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Home My WebLink AboutFY Ended September 30, 2002TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30,2002 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditors' Report General Purpose Financial Statements: Combined Balance Sheet - All Fund Types and Account Groups Combined Statement of Revenues. Expenditures and Changes in Fund Balances -All Governmental Fund Types Statement of Revenues. Expenditures, and Changes in Fund Balances - Budget and Actual (GAAP Basis) -General Fund Notes to General Purpose Financial Statements Supplementary Information - Information Required by Texas Natural Resources Consawation Commission (TCEQ) (C) Auditor;' Report on Supplemental Schedules is incorporated in "Independent Auditors" Report on page 1. (D) Notes required by the TCEQ in the Annual Audit Report Requirements for Texas Water Districts and Authorities are incorporated into the notes presented as part of the General Purpose Financial Statements. (E) Schedule of services and rates (F) Schedule of General Fund Expenditures (G) Schedule of Temporary investments -all funds (H) Analysis of taxes levied and receivable (I) Analysis of changes in general fixed assets and organizational costs (J) General long-term debt service requirements - by year (K) Analysis of changes in general long-term debt (L) Comparative schedule of revenues and expenditures -five years (M) Insurance coverage (N) Board members, key administrative personnel and consultants Annual Filing Affidavit THIS PAGE INTENTIONALLY LEFT BLANK RUTLEDGE CRAlN & COMPANY, PC CERTIFIED PUBLIC ACCOUNTANTS 2401 Garden Park Courl. Suite 6 Arlington. Texas 76013 INDEPENDENT AUDITORS' REPORT To the Board of Directors Trophy Club Municipal Utility District No. 1 Trophy Club, Texas We have audited the accompanying general purpose financial statements of Trophy Club Municipal Utility District No. 1, as of September 30. 2002 and for the year then ended. These general purpose financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on the general purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the general purpose financial statements referred to above present fairly, in all material respects, the financial position of Trophy Club Municipal Utility District No. 1, as of September 30. 2002, and the results of its operations for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying supplemental information listed in the table of contents is presented for purposes of additional analysis and is not a required part of the general purpose financial statements of Trophy Club Municipal Utility District No. 1. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. cr& November 1.2002 1 Memoers - Meric (817) 265-9989 American 1nsti:ule of Ceriifled Public Accounlants Fan (817) 851-9623 iex3s Saoely of CerItl8ed Pubilc Accounlanls TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. I COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS SEPTEMBER 30. 2002 (WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2001) Governmental Fund Types General Debt Service ASSETSANDOTHERDEBITS Assets: Cash and cash equivalents Investments Receivables (net of allowances for uncollectibles): Taxes Intergovernmental Miscelleneous Due from other funds Prepaid items Restricted assets: Note receivable Contract receivable Fixed assets Other Debits: Amount available in debt service fund Amount to be provided forretirement ofgeneral long-term debt Total Assets LIABILITIES. EQUITY AND OTHER CREDITS Liabilities: Accounts payable Accrued liabilities Liabilities payable from restricted assets: Due to other funds Due to other governments Deferred revenue General obligation bonds payable Contractual obligations payable Notes payable ~abital leases payable Total Liabilities Equity and other credits: Investment in general fixed assets Fund balances: Reserved for note receivable Unreserved, undesignated Total equity and other credits Total Liabilities, Equity & Other Credits Fund Fund The accompanying notes are an integral part of this siatemmi. 2 Totals Account Groups General General Long- Fixed Assets Term Debt (Memorandum Only) Sentember 30. Se~tember 30. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. I COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES EXHIBIT A-2 ALL GOVERNAIENTAL FUND TYPES YEAR ENDED SEPTEIJBER 30. 2002 (WITH COMPARATIVE TOTALS FOR YEAR ENDED SEPTEMBER 30.2001) Totals (Memorandum Only) September 30, September 30, 2002 2001 Governmental Fund Types General Debt Service Fund Fund Revenues: Ad valorem taxes, penalties and interest $ 270,501 $ 756,348 Sale of assets 907,900 - Miscellaneous revenues 323.605 - Interest Total revenues Expenditures: Current: A dministrative Fire deparfment Contribution to Trophy Club/Westlake DPS Debt service: Principal Interest Paying agent fees Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess of revenues and other financing sources over (under) e~penditures and other financing uses 364,784 (70,305) Fund balances, October 1 Residual equity transfer Fund balances, September 30 - I he accompanying notes are an integral pari oiihis sialemeni. