income 7,054 110 - - 6,218 13,382 Contributions 3,100 - 1,010,000 - - 1,013,100 Miscellaneous 2,667 - - - - 2,667 Total revenues 735,244 110 1,173,578 1,162,686 6,218 3,077,836 EXPENDITURES Current: Economic development - - 163,578 - - 163,578 Visitor services 717,055 - - - - 717,055 Debt service Principal retirement - - - - - - Interest and other fiscal charges - - - - - - Total expenditures 717,055 - 163,578 - - 880,633 Excess of revenues over expenditures 18,189 110 1,010,000 1,162,686 6,218 2,197,203 OTHER FINANCING SOURCES (USES) Transfers in - - - - 1,010,000 1,010,000 Transfers out (230,970) - (1,010,000) (1,162,686) - (2,403,656) Total other financing sources (uses)(230,970) - (1,010,000) (1,162,686) 1,010,000 (1,393,656) Net change in fund balances (212,781) 110 - - 1,016,218 803,547 Fund balances, October 1 1,011,951 13,679 - - 397,127 1,422,757 Fund balances, September 30 799,170$ 13,789$ -$ -$ 1,413,345$ 2,226,304$ Special Revenue Funds Town Of Westlake Exhibit C-4 Schedule of Revenues, Expenditures And Changes in Fund Balances Budget and Actual – Visitors Association Fund For the Year Ended September 30, 2017 95 Variance Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Hotel occupancy 804,640$ 804,640$ 722,423$ (82,217)$ Interest income 2,900 5,150 7,054 1,904 Contributions 1,200 3,000 3,100 100 Miscellaneous 4,150 8,020 2,667 (5,353) Total revenues 812,890 820,810 735,244 (85,566) EXPENDITURES Visitor services 872,095 818,281 717,055 101,226 Total expenditures 872,095 818,281 717,055 101,226 Excess (deficiency) of revenues over (under) expenditures (59,205) 2,529 18,189 15,660 OTHER FINANCING USES Transfers out (157,850) (211,645) (230,970) (19,325) Total other financing uses (157,850) (211,645) (230,970) (19,325) NET CHANGE IN FUND BALANCE (217,055) (209,116) (212,781) (3,665) FUND BALANCE AT BEGINNING OF YEAR 1,011,951 1,011,951 1,011,951 - FUND BALANCE AT END OF YEAR 794,896$ 802,835$ 799,170$ (3,665)$ Visitors Association Fund Budgeted Amounts Town of Westlake Exhibit C-5 Schedule of Revenues, Expenditures and Changes In Fund Balances Budget and Actual – Lone Star Public Facilities Corporation Fund For the Year Ended September 30, 2017 96 Variance Favorable Original Amended Actual (Unfavorable) REVENUES: Interest income 30$ 80$ 110$ 30$ Total revenues 30 80 110 30 EXPENDITURES: Economic development - - - - Total expenditures - - - - NET CHANGE IN FUND BALANCE 30 80 110 30 FUND BALANCE AT BEGINNING OF YEAR 13,679 13,679 13,679 - FUND BALANCE AT END OF YEAR $13,709 $13,759 $13,789 $30 Lone Star Public Facilities Corporation Budgeted Amounts Town of Westlake Exhibit C-6 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual – Economic Development Fund For the Year Ended September 30, 2017 97 Variance Favorable Original Amended Actual (Unfavorable) REVENUES: Taxes Sales 102,000$ 102,000$ 134,400$ 32,400$ Hotel occupancy 32,640 32,640 29,178 (3,462) Miscellaneous 1,210,000 1,010,000 1,010,000 - Total revenues 1,344,640 1,144,640 1,173,578 28,938 EXPENDITURES: Economic development 134,640 134,640 163,578 (28,938) Total expenditures 134,640 134,640 163,578 (28,938) Excess of revenues over expenditures 1,210,000 1,010,000 1,010,000 - OTHER FINANCING SOURCES (USES) Transfers out (1,210,000) (1,010,000) (1,010,000) - Total other financing sources (uses)(1,210,000) (1,010,000) (1,010,000) - NET CHANGE IN FUND BALANCE - - - - FUND BALANCE AT BEGINNING OF YEAR - - - - FUND BALANCE AT END OF YEAR -$ -$ -$ -$ Economic Development Fund Budgeted Amounts Town of Westlake Exhibit C-7 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual – 4B Economic Development Corporation Fund For the Year Ended September 30, 2017 98 Variance Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales 1,137,500$ 1,137,500$ 1,162,686$ 25,186$ Total revenues 1,137,500 1,137,500 1,162,686 25,186 EXPENDITURES Economic development - - - - Total expenditures - - - - Excess of revenues over expenditures 1,137,500 1,137,500 1,162,686 25,186 OTHER FINANCING USES Transfers out (1,137,500) (1,137,500) (1,162,686) (25,186) Total other financing uses (1,137,500) (1,137,500) (1,162,686) (25,186) NET CHANGE IN FUND BALANCE - - - - FUND BALANCE AT BEGINNING OF YEAR - - - - FUND BALANCE AT END OF YEAR -$ -$ -$ -$ 4B Economic Development Corporation Budgeted Amounts Town of Westlake Agency Funds 99 PID Agency Fund To account for bond proceeds, assessments, and related debt associated with bonds issued by the Town as an agent for the Solana public improvement district. Town of Westlake Exhibit C-8 PID Agency Fund Statement of Changes in Assets and Liabilities For the Year Ended September 30, 2017 100 Balance at Balance at Beginning End of Year Additions Deletions of Year ASSETS Restricted cash and cash equivalents 2,769,575$ 8,724$ (692,723)$ 2,085,576$ Total assets 2,769,575$ 8,724$ (692,723)$ 2,085,576$ LIABILITIES Liability to bond holders 2,769,575$ 8,724$ (692,723)$ 2,085,576$ Total liabilities 2,769,575$ 8,724$ (692,723)$ 2,085,576$ 101 Town of Westlake 102 Statistical Section Statistical Section Unaudited 103 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. Page Financial Trends 104 - 109 These schedules contain trend information to help the reader understand how the Town's financial performance and well-being have changed over time. Revenue Capacity 110 - 114 These schedules contain 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 Exhibit S-9. Debt Capacity 115 - 117 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. Demographic and Economic Information 118 - 120 These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town's financial activities take place. Operating Information 121 - 122 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. Sources: Unless otherwise noted, the information in these schedules is derived from annual financial reports for the relevant year. Town of Westlake Exhibit S-1 Net Position by Component Last Ten Years Accrual Basis of Accounting – Unaudited 104 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Governmental activities: Invested in capital assets, net of related debt 10,313,743$ 13,244,690$ 13,633,485$ 12,658,921$ 14,866,299$ 21,177,426$ 32,048,991$ 29,633,298$ 38,299,337$ 46,499,873$ Restricted 2,004,763 1,761,067 1,564,868 7,137,362 4,726,376 4,243,239 2,284,947 17,827,177 7,489,048 2,034,916 Unrestricted 3,835,751 4,122,185 5,866,046 3,448,100 5,023,731 6,636,876 910,977)( 7,108,101 9,260,572 9,513,643 Total governmental activities net position 16,154,257$ 19,127,942$ 21,064,399$ 23,244,383$ 24,616,406$ 32,057,541$ 33,422,961$ 54,568,576$ 55,048,957$ 58,048,432$ Business-type activities: Invested in capital assets, net of related debt 7,726,576$ 7,349,032$ 7,033,831$ 6,875,031$ 6,877,555$ 6,601,949$ 6,734,414$ 6,410,547$ 6,044,363$ 5,583,570$ Unrestricted 1,997,281)( 1,945,578)( 2,003,600)( 1,542,092)( 1,636,249)( 842,457)( 1,272,014)( 2,608,315)( 4,041,360)( 3,746,696)( Total business-type activities net position 5,729,295$ 5,403,454$ 5,030,231$ 5,332,939$ 5,241,306$ 5,759,492$ 5,462,400$ 3,802,232$ 2,003,003$ 1,836,874$ Primary government: Invested in capital assets, net of related debt 18,040,319$ 20,593,722$ 20,667,316$ 19,533,952$ 21,743,854$ 27,779,375$ 38,783,405$ 36,043,845$ 44,343,700$ 52,083,443$ Restricted 2,004,763 1,761,067 1,564,868 7,137,362 4,726,376 4,243,239 2,284,947 17,827,177 7,489,048 2,034,916 Unrestricted 1,838,470 2,176,607 3,862,446 1,906,008 3,387,482 5,794,419 (2,182,991) 4,499,786 5,219,212 5,766,947 Total primary government net position 21,883,552$ 24,531,396$ 26,094,630$ 28,577,322$ 29,857,712$ 37,817,033$ 38,885,361$ 58,370,808$ 57,051,960$ 59,885,306$ Source:Annual financial reports Fiscal Year Town of Westlake Exhibit S-2 Changes in Net Position Last Ten Years - Continued Accrual Basis of Accounting – Unaudited 105 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EXPENSES Governmental activities: General government 2,031,460$ 2,203,882$ 2,272,127$ 2,478,826$ 2,518,490$ 2,606,785$ 2,784,587$ 3,145,716$ 4,491,557$ 5,716,302$ Public Safety 1,795,782 1,939,441 1,698,164 1,801,585 1,883,424 1,978,803 2,190,050 2,381,437 2,737,084 3,063,003 Cultural and Recreation 129,641 115,770 105,997 122,400 111,765 113,924 123,541 129,970 187,274 217,489 Public Works 1,013,804 1,028,934 594,705 470,054 216,901 267,973 955,794 1,081,996 1,102,636 1,634,549 Economic Development 473,451 207,044 309,653 680,823 546,039 626,423 147,680 171,757 141,779 163,578 Visitor Services 312,777 341,270 420,270 356,365 475,719 521,521 493,087 665,936 740,835 737,071 Education 3,305,220 3,722,705 4,138,875 4,884,985 6,193,560 5,803,611 7,147,411 8,598,261 9,516,287 8,566,295 Interest on long-term debt 991,184 1,068,935 1,026,026 1,127,913 897,573 1,031,328 998,951 1,022,201 990,413 1,401,199 Total governmental activities expenses 10,053,319 10,627,981 10,565,817 11,922,951 12,843,471 12,950,368 14,841,101 17,197,274 19,907,865 21,499,486 Business-type activities: Water and Sewer 2,410,765 2,694,407 2,567,675 2,794,235 3,098,466 3,356,466 3,690,137 4,861,529 5,519,116 4,893,075 Cemetery 13,299 473 27,822 5,604 6,282 5,328 7,121 7,297 7,831 8,021 Total business-type activities expenses 2,424,064 2,694,880 2,595,497 2,799,839 3,104,748 3,361,794 3,697,258 4,868,826 5,526,947 4,901,096 Total primary government program expenses 12,477,383$ 13,322,861$ 13,161,314$ 14,722,790$ 15,948,219$ 16,312,162$ 18,538,359$ 22,066,100$ 25,434,812$ 26,400,582$ PROGRAM REVENUES