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND YE.4R ENDED SEPTEMBER 30, 2002 General Fund Variance Revenues: Water, sewer, fire department Ad valorem taxes, penalties and interest Sale of assets Miscellaneous revenues Interest Total revenues Expenditures: Current: Administrative Fire department Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances, October 1 Fund balances. September 30 Favorable Budget Actual (Unfavorable) The accompanying notes are an integral part oithis statement TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS Sepiember 30, 2002 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Trophy Club Municipal Utility District No. 1 (the District) was created by an order of the Texas Natural Resources Conservation Commission (TCEQ) (formerly the Texas Water Commission) on March 4, 1975 and confirmed by the electorate of the District at a confirmation election held on October 7. 1975. The Board of Director's held its first meeting on April 24, 1975. The bonds were first sold on June 8. 1976. The District operates pursuant to Article XVI, Chapter 59 of the Texas Constitution and Chapter 54 of the Texas Water Code, as amended. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for the District. The financial statements of the District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. As required by generally accepted accounting principles, these financial statements present the District only. There are no component units which satisfy requirements for blending within the District's financial statements or discrete presentation. Master District The Master District holds legal title to the central water supply system and the central waste disposal system. The proportionate allocation of costs and related beneficial usage rights in the major assets is estimated as follows: Water plant and wells Twentv-one inch water line ~levaied tank Original treatment plant and land First expanded treatment plant Second expanded treatment plant Administration building (A) Future MUD 1 MUD2 40.91 % 27.14% 31.95% 50.00% 50.00% 0.00% (A) The developer's original intent was for five districts. (8) MUD 2 does not acknowledge any portion of the cost of the administration building as being their responsibility. Pursuant to the provisions of the New Master District Contract dated October 4. 2000, the Master District is managed as a joint venture of the District and MUD2 whereby representatives of the boards of directors of the District and MUD2 serve on the Master District board of directors. Accordingly the financial statements of the Master District have been removed from those of the District effective October 1. 2000 and are presented separately. Agreements exist between the District and MUD2 that Compensate the District for water and sewer plant capacity and out of district sales as approved and required by the TCEQ. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 Based upon this arrangement, all financial transactions relating to water and sewer operations are included in the financial statements of the Master District joint venture. A summary of the Master District financial statements for the year ended September 30. 2002 follows: Total assets Total liabilities Total equity Total revenue, including other sources $ 2,803,157 Total expenditures (3,136,601) Excess of revenues over (under) expenditures (243,444) Plus capital expenditures 275,115 Net revenue (loss) before capital expenditures $ 31,671 The Master District Joint Venture financial statements are available at the District's administrative offices Termination of Trouhv Club / Westlake De~artment of Public Safetv Joint Venture Effective June 1. 2002, the joint venture was terminated by the venturers - the Trophy Club Entities (Town of Trophy Club, Texas, Trophy Club Municipal Utility District No. !, and Trophy Club Municipal Utility District No. 2) and the Town of Westlake, Texas. The Town of Trophy Club. Texas assumed responsibility for police and emergency medical services: MUD1 assumed responsibilities for fire protection. 8. Measurement Focus, Basis of Accounting and Basis of Presentation The accounts of the District are organized and operated on the basis of funds and account groups. Afund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Account groups are a reporting device to account for certain assets and liabilities of the governmental funds not recorded directly in those funds. The District utilizes governmental fund types to account for the District's activities and to prepare its financial statements. Governmental fund types use the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting revenues are recognized when susceptible to accrual 0.e.. when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The District considers all revenues available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Those revenues susceptible to accrual are ad valorem taxes and interest. Penalties and interest on property taxes and miscellaneous revenue are recorded when received, as they are generally not measurable until