Governmental activities: Fees, fines, and charges for services: General Government 522,215$ 677,948$ 716,624$ 721,157$ 673,090$ 774,909$ 33,975$ 110,778$ 789,457$ 73,180$ Public Safety 113,755 107,634 80,665 140,600 142,402 182,154 848,772 887,919 932,017 783,681 Public Works 902,875 594,338 1,597,655 292,572 407,328 659,246 1,022,769 936,245 1,789,776 3,338,541 Education 42,839 98,314 102,406 99,638 195,059 182,220 222,270 531,090 283,077 275,759 Operating grants and contributions 1,296,378 1,522,935 853,151 728,242 5,269,841 4,907,472 6,592,642 7,615,653 7,863,168 8,047,113 Capital grants and contributions - 2,059,624 83,250 425,900 - 5,897,456 80,472 19,983,078 269,185 3,485,255 Total governmental activities program revenues 2,878,062 5,060,793 3,433,751 2,408,109 6,687,720 12,603,457 8,800,900 30,064,763 11,926,680 16,003,529 Business-type activities: Charges for services: Water and Sewer 2,037,306 2,345,236 2,101,510 3,078,868 2,934,842 3,157,332 3,428,702 3,549,775 3,968,086 4,815,635 Cemetery 2,100 - 5,550 13,300 4,500 5,510 7,749 13,620 11,115 9,964 Operating grants and contributions - - 46,810 - 24,423 - - - - - Capital grants and contributions 169,034 - - - - - - - - 50,000 Total business-type activities program revenues 2,208,440 2,345,236 2,153,870 3,092,168 2,963,765 3,162,842 3,436,451 3,563,395 3,979,201 4,875,599 Total primary government program revenues 5,086,502$ 7,406,029$ 5,587,621$ 5,500,277$ 9,651,485$ 15,766,299$ 12,237,351$ 33,628,158$ 15,905,881$ 20,879,128$ Fiscal Year Town of Westlake Exhibit S-2 Changes in Net Position Last Ten Years – Concluded Accrual Basis of Accounting – Unaudited 106 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NET (EXPENSE) REVENUES Governmental activities 7,175,257)$( 5,567,188)$( 7,132,066)$( 9,514,842)$( 6,155,751)$( 346,911)$( 6,040,201)$( 12,867,489$ 7,981,185)$( 5,495,957)$( Business-type activities 215,624)( 349,644)( 441,627)( 292,329 140,983)( 198,952)( 260,807)( 1,305,431)( 1,547,746)( 25,497)( Total primary government net expense 7,390,881)( 5,916,832)( 7,573,693)( 9,222,513)( 6,296,734)( 545,863)( 6,301,008)( 11,562,058 9,528,931)( 5,521,454)( GENERAL REVENUES AND OTHER CHANGES IN NET POSITION Governmental activities: Taxes Sales 3,590,575$ 3,664,409$ 3,790,533$ 4,609,626$ 3,657,274$ 4,375,397$ 4,725,845$ 4,925,428$ 4,609,523$ 4,650,744$ Property 1,260,112 1,441,238 1,366,633 1,367,069 1,438,969 1,476,355 1,576,750 Hotel Occupancy 527,662 497,769 457,693 527,261 590,853 709,578 796,481 872,179 822,490 751,601 Mixed Beverage 16,177 17,869 17,902 19,721 38,286 39,727 51,602 59,184 61,476 68,432 Franchise 649,108 624,401 603,233 586,836 664,991 734,935 795,322 963,040 930,043 818,423 Unrestricted grants and contributions 2,500,817 2,960,590 3,484,141 3,744,757 - - - - - - Investment earnings 188,459 61,224 38,383 46,248 33,353 24,218 26,713 28,904 55,600 182,095 Miscellaneous 564,973 568,782 676,638 691,345 1,112,858 1,023,149 246,633 198,199 241,501 278,071 Transfers 220,819 61,321 - 145,216 45,507 485,591)( 43,399 323,100 264,578 169,316 Extraordinary item 56,704 124,346)( - - - - - Special item - 67,760 - - - - - Gain on sale of capital assets - - - 7,000 - - - - - - Total governmental activities 8,258,590 8,456,365 9,068,523 11,694,826 7,527,774 7,788,046 8,053,064 8,809,003 8,461,566 8,495,432 Business-type activities: Investment earnings 32,103 7,858 8,334 9,929 10,077 6,552 7,114 7,083 13,095 28,684 Miscellaneous 44,071 77,266 60,070 145,666 84,780 224,995 50,000 50,000 - - Transfers 220,819)( 61,321)( - 145,216)( 45,507)( 485,591 43,399)( 323,100)( 264,578)( 169,316)( Total business-type activities 144,645)( 23,803 68,404 10,379 49,350 717,138 13,715 266,017)( 251,483)( 140,632)( Total primary government 8,113,945 8,480,168 9,136,927 11,705,205 7,577,124 8,505,184 8,066,779 8,542,986 8,210,083 8,354,800 CHANGE IN NET POSITION Governmental activities 1,083,333 2,889,177 1,936,457 2,179,984 1,372,023 7,441,135 2,012,863 21,676,492 480,381 2,999,475 Business-type activities 360,269)( 325,841)( 373,223)( 302,708 91,633)( 518,186 247,092)( 1,571,448)( 1,799,229)( 166,129)( Total primary government 723,064$ 2,563,336$ 1,563,234$ 2,482,692$ 1,280,390$ 7,959,321$ 1,765,771$ 20,105,044$ 1,318,848)$( 2,833,346$ Source: Annual financial reports Fiscal Year Town of Westlake Exhibit S-3 Fund Balances Governmental Funds Last Ten Years Modified Accrual Basis of Accounting – Unaudited 107 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General fund Reserved 303,639$ 193,105$ 214,750$ -$ -$ -$ -$ -$ -$ -$ Unreserved 2,503,099 2,532,207 3,578,235 - - - - - - - Nonspendable: Prepaid items 62,020 6,856 6,906 8,821 13,334 12,794 18,705 Restricted for: Court security and technology 186,776 192,768 194,422 193,082 203,173 238,636 219,693 Committed for: Future projects 219,687 49,941 74,941 80,442 80,442 335,322 335,392 Assigned for: Future equipment 22,000 22,000 24,000 - - - - Unassigned - - - 3,524,911 4,992,240 6,751,362 7,671,173 7,383,601 9,092,721 10,363,702 Total general fund 2,806,738$ 2,725,312$ 3,792,985$ 4,015,394$ 5,263,805$ 7,051,631$ 7,953,518$ 7,680,550$ 9,679,473$ 10,937,492$ All other governmental funds Reserved Special revenue funds 1,527,724$ 1,256,954$ 1,112,941$ -$ -$ -$ -$ -$ -$ -$ Unreserved, reported in: Special revenue funds 1,666,371 1,933,564 2,693,846 - - - - - - - Nonspendable: Prepaid items 33,511 60,963 62,635 80,118 83,359 68,718 243,401 Restricted for: Tourism 1,109,365 1,052,546 1,025,891 1,107,520 1,081,009 1,003,636 791,308 Future projects 4,647,863 3,594,379 10,370,914 1,751,405 13,632 13,679 13,789 Debt service 7,505 22,657 1,482 1,081 20,916 30,468 11,963 Education 885,365 758,127 931,094 993,998 1,592,227 1,098,359 729,709 Economic development 267,577 178,384 - - - - - Capital projects funds 3,233,471 323,009 237,177 - - - - 17,713,788 8,501,489 15,080,456 Unassigned - - - - - - - - - - Total all other governmental funds 6,427,566$ 3,513,527$ 4,043,964$ 6,951,186$ 5,667,056$ 12,392,016$ 3,934,122$ 20,504,931$ 10,716,349$ 16,870,626$ Note: further consideration, the 4B Economic Development Corporation and Lone Star Public Facility Corporation funds are now classified as blended component units. The Town implemented GASB Statement No. 54 in fiscal year 2011. Source: Annual financial reports Economic Development Funds were classified as special revenue funds through FY 2002 and considered discretely presented component units through FY 2007. Upon Fiscal Year Town of Westlake Exhibit S-4 Changes in Fund Balances Governmental Funds Last Ten Years – Continued Modified Accrual Basis of Accounting – Unaudited 108 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 REVENUES Taxes 4,783,522$ 4,804,448$ 4,869,361$ 7,000,690$ 6,393,472$ 7,226,180$ 7,722,606$ 8,252,748$ 7,902,983$ 7,867,015$ Licenses, fees and permits 1,108,083 860,697 1,746,954 530,646 598,394 944,735 1,175,075 1,200,790 2,715,236 3,521,686 Fines and penalties 554,376 523,515 647,170 605,705 622,338 695,167 730,441 734,152 796,014 673,716 State program revenues 2,673,680 3,163,129 3,687,706 3,945,658 4,369,635 4,696,540 5,269,641 6,173,418 6,543,782 6,603,358 Federal program revenues 75,207 56,134 199,436 337,508 152,351 81,958 80,103 87,797 98,564 140,152 Investment earnings 188,459 61,224 38,383 46,248 33,353 24,218 26,713 28,904 55,600 182,095 Contributions 1,048,308 1,264,262 533,400 - 732,535 5,916,014 82,446 18,785,953 283,684 728,887 Other revenues 607,812 673,400 779,044 980,816 1,323,237 1,274,826 1,665,003 2,471,191 1,542,835 2,863,801 Total revenues 11,039,447 11,406,809 12,501,454 13,447,271 14,225,315 20,859,638 16,752,028 37,734,953 19,938,698 22,580,710 EXPENDITURES General government 1,516,346 1,519,600 1,644,587 1,733,324 1,878,885 1,910,545 2,236,360 2,411,239 3,280,507 4,596,827 Public safety 1,731,317 1,890,469 1,634,936 1,842,751 2,224,469 1,967,584 2,146,587 2,490,551 2,453,857 2,684,244 Cultural and recreation 129,641 115,770 105,997 122,400 111,765 113,924 123,541 130,322 185,923 164,720 Public works 846,604 841,822 333,831 326,749 391,115 532,675 615,781 744,028 773,751 784,279 Economic development 495,071 229,907 401,879 706,391 243,939 296,565 147,685 171,757 141,779 163,578 Visitor services 312,777 341,270 420,270 356,365 475,719 521,521 493,082 670,157 725,971 717,055 Education 3,305,220 3,722,705 4,138,875 4,884,985 6,193,560 5,762,652 7,143,678 7,938,501 9,245,592 8,819,174 Capital Outlay 463,918 4,335,114 682,103 1,023,772 1,110,476 7,601,631 9,964,047 5,274,282 9,561,954 7,082,844 Capital Project Debt service Principal 395,000 593,937 563,703 555,000 668,000 2,955,000 1,004,677 1,130,762 1,150,490 1,124,697 Interest and other fiscal charges 923,944 990,641 977,163 1,083,377 952,027 830,425 1,116,489 977,412 947,411 1,105,376 Bond issuance cost 33,000 - - 36,446 148,891 185,699 69,283 - - 368,278 Total expenditures 10,152,838 14,581,235 10,903,344 12,671,560 14,398,846 22,678,221 25,061,210 21,939,011 28,467,235 27,611,072 EXCESS (DEFICIENCY) OF REVENUES OVER OVER (UNDER) EXPENDITURES (UNDER) EXPENDITURES 886,609$ 3,174,426)$( 1,598,110$ 775,711$ 173,531)$( 1,818,583)$( 8,309,182)$( 15,795,942$ 8,528,537)$( 5,030,362)$( Fiscal Year Town of Westlake Exhibit S-4 Changes in Fund Balances Governmental Funds Last Ten Years – Continued Modified Accrual Basis of Accounting – Unaudited 109 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 OTHER FINANCING SOURCES (USES): Proceeds from sale of land -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Sale of assets 7,000 - - - - - 1,200,000 Issuance of debt 2,500,000 117,640 - 2,095,000 - 8,294,800 - - - - Premium on CO issued 284,437 - - - - Refunding bonds issued - - - - 7,799,196 2,200,000 1,910,000 - - 5,795,000 Premium on refunding bonds issued 37,723 84,598 - - 1,020,809 Payments to bond escrow agent - - - - 7,650,305)( - (1,925,315) - - 6,452,467)( Issuance of capital lease - - - - - - 239,009 16,740 474,300 - Notes payable issued 50,000 - - 401,484 162,059 - - Certificate of obligations issued - - - - - - - - - 10,710,000 Special item - 67,760 40,959 - - - - Extraordinary item 56,704 124,346)( 40,959)( - - - - Transfers in 2,160,174 2,435,486 1,804,577 7,082,163 2,121,099 2,104,929 3,094,211 4,617,896 2,485,227 3,621,066 Transfers out 1,939,355)( 2,374,165)( 1,804,577)( 6,936,947)( 2,075,592)( 2,590,520)( (3,050,812)(4,294,796)(2,220,649)(3,451,750) Total other financing sources (uses)2,720,819 178,961 - 2,353,920 137,812 10,331,369 753,175 501,899 738,878 12,442,658 Prior period adjustment - - - - - - - - - - NET CHANGES IN FUND BALANCES 3,607,428$ 2,995,465)$( 1,598,110$ 3,129,631$ 35,719)$( 8,512,786$ 7,556,007)$( 16,297,841$ 7,789,659)$( 7,412,296$ DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES 13.6% 15.4% 15.0% 14.1% 12.5% 25.3% 14.4% 12.8% 11.1% 12.4% 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 4B Economic Development Corporation and Lone Star Public Facility Corporation funds are now classified as blended component units. Source:Annual Financial Reports Fiscal Year Town of Westlake Exhibit S-5 Assessed Value and Estimated Actual Value of Taxable Property Last Seven Fiscal Years Modified Accrual Basis of Accounting – Unaudited 110 Less:Total Taxable Total Fiscal Real Personal Tax-Exempt Assessed Direct Year Property Property Property Value Tax Rate 2011 951,070,355$ 70,569,170$ 143,856,142$ 877,783,383$ 0.16010 2012 1,016,474,604 85,329,823 156,315,552 945,488,875 0.15684 2013 1,099,249,031 122,792,343 335,814,215 886,227,159 0.15684 2014 1,091,142,760 151,927,427 346,730,543 896,339,644 0.15634 2015 1,123,354,430 139,936,507 342,248,275 921,042,662 0.15634 2016 1,175,230,336 107,537,466 336,770,136 945,997,666 0.15634 2017 1,468,274,115 132,422,540 437,293,366 1,163,403,289 0.13695 Note:No ad valorem taxes were assessed by the Town of Westlake prior to the fiscal year ended September 30, 2011. Source:Tarrant County Appraisal District Denton Central Appraisal District Appraised Value Town of Westlake Exhibit S-6 Principal Property Tax Payers Current and Six Years Ago – Unaudited 111 Percentage Percentage Taxable of Total Town Taxable of Total Town Assessed Taxable Assessed Taxable Taxpayer Value Rank Assessed Value Taxpayer Value Rank Assessed Value BRE Solana LLC 173,218,573$ 1 14.89% Maguire Thomas Partners, etal 116,839,380$ 1 13.31% FMR Texas, LLC/LTD Partnership 80,939,255 2 6.96% FMR Texas, LLC/LTD Partnership 148,569,643 2 16.93% DCLI, LLC 47,521,483 3 4.08% Maguire Partners 39,117,985 3 4.46% Fidelity Investments Inc.39,098,584 4 3.36% Lexington TNI Westlake LP 18,249,200 4 2.08% Dallas MTA LP 38,537,456 5 3.31% First American Leasing/Real Estate 17,636,457 5 2.01% Marsh USA, INC.15,402,373 6 1.32% DCLI, LLC 13,234,691 6 1.51% Lexington TNI Westlake LP 14,618,533 7 1.26% Fidelity Investments 12,277,810 7 1.40% Prince Whipple Trust 7,070,782 8 0.61% Levi Strauss & Co.8,215,271 8 0.94% Hutton Keith 6,391,904 9 0.55% Westlake Terra, LLC 7,400,002 9 0.84% Wells Vernon III 5,837,063 10 0.50% EMC Corp 6,418,484 10 0.73% Total 428,636,006$ 36.84% Total 387,958,923$ 44.20% CY Taxable Value 1,163,403,289 877,783,383 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 $877,783,383. (3) Total Taxable Assessed Value including real and personal property for tax year 2016 (fiscal year 2017) is $1,163,403,289. 20112017 Town of Westlake Exhibit S-7 Property Tax Levies and Collections Last Seven Fiscal Years – Unaudited 112 Taxes Levied Adjusted Collections Fiscal for the Adjustments Taxes Levied Percent in Subsequent Percentage Year Fiscal Year to Levy for Fiscal Year Amount of Levy Years Amount of Levy 2011 1,409,956$ 47,560$ 1,362,396$ 1,356,050$ 99.53%4,136$ 1,360,186$ 99.84% 2012 1,486,968 47,220 1,439,748 1,437,908 99.87%3,359 1,437,908 99.87% 2013 1,398,777 45,297 1,353,480 1,352,097 99.90%3,358 1,352,097 99.90% 2014 1,405,819 44,761 1,361,058 1,350,639 99.23%10,172 1,360,811 99.98% 2015 1,450,674 43,948 1,406,726 1,405,148 99.89%1,005 1,406,153 99.96% 2016 1,482,989 40,244 1,442,745 1,441,536 99.92%- 1,441,536 99.92% 2017 1,573,803 33,281 1,540,522 1,536,921 99.77%- 1,536,921 99.77% 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 of the Levy to Date Collected within the Fiscal Year Total Collections Town of Westlake Exhibit S-8 Direct and Overlapping Property Tax Rates (Per $100 of Assessed Value) Last Seven Fiscal Years – Unaudited 113 Operating/ Tarrant Tarrant Trophy Total Fiscal General Debt Service Total (A)Carroll Northwest Keller Denton Tarrant County County Club Direct and Year Fund Fund Direct ISD ISD ISD County County College Dist Hospital Dist.MUD #1 Overlapping 2011 0.15620 0.00390 0.16010 1.41500 1.37500 1.53060 0.27736 0.26400 0.13764 0.22790 0.19500 5.58260 2012 0.13835 0.01849 0.15684 1.41500 1.37500 1.54000 0.28287 0.26400 0.14897 0.22790 0.17500 5.58557 2013 0.14197 0.01487 0.15684 1.40000 1.37500 1.54000 0.28287 0.26400 0.14897 0.22790 0.13339 5.52896 2014 0.13710 0.01924 0.15634 1.40000 1.45250 1.54000 0.27220 0.26400 0.14950 0.22790 0.13339 5.59583 2015 0.13710 0.01924 0.15634 1.40000 1.45250 1.54000 0.27220 0.26400 0.14950 0.22790 0.13339 5.59583 2016 0.13947 0.01687 0.15634 1.40000 1.45250 1.54000 0.27220 0.26400 0.14950 0.22790 0.13339 5.59583 2017 0.12882 0.00813 0.13695 1.39000 1.45250 1.52000 0.24841 0.25400 0.14473 0.22790 0.12722 5.50171 Notes:Prior to fiscal year ended September 30, 2011, the Town of Westlake did not assess an advalorem tax. Overlapping rates are those of local and county governments that apply to property owners within the Town of Westlake. Not all overlapping rates apply to all Town's property owners (e.g., the rates for the counties and school districts apply only to the proportion of the Town's property owners whose property is located within the geographic boundaries of the county and school district) Source:Tarrant County Appraisal District Denton Central Appraisal District School Districts Counties City Direct Rates Overlapping Rates Town of Westlake Exhibit S-9 Taxable Sales by Industry Type Last Ten Fiscal Years – Unaudited 114 NAICS Industry Type 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 11 Agriculture, Forestry, Fishing and Hunting 182$ 210$ $ - 60$ 38$ 163$ 731$ 775$ 2,083$ 1,685$ 21 Mining 2,109 20 400 4,260 3,050 335 15 714 655 128 22 Utilities 230,072 186,773 178,693 180,032 171,131 176,622 204,280 191,031 138,331 147,000 23 Construction 998,867 1,043,752 68,306 132,780 139,000 365,049 239,888 216,546 230,067 340,077 31-33 Manufacturing 371,193 430,515 386,492 402,062 526,755 295,660 375,905 234,651 209,128 86,798 42 Wholesale Trade 142,999 138,456 105,557 145,631 134,466 59,571 421,371 515,602 356,946 339,854 44-45 Retail 610,119 648,597 1,097,007 707,553 1,106,427 1,132,811 962,244 1,332,659 415,356 458,833 48-49 Transportation and Warehousing 791 556 316 1,156 3,662 1,962 3,550 1,107 1,133 51 Information 320,848 377,828 423,834 508,609 367,298 378,221 623,828 567,685 551,172 387,714 52 Financial and Insurance 107,319 68,936 87,188 73,455 27,857 75,529 505,585 295,622 754,386 509,201 53 Real Estate and Rental and Leasing 138,879 154,315 327,207 210,158 215,754 457,693 493,570 708,747 940,971 999,118 54 Professional, Scientific, and Technical Services 199,700 192,008 202,263 231,526 221,331 536,971 242,069 193,145 287,066 261,704 56 Admin and Support and Waste Mgmt & Rem Srv 127,779 22,319 39,539 65,045 39,027 110,686 103,340 50,264 125,033 85,430 61 Education Services 282 2,980 619,228 1,675,351 356,689 373,117 153,279 201,761 230,775 220,078 62 Health Care and Social Assistance 238 - 170 106 251 11,018 2,887 228 398 71 Arts, Entertainment and Recreation 199,876 174,485 158,996 206,050 204,456 184,687 191,343 189,027 201,391 241,107 72 Accommodation and Food Services 130,923 140,344 140,996 175,938 93,123 204,044 221,061 246,755 230,615 233,769 81 Other Services (except Public Administration)18,576 1,756 4,462 4,632 9,805 13,156 17,412 8,965 3,167 2,963 92 Public Administration - - 11 1 135 295 27,243 - - 1 3,599,961$ 3,584,085$ 3,840,735$ 4,723,629$ 3,617,604$ 4,368,523$ 4,796,144$ 4,960,386$ 4,678,477$ 4,316,991$ Town direct sales tax rate 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% Note: Source:Texas State Comptroller reports 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 Fiscal Year Town of Westlake Exhibit S-10 Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years – Unaudited 115 Percentage General Certificates of Actual Fiscal Obligation of Taxable Per Year Bonds Obligation Tax Notes Total Sales Capita 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 8,962,656 12,210,000 - 21,172,656 9.19% 21,343 2012 16,770,000 4,877,000 - 21,647,000 11.84% 20,369 2013 16,590,000 13,622,000 - 30,212,000 13.81% 27,251 2014 18,260,000 11,044,000 - 29,304,000 12.40% 24,748 2015 17,480,000 11,046,131 - 28,526,131 11.58% 23,772 2016 17,091,659 10,739,306 - 27,830,965 12.08% 22,627 2017 15,267,000 18,460,700 1,530,000 35,257,700 15.16% 26,914 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 personal income and population data. General Bonded Debt Outstanding 0 5 10 15 20 25 30 35 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Millions General Obligation Bonds Certificates of Obligation Town of Westlake Exhibit S-11 Ratios of Outstanding Debt by Type Last Ten Fiscal Years – Unaudited 116 General Certificates Other Certificates Total Percentage Fiscal Obligation of Capital Contractual of Primary of Personal Per Year Bonds Obligation Leases Loans Obligations Obligation Government Income Capita 2008 9,850,000 11,375,000 15,264 - 5,763,022 27,003,286 23%34,399 2009 9,735,000 10,975,000 46,559 - 5,734,191 26,490,750 22%32,990 2010 9,630,000 10,555,000 - - 5,658,888 25,843,888 25%30,512 2011 8,962,656 12,210,000 - 50,000 5,580,380 26,803,036 21%27,019 2012 16,770,000 4,877,000 - 34,075 5,498,668 27,179,743 20%25,576 2013 16,590,000 13,622,000 - 18,150 5,412,149 35,642,299 24%32,150 2014 18,260,000 10,029,800 237,378 437,253 5,320,824 1,014,200 35,299,455 22%29,812 2015 17,480,000 9,759,250 154,347 357,041 5,226,294 1,286,881 34,263,813 21%28,553 2016 17,091,659 9,736,953 563,045 275,101 5,126,958 971,300 33,796,069 20%28,308 2017 15,267,000 18,460,700 1,530,000 162,004 238,404 5,156,839 949,300 41,764,247 22%31,881 Note: See Table 13 for personal income and population data. 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. Governmental Activities Business-Type Activities Tax Notes Town of Westlake Exhibit S-12 Direct and Overlapping Governmental Activities Debt As of September 30, 2017 –Unaudited 117 Amount of Debt Outstanding As of Percent (1)Amount Carroll ISD 269,575,245$ 9/30/2017 10.81%29,141,084$ Denton County 645,305,000 9/30/2017 0.02%129,061 Keller ISD 706,960,916 9/30/2017 1.19%8,412,835 Northwest ISD 803,407,028 9/30/2017 2.64%21,209,946 Tarrant County 321,795,000 9/30/2017 0.76%2,445,642 Tarrant County Hospital District 20,835,000 9/30/2017 0.79%164,597 Trophy Club MUD#1 9,450,000 9/30/2017 18.98%1,793,610 Total Overlapping Debt 63,296,774 Town of Westlake Outstanding Debt 35,658,108 Total Direct & Overlapping Debt 98,954,882$ Source: Texas Municipal Report prepared by employees of the Municipal Advisory Council of Texas ("MAC") Note: (1) were estimated by determining the portion of the entity's taxable assessed value that is within the Town's boundaries and 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. Overlapping 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. Taxing Body Town of Westlake Exhibit S-13 Demographic and Economic Statistics Last Ten Fiscal Years – Unaudited 118 Per Capita Tarrant County Calendar Estimated Personal Personal Unemployment Year Population Income Income Rate 2008 785 115,891,905 147,633 5.1% 2009 803 120,920,285 150,586 8.1% 2010 847 102,852,057 121,431 8.1% 2011 992 126,678,400 127,700 7.9% 2012 1,063 138,423,531 130,254 6.2% 2013 1,109 147,292,890 132,859 6.0% 2014 1,184 160,462,095 135,516 5.0% 2015 1,200 165,871,904 138,227 4.0% 2016 1,230 173,419,076 140,991 4.1% 2017 1,310 188,392,333 143,811 3.2% Sources: American Community Survey (ACS) USA.com - Per Capita Income source North Central Texas Council of Governments/US Census 2010 Tarrant County Unemployment Rate information taken from Texas Workforce Commission. Population for 2000 is from the 2000 census. Fiscal Years 2001 through 2003 are estimated. The Town assumed 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 are approximately 1.28 school-age children in each household; therefore, we will use a 3.23 average household size to calculate population. Town of Westlake Exhibit S-14 Principal Employers Current and Nine Years Ago – Unaudited 119 2007 Percentage Percentage of Estimated of Estimated Total Town Total Town Employer Employees Employment Employer Employees Employment Fidelity Investments 5,400 52.23%Fidelity Investments 3,100 37.15% Travelocity 880 8.51%First American/Core Logic 3,000 35.95% Wells Fargo 617 5.97%Wells Fargo 790 9.47% Schwab 526 5.09%Chrysler Financial/TD Auto Finance 325 3.89% Sabre JLL Facilities 500 4.84%McKesson Corporation 215 2.58% Deloitte 487 4.71%Sonitrol/World Factory 165 1.98% Verizon Wireless 384 3.71%Walco 150 1.80% Goosehead Insurance 200 1.93%Vaquero Club 140 1.68% Sount Physicians 173 1.67%Marriott Solana Hotel 120 1.44% Marriott Solana Hotel 143 1.38%Pfizer, Inc.115 1.38% Levi Strauss 140 1.35%Town of Westlake/Westlake Academy 73 0.87% Vaquero Country Club 135 1.31%Premier Academy 34 0.41% Westlake Academy 133 1.29%Solara Healthcare 28 0.34% All Other Business 620 6.00%All Other Business 90 1.08% Total 10,338 100% Total 8,345 100% Source: Cushman &Wakefield tenant records and contact with employers of the Town 2017 