received. The District reports deferred revenue on its combined balance sheet. Deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Governmental funds include the following fund types: The general fund is the District's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS Sspteinbei 30,2002 Debt service funds account for the servicing of general long-term debt not being financed by proprietary or nonexpendable trust funds. Account Groups include the following: The general fixed assets account group is used to account for all fixed assets of the District. The general long-term debt account group is used to account for general long-term debt and certain other liabilities of the District. C. Assets, Liabilities and Equity 1. Deposits and Investments The District's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturiiies of three months or less from the date of acquisition. State statutes authorize the District 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 and 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 (I), pledged with third party selected or approved by the District, and placed through a primary government securities dealer. Investments are stated at fair value 2. 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 either "interfund receivableslpayables" (i.e., the current portion of interfund loans) or "advances toprom other funds." All other outstanding balances between funds are reported as "due toprom other funds." Advances between funds are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources, Trade accounts receivables are shown net of an allowance for uncollectibles. Trade accounts receivable in excess of ninety days comprise most of the allowance for uncollectibles. Property taxes are levied as of October 1, on the assessed value listed as of the prior January 1, for all real and certain personal property located in the District. The appraisal of property within the District is the responsibility of Denton Appraisal District (Appraisal District) as required by legislation passed by the Texas legislature. The Appraisal District is required under such legislation to assess all property within the Appraisal District on the basis of 100% of its appraised value and is prohibaed from applying any assessment ratios. The value of property within the Appraisal District must be reviewed every five years; however, the District may, at its own expense, require annual reviews of appraised values. The District may challenge appraised values established by the Appraisal District through various appeals and, if necessary, legal action. Property taxes for the District are not limited as to rate or amount. In an election held October 7. 1975, the electorate of the District authorized the levy of up to $0.25 per $100 valuation for the operations and maintenance of the District. Property taxes attach as an enforceable lien on property as of January 1, following the levy date. Taxes are due by January. 31, following the levy date. Property taxes are recorded as receivables when levied. Following is information regarding the 2001 tax levy: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 Adjusted taxable values 5 427,871,500 O&M tax levy $0.0632/5100 5 270.415 l&S tax levy 50.1768/5100 756,477 Total tax levy $0.2400/5100 $ 1,026,892 3. Prepaid Items Certain payments to vendorj reflect costs applicable to future accounting periods and are therefore recorded as prepaid items. 4. Fixed Assets Fixed assets used in governmental fund types of the District are recorded in the general fixed assets account group at cost or estimated historical cost if purchased or constructed. Dedicated fixed assets are recorded at their estimated fair value at the date of dedication. Assets in the general fixed assets account group are not depreciated. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not included in the general fixed assets account group. Public domain ("infrastructure") general fixed assets consisting primarily of drainage systems have been capitalized 5. Organizational Costs The District, in conformance with requirements of the TCEQ, capitalized costs incurred in the creation of the District. The TCEQ requires capitalization as organizational costs for the construction period all costs incurred in the issue and sale of bonds, bond interest and amortized bond premium and discount, losses on sales of investments, accrued interest on investments purchased, attorney fees and some administrative expenses until construction and acceptance or use of the first revenue producing facility has occurred. 6. Long-term Obligations The District reports long-term debt of governmental funds at face value in the general long-term debt account group. Certain other governmental fund obligations not expected to be financed with current available financial resources are also reported in the general long-term debt account group. For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized during the current period. Bond proceeds are reported as an other financing source net of the applicable premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. 