Town of Westlake Exhibit S-15 Full-Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years – Unaudited 120 Function/Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 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 Town Manager 0.75 0.90 1.00 0.90 1.00 Assistant to town managerAssistant to Town Manager 1.00 1.00 1.00 1.00 0.75 0.00 0.00 0.00 0.50 0.50 Administrative 0.00 0.75 0.50 0.75 0.75 1.00 0.50 0.50 0.00 1.50 BuildingBuilding official 1.00 1.33 1.33 1.33 1.33 1.50 1.66 1.66 3.17 4.00 Town secretary 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.25 1.25 1.50 Facilities/Grounds maintenance 0.75 1.08 1.08 1.08 0.83 1.00 1.09 1.34 1.58 0.50 Municipal 4.00 4.25 4.50 4.50 3.75 4.75 5.10 5.00 4.60 4.00 Finance 3.00 3.00 3.00 3.00 3.00 3.00 4.00 4.00 4.25 4.00 Payroll/Human Resources 1.00 1.33 1.33 1.33 1.33 2.00 2.00 2.00 2.00 2.00 Information Technology 1.00 1.00 1.00 1.00 Public safety (EMS)11.00 9.00 9.00 9.00 9.00 10.00 13.25 14.25 14.25 11.00 Culture and recreation 0.75 0.75 0.75 0.75 0.50 0.75 0.84 0.84 0.84 0.50 Public works 1.50 1.50 1.50 1.50 2.00 3.00 2.66 2.66 2.67 3.00 Marketing and public affairs 0.00 0.00 0.00 0.00 1.00 1.00 2.00 2.00 2.00 2.00 Education 43.00 48.10 55.62 59.44 67.48 76.18 91.18 93.65 95.31 95.05 Total 69.00 74.09 81.61 85.68 93.72 106.93 128.18 132.15 135.32 132.55 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. Fiscal Year Town of Westlake Exhibit S-16 Operating Indicators by Function/Program Last Ten Fiscal Years – Unaudited 121 Function/Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General government Permits issued 93 61 44 70 85 132 144 159 218 217 Permit values 188,578,581$ 21,051,297$ 190,388,737$ 21,173,592$ 29,481,047$ 50,544,048$ 59,358,904$ 80,011,354$ 87,307,794$ 262,690,940$ Police (Contract with Keller PD) Motor vehicle stops 10,357 9,247 9,763 9,829 12,221 9,993 9,579 10,432 11,109 10,718 Traffic accident investigations 208 266 273 348 343 322 341 398 461 386 Part I crimes 26 23 19 30 39 9 15 20 13 22 DWI arrests 45 24 32 80 50 69 55 62 66 70 Fire/EMS Fire runs 169 118 172 191 181 238 211 211 257 248 Ambulance runs 159 184 187 264 266 286 240 253 288 269 Inspections 132 15 71 71 54 96 286 261 246 290 Public Works - General Street resurfacing (LF)- - - 3,800 30,000 - - - - 6,000 Potholes repaired 20.00 10.00 5.00 36.00 6.00 2.00 6.00 20.00 20.00 10.00 Public Works - Utility Number of water accounts 419 437 478 500 568 614 651 713 752 810 Water main breaks 4 5 6 4 4 3 1 1 - - Avg daily consumption MG (water)0.999 1.020 0.889 1.200 1.100 1.090 1.045 1.021 1.122 1.233 Peak daily consumption MG (water)2.060 2.740 2.460 2.540 2.600 2.480 2.690 2.770 1.586 1.646 System capacity - MG (water)1.685 1.685 1.685 1.685 1.685 1.685 2.685 2.685 2.685 2.685 Water purchased (in gallons x 000)364,764 372,933 324,843 443,222 407,305 401,457 381,482 372,838 409,817 450,208 Water sold (in gallons x 1000)340,743 313,495 290,000 385,320 376,496 357,297 347,148 360,000 350,000 419,520 Wastewater Number of new sewer connections 240 251 254 245 292 325 350 384 403 454 Avg daily sewage treatment 0.124 0.101 0.063 0.163 0.136 0.151 0.208 0.166 0.132 0.176 (thousands of gallons) Source: Various Town departments Notes: N/A represents information that is unavailable. Fiscal Year Town of Westlake Exhibit S-17 Capital Asset Statistics by Function/Program Last Ten Fiscal Years – Unaudited 122 Function/Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 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 3 3 3 3 3 3 3 3 Telecommunications Duct Bank (LF)43,703 49,103 51,803 57,783 57,783 57,783 59,936 66,084 66,084 82,231 Telecommunications Duct Bank Manholes 104 113 122 122 122 122 122 140 140 140 Water Water mains (LF)64,600 70,000 79,000 130,000 137,891 137,891 142,694 148,117 148,117 181,393 Fire hydrants 130 130 154 188 191 191 201 214 214 256 Storage capacity MG 1,685 1,685 1,685 1,685 1,685 1,685 2,685 2,685 2,685 2,685 Wastewater Sanitary sewers (LF)39,300 39,300 49,900 94,000 94,000 94,000 98,964 104,373 104,373 123,168 Manholes 267 284 304 304 304 304 326 355 355 444 Public Works - Utility Streets (miles)10.80 10.80 10.80 10.80 10.25 10.25 10.25 10.50 10.42 10.42 Traffic signals (school zone flashers)2 2 2 2 2 2 2 2 2.0 2.0 Parks and recreation Open Space (acres)25 25 25 25 25 25 27 27 27.0 27.0 Playgrounds 2 2 2 2 2 2 2 2.0 2.0 2.0 Softball/soccer field 1 1 1 1 1 1 1 1.0 1.0 1.0 Football field 1 1 1 1 1 1 1 1.0 1.0 1.0 Public trails (miles)3.5 3.5 3.5 5.0 5.0 5.0 7.0 8.5 8.5 8.5 Source: Various Town departments Note: No capital asset indicators are available for the general government. Note: The amount of roads decreased in FY 2011-2012 due to a portion of road being dedicated to TxDot Fiscal Year