7. Fund Equity Reservations of fund balance represent amounts that are not appropriable or are legally segregated for a specific purpose. Reserved fund balance represents the amount of prepaid items. 8. Memorandum Only-Total Columns Total columns on the general purpose financial statements are captioned as "memorandum only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position, results of operations or cash flows in accordance with generally accepted accounting principles. Interfund eliminations have not been made in the aggregation of this data. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30: 2002 9. Comparative Data/Reclassifications Comparative total data for the prior year have been presented in selected sections of the accompanying financial statements in order to provide an understanding of the changes in the District's financial position and operations. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current yeah presentation. 11. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles as follows: 1. The Board of Directors adopts an annual budget for the General Fund on the modified accrual basis. The Board of Directors budgets revenue but does not budget expendituras for the Debt Service Fund. 2. The Board of Directors approves all budget appropriations. Any revisions which alter the total appropriations of the General Fund must be approved by the Board of Directors. The level of budgetary responsibility is by total appropriations of the General Fund. 3. All annual appropriations lapse at fiscal year end. 4. No significant amendments to the budget occurred during the year. 6. BudgeVGAAP Reconciliation The budget is adopted on the modified accrual basis of accounting, thus there are no reconciling items between the Budget basis and the GAAP basis of accounting. C. Excess of Expenditures Over Appropriations For the year expenditures exceeded appropriations for the following funds: General Fund $559,812 Ill. DETAILED NOTES ON AU FUNDS AND ACCOUNT GROUPS A. Cash. Cash Equivalents, and Investments At year end, the District's carrying amount of deposits was $190.531 and the bank balance was $132,469. All of the bank balance was covered by federal depository insurance or by collateral held by the District's agent in the District's name. l nvestments Investments are categorized into these three categories of credit risk: 1. insured or registered, or securities held by the District or its agent in the District's name 2. Uninsured and unregistered, with securities held by the counter party's trust department or agent in the District's name. 3. Uninsured and unregistered, with securities held by the counter party's, or by its trust department or agent but not in the District's name. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 At year end, the District's investments were as follows: Carryinp Marltet Investments not subject to categorization: Texas Local Government Pool System (TexPool) $l.185.30? $_t185392 TexPool is an external investment pool operated by the Texas Comptroller of Public Accounts and is not SEC registered. The Texas Interlocal Cooperation Act and the Texas Public Investments Act provide for creation of public funds investment pools and permit eligible governmental entities to jointly invest their funds in authorized investments. The fair value of investments in the pool is independently reviewed monthly. At September 30, 2002, the fair value of the position in TexPool approximates iair value of the shares. 8. Fixed Assets Activity in the general fixed assets account group for the District was as follows for the year ended September 30. 2002: Land Buildings Furniture and fixtures Machinery and equipment Autos and trucks Water system Sanitary wastewater system Drainage system Construction in progress Engineering fees District Organization Balance Balance 9/30/2001 Additions Disposals 9/30/2002 5 248,093 $ - 5 $ 248.093 Total $18,927,987 5 461,564 $ (969.435) 518,420,116 C. lnterfund Receivables and Payables There were no interfund receivable balances as of September 30, 2002. D. Long-Term Debt 1. Combination Tax and Revenue Bonds/Contractual Obligations The District periodically issues combination tax and revenue bonds for general uses and expansions of the system. This debt for the bonds is recorded in the general long-term debt account group (to be repaid from a combination of property tax revenue and revenues of the water and waste water utility system). Combination bonds are as follows: Water works and sewer system combination unlimited tax and revenue bonds, Series 1993, with Interest rates ranging from 3.25% to 5.9% , due through 2007. 5 1,950.000 Water works and sewer system combination unlimited tax and revenue refunding bonds, Series 1997, with interest rates ranging from 4.0% to 5.0% due through 2011, including related capital appreciation bonds. 2,960.000 Total combination tax and revenue bonds Less unaccreted discount Total long-term bonds TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 The District periodically issues other forms of long-term debt including contractual obligations, and public properly finance contractual obligations, which are unsecured. The debt for the bonds is recorded in the general long-term debt account group (to be repaid from revenues of the water and waste water utility system). Such other debt is as follows: Public property finance contractual obligations, Series 1996, with interest rate of 5.5096. due through 2006. Public properly finance contractual obligations, Series 1999, with interest rates ranging from 5.50%. due through 2006. Total long-term contractual obligations Total general long-term debt net 2. Notes Payable The District has financed the purchase of personal firefighting equipment with a note payable Annually at $2,445 including interest accruing at 2.50% through September, 2018. $ -29,310 3. Capltal Lease Obligations The District shares the purchase of various oifice equipment with capkal leases with the Town of Trophy Club and MUD2. The District's share of the total monthly payments (including interest accruing at 7.00%) is $447, payable through May, 2005. $ 3-5&3!2 4. Changes in General Long-Term Debt During the year, the following changes in general long-term debt occurred: Balance Balance 9/30/2001 Additions Payments 9/30/2002 Combination tax & revenue bonds $ 5,495,000 $ $ (585.000) $ 4,910,000 Unaccreted discount (1 11,865) 12,820 (99,045) Net combination bonds 5.383.135 (572.180) 4,810.955 Contract obligations Note payable Capital cease obligations 15.914 32,001 (1'2,285j 35;630 $ 5,781,835 5 32,001 $ (639,941) $ 5,173,895 5. Debt Service Requirements The requirement to amortize all bonds and contractual obligations outstanding as of September 30 is summarized below: Year Ending September 30. Principal Interest Total 2003 $ 696.000 $ 236.915 $ 932.915 2004 729,000 201,484 930.484 2005 767.000 163.694 930,694 2006 789.000 137.982 926.982 2007 807.000 137.982 944,982 Thereafter 1,420.000 176,765 1,596,765 Total 5,208,000 $ 1,054,822 $ 6,262,822 Discount -- (99,045) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 The requirements to amortize the note payable and capital lease obligation as of September 30 are summarized below: Year Endino Notes Caoital September 30. Payable ~easd Oblig. 2003 5 2,245 5 15.704 2004 2.245 15.704 - .- Thereafter 24,695 Total 35,920 41.877 Less interest (6,610) (6.247) 6. Additional Long-term Debt Disclosure Tax and revenue bonds authorized and unissued as of September 30,2002 amounted to 5i ,229,217 The bonds are payable from the proceeds of ad valorem taxes levied upon all property subject to taxation within the District, without limitation as to rate or amount, and are further payable from, and secured by a lien on and pledge of the net revenue to be received from the operation of the District's waterworks and sanitary sewer system. The outstanding bonds are callable for redemption prior to maturity at the option of the District as follows: Series 1993 -All maturities from 2003 to 2007 are callable in principal increments of 55,000 on or after September 1. 2002 at par plus unpaid accrued interest to the fixed date for redemptions. Series 1996 -All maturities are callable at anytime in principal increments of $1,000 plus unpaid accrued interest to the fixed date for redemptions. Series 1997 -All maturities from 2008 to 2011 are callable in principal increments of 55,000 on or after September 1. 2007 at par plus unpaid accrued interest to the fixed date for redemptions. The provisions of the bond resolutions relating to debt service requirements have been met, and the cash allocated for these purposes is sNicient to meet debt service requirements for the year ended September 30.2002. IV. OTHER INFORMATION A. Risk Management The District is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; business interruption; errors and omissions: injuries to employees; employee health benefis: and other claims of various nature. Commercial insurance is purchased for the risks of loss to which the District is exposed. Any losses reported but unsettled or incurred and not reported, are believed to be insignificant to the District's general purpose financial statements. 8. Commitments The District follows the guidelines of the TCEQ in its dealings with developers. The District leases certain equipment and a modular building under the provisions of operating leases. One half of the monthly rent ($450 per month) on the modular buildings lease is repaid to the District by the Town of Trophy Club. Future minimum rental payments are 53,600 for 2002. C. Contingent Liabilities The District is currently not subject to any pending litigation. However, the District is an interested party to several administrative hearings at year end. Although the outcome of these matters is not presently determinable, it is TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 management's opinion that resolution of these matters will not have a material adverse effect on the financial condition of the District. D. Concentration Of Credit Risk Property taxes and accounts receivable for utilities are due from citizens and businesses within the District's boundaries. Risk of loss is immaterial due to wide dispersion of receivables and policies which address procedures for filing property tax liens or utility service cut-off. E. Contracts Under the terms of a contract whereby MUD 1 and MUD 2 sold an unused portion of the water supply system to the City of Roanoke, Texas, the City of Roanoke will make annual payments to the Master District account of $23,663 including interest through 2006. At September 30. 2002, the District's share (60%) of the receivable was $48,638. SUPPLEMENTARY INFORMATION THIS PAGE INTENTIONALLY LEFT BLANK TROPHY CLUB MUNICIPAL UTlLlN DISTRICT NO. 1 SUPPLEMENTARY SCHEDULES INCLUDED WITHIN THIS REPORT September 30,2002 (D) Notes required by the TCEQ in the Annual Audit Report Requirements for Texas Water Districts and Authorities are incorporated into the notes presented as part of the General Purpose Financial Statements. (E) Schedule of selvices and rates. (F) Schedule of General Fund expenditures. (G) Schedule of temporary investments -all funds. (H) Analysis of taxes levied and receivable (I) Analysis of changes in general fixed assets and organizational costs. (J) General long-term debt service requirements - by year (K) Analysis of changes in general long-term debt. (L) Comparative schedule of revenues and expenditures -five years (M) Insurance coverage (N) Board members, key administrative personnel and consultants. (0) Management letter to Board of Directors. Annual Filing Affidavit THIS PAGE INTENTIONALLY LEFT BLANK TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (E) SERVICES AND RATES September 30,2002 1. Services provided by the District: Retail Water Wholesale Water Drainage rn Retail Wastewater Wholesale Wastewater Irrigation ParksjRecreation Fire Protection Security Solid WasteIGarbage Flood Control 0 Roads Participates in joint venture, regional system and/or wastewater service (other than emergency interconnect) [7 Other 2. Retail Rates Rased on 516 Meter: a Retail Rates Not Applicable Most prevalent type of meter (if not a 518") NlA Flat Wesper1,030 Minirmm Minirmm Rate GallwsCX~ &F Usage YIN Minirmrn kage Lds WATER: $ 11.00 0 No $ 203 0 to 6,033 No 230 6,532 to 1ZMX) No 250 1ZWOto 25,033 No 28) Morethan 25,030 NOTE: CM of district water rates are detein-ined by cwtract. GCLFCOURSE: 0 Yes/$l,m WA Oto XO,o 260 3C0,Mll to + STOFM DFWN ASSESSMENT: $ I. I\VA Yes NOTE: All rates above me effective Septenke 1,- District employs winter averaging for wastewater usage? Yes NO • Total water and wastewater charges per 10,000 gallons usage (including surcharges) -effective September 30. 2002 First 10,000 gallons used $64.40 Next 10.000 gallons used 29.20 Next 10.000 gallons used and subsequent 25.50 Maximum residential wastewater charge is for 12,000 gallons or $36.20. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (E) SERVICES AND RATES (Continued) September 30,2002 3. Retail Service Providers: Number of retail water and/or wastewater* connections within the District as of the fiscal year end. Provide actual numbers and single family equivalents (ESFC) Inactive Active Adive Connedions Connections (ESFQ (ESFC) " Single Family 1,156 1,156 0 Commercial 89 272 0 Other - recreational centers, government & VFD 15 46 0 TOTAL * Number of connections relates to water service, if provided. Otherwise, the number of wastewater connections should be provided. "Inactive" means that water and wastewater connections were made, but service is not being provided. 4. Total water consumption (in thousands) during the fiscal year: Gallons pumped into system: Gallons billed to customerr: 5. Standby Fees: Does the District Assess standby fees? Yes El No For the most recent full fiscal year. FY 2002: Debt Service 'Operations and maintenance Total levy Total Collected Percentage Collected Total levy Total Collected Percentage Collected Have standby fees been levied in accordance with Water Code Section 49.231, thereby constituting a lien on propem? Yes No * * Standby fees are levied by the District and constitute a lien under recorded deed restrictions or covenants pursuant to Section 293.150 of Title 30 of Texas Administrative Code. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (E) SERVICES AND RATES (Continued) September 30,2002 6. Anticipated sources of funds to be used for debt service payments in the DistricYs following fiscal year: a. Debt Service Tax Receipts $ 757,918 b. Surplus Construction Funds 0 c. Water and/or Wastewater Revenue d. Standby fees e. Debt Service Fund Balance To Be Used 0 f. Interest Revenues 0 g. Other (Describe) 0 TOTAL ANTICIPATED FUNDS TO BE USED $ 757.9U. 7. Location of District: Counties in which district is located: Denton, Tarrant. Is the District located entirely within one county? Yes No €4 Is the District located within a city? Entirely Partially Not at all €4 City in which district is located. Town of Trophv Club. Town of Westlake. Is the District located within a city's extra territorial jurisdiction (ETJ)? Entirely Partially Not at all Unknown ETJ's in which district is located. Is the General Membership of the Board appointed by an office outside the District? Yes No €4 if yes. by whom? CURRENT Personnel Professional fees: Auditing Legal Engineering TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (F)SCHEDULEOFGENERALFUNDMPENDlTURES September 30,2002 Fire Operating Department Department Current Year Prior Year $ 206.930 $ 13,765 $ 220.695 $ 13,002 Purchased services for resale: Bulk water purchases Contract services: Tax administration fee Utilities and telephone 7,289 7,289 Repairs and maintenance 10,353 10.353 84.052 DPS Joint Venture Contribution 367,281 367.281 258,026 Other operating costs Administrative expenditures: Directors fees Office supplies 654 13 667 269 Insurance and bonds 2.674 4,702 7,376 3.100 Other admin.expenditures 49,800 21,808 71.608 5,494 Capital outlay 461,564 461.564 Debt service TOTAL EXPENDITURES $ 279,070 $ 918.183 $ 1,797,253 $ 385.033 Number of employees employeed by the District: Full time ' Part time Note: During 2002. MUD1 resumed responsibility for fire protection upon termination of the TC / W DPS Joint Venture. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 IGl SCHEDULE OF TEMPORARY INVESTMENTS ~, September 30,2002 Identification Interest Maturity Balance Accrued Interest Funds Number Rate Date End of Year End of Year General Fund TexPool TexPool Total 613300002 1.64% Demand $ 1,081,462 Paid daily 613300004 1.6476 Demand 226 Paid daily 1.081.688 Debt Service Fund TexPool 61 3300003 1.64% Demand 103.614 Paid Daily Total - All Funds $ 1.185.302 Taxes receivable, beginning of year 2001 tax levy Total to be accounted for Less collections, write offs 8 adjustments: Current year Prior years Total TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (H) ANALYSIS OF TAXES LEVIED AND RECEIVABLE September 30,2002 Taxes receivable, end of year Taxes receivable by year 1992 and prior 1993 1994 1995 1996 1997 1998 1999 2000 2001 Taxes receivable, end of year Property valuations (in 000's): Land l mprovements Personal property Exemptions Tax rate per 5100 valuation: Operations Fire Department Debt Service Total tax rate per 5100 valuation Tax Levy: Percent of taxes collected to taxes levied: General Fund Debt Operations Fire Total Service Total TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (H) ANALYSIS OF TAXES LEVIED AND RECEIVABLE (Continued) September 30,2002 Tax rate for any other special district which (a) encompass less than a county. (b) provides water, wastewater collection, drainage or roads to property in the district and (c) taxes property in the district. Name of Special Districts Service Provided Tax Rate Total rate (s) of special districts $ Tax rates (per $100 net taxable value) for all overlapping jurisdictions. Include any taxing entities which overlap 10% or more of the District. Denton Tarrant County County County DentoniTarrant $ 0.24897 5 0.27250 City Town of Trophy Club 0.44051 School District Northwest ISD/Carroll ISD 1.83481 1.93500 2.52429 2.20750 Special Districts not included above Hosoital District 0.23240 ~ar;ant County Comm. College 0.13938 Total Special Districls 0.37178 Total District Tax Rate 0.24000 0.24000 Total Overlapping Tax District $ 2.76429 $ 2.81928 Physical Facilities: Land Buildings Water system Sanitary wastewater system Drainage system Machinsry and equipment Autos and trucks Furniture and fixtures TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (I) ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS September 30,2002 Balance 8/30/200l Additions Disposals $ $ (1 00,000) 461,564 (607.900) (31,586) (27,868) f1.878) Balance 8/30/2002 .. . Engineering fees 837,127 8371127 Construction in Progress 68,786 68.786 Total Physical Facilities 18,405,289 461,564 (868,433) 17,887,430 District Organizational Costs - Creation Period: Engineering and surveys 10,981 Filing fees, licenses, legal notice & permits 2,640 Legal fees 13.725 Director fees and per diem 400 Other costs 361 District Organizational Cosls - Construction Period: Legal fees 103,482 Financial consulting fees 161,513 Operating 19.461 Bond interest 206;017 Amortized bond discount 4,088 Total Dislrict Organizational Costs 522.688 Total Physical Facilities & organization costs $ 18,827,887 $ 461,564 $ (869.433) 5 18,420.1 18 Amounts Provided By: General Fund: Dedicated by developers Revenue Debt Service Fund - Revenue Capital Projects Fund: Bond proceeds Revenue Total Amounts Provided Balance Balance 9/30/2001 Disposals Additions Q/30/2002 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (J) GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS September 30,2002 Series 1993 Combination Tax Bonds Due During Fiscal Principal Due Interest Due Years Ending 1 -Sep Mar 1ISep 1 Total 2003 $ 350.000 $ 111,365 5 461.365 2004 365.000 92,115 457.115 2005 390.000 71,675 461,675 2006 410.000 49,445 459.445 2007 435.000 25,665 460,665 $ 1,950,000 $ 350.265 $ 2,300,265 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (J) GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS (Continued) September 30,2002 Series 1996 Public Property Finance Contractual Obligations Due Durina Fiscal Princi~al Due Interest Due Years ~iding 1 -sep Mar 1ISep 1 Total TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (J) GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS (Continued) September 30, 2002 Series 1997 Combination Tax Bonds Due Durina Fiscal Princioal Due Interest Due Years ~ndin~ I -5ep Mar I/Sep 1 Total - 201 1 380.000 18.620 398,620 2.960.000 5 634,775 $ 3,594,775 Discount (99.045) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (J) GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS (Continued) September 30,2002 Series 1999 Public Property Finance Contractual Obligations Due During Fiscal Principal Due Interest Due Years Ending I -Sep Mar 1ISep 1 Total TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (J) GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS (Continued) September 30,2002 Annual Requirements for All Series Due During Fiscal Total Total Total Principal Years Ending Principal Due Interest Due 8 Interest Due Discount Interest rate Date interest payable Maturity dale Bonds outstanding at beginninn of year Accretion of capital appreciation bonds Bonds sold during currenl year Retirements of principal Bonds outstanding at end of year Retirements of interest TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (K) ANALYSIS OF CHANGES IN GENERAL LONG-TERM September 30,2002 Series Series Series Series 1993 1998 COS 1997 Tax 1999 CO's Total TROPHY CLUB MUNlClPAL UTlLlN DISTRICT NO. 1 (K) ANALYSIS OF CHANGES IN GENERAL LONG-TERM (Continued) September 30,2002 Paying agents Name 8 Ci: Series 1989, Series 1993, and Series 1997 Series 1996 and 1999 JP Morgan Chase P.O. BOX 219053 Dallas, Texas 75221-9053 Texas National Bank 3205 E. Hwy 114 Southlake, Texas 76052 Tax Other Refunding Bond Authorii Bonds Bonds Bonds Amount authorized by voters 5 12,344,217 $ $ Amount issued (11,115,000) Remaining to be issued $ 1,229.217 $ 5 The general obligation bonds were authorized on October 7. 1975. Debt Service Fund cash and cash equivalents balance as of September 30,2002: 5153429 Average annual debt service payment (principal &interest) for remaining term of debt:$&- REVENUE Water and sewer service Inspection &tap connection fees 4d valorem property taxes Penalties and interest inlerest earned Sale of assets Miscelianeous and other Proceeds from debt Totai revenue TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (L) COMPARATIVE SCHEDULES OF REVENUE AND EXPENDITURES - GENERAL FUND September 30, 2002 Amounts 2002 2001 2000 1999 $ $ 5 2,384,991 $ 2,100,956 64.403 94,455 270,313 263,059 142.693 368,892 188 1.422 36.150 36,280 60.031 69.7 13 116,548 84,206 907,900 323,605 26.754 263,933 85.991 105,000 1,562,037 362,948 3.008.71 8 2,875,792 Percent of total revenue 1998 2002 200 1 2000 1999 1998 5 2.062.330 0.056 0.0% 79.396 73.10:. 77.8% EXPENDITURES Purchased water and sewer services 753,467 610.959 61 1.062 0.0% 0.0% 25.0% 21.2% 23.1% Salaries, wages and employee benefits 220,695 13,002 832,499 944.685 735,262 14.1% 3.8% 27.7% 32.6% 27.756 Professional fees 40,750 9,406 113.238 45,426 37,553 2.6% 2.6% 3.856 1.856 1.496 Recurring operating expenditures 108.963 104,599 607.113 686,010 721.081 6.8% 28.856 20.25' 23.9% 27.25'. Contribution to Trophy Club I Westiake Dept. of Public Safety Joint Venture 387.261 258,026 326,439 23.5% 71.17'. 10.8% 0.05'. 0.0% Capilal outlay 461.564 107,433 289.259 41 1.359 29.5% 0.0% 3.656 10.1% 15.556 Debt service 80.404 80.395 0.0% 0.0% 0.056 2.8% 3.056 Jaymenl to escrow agent 'Totai Expenditures Excess (deficiency) of revenues over (under) expenditures $ 364,784 $ (22.085) S 268,509 S 219,049 $ 53.025 23.4% -6.13'. 8.9% 7.6% 2.0% ----- 'Total Active Retail Water andlor *Wastewater Connections 1,271 1.252 1.211 1,179 1.106 (Continued) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (L) COMPARATIVE SCHEDULES OF REVENUE AND EXPENDITURES - DEBT SERVICE FUND (Continued) September 30, 2002 Arnounls Percent of total revenue REVENUE 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998 Ad valorem property taxes S 753,137 S 740,089 S 804,423 S 738,181 S 700,912 98.296 91.5% 95.5% 96.7% 98.5% Penalties and interest 3,211 4.984 4,800 4.838 7,033 0.4% 0.694 0.896 0.896 1.096 interest earned 10,458 23.352 23.642 20,328 18,801 1.4% 2.9% 3.7% 2.7% 2.6% Miscellaneous and other 40,295 0.096 5.0% 0.096 0.096 0.0% Proceeds from debt issue 0.0% 0.096 0.0% 0.096 0.0% Totoi revonue 766.808 808.720 632,885 783.343 728,548 100.096 100.0% 100.0% 100.096 100.0% EXPENDiTURES Principal retirement 585.000 515,000 455,000 400.000 300,000 76.3% 83.796 71.9% 52.4% 4 1.396 irllereet and fiscal charges 252.111 277,091 298.715 318,280 341,998 32.9% 34.396 47.2% 41.4% 47.196 Paynlent to refunding bond ogenl 0.0% 0.096 0.0% 0.0% 0.0% Deb1 issue costs 0.096 0.096 0.0% 0.096 0.056 Tolai Expendilutes 837,111 792,091 753,715 716,260 841.998 109.2% 97.996 119.196 93.8% 88.4% Excess (daliciancy) of revenues over (~u~de!) expenditures $ (70.305) S 18.629 S (120.850) S 47,083 5 84,548 -9.2% 2.1% -19.1% 6.296 11.676 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (M) INSURANCE COVERAGE September 30,2002 Type of Policy Amount of Corporation Clause Type of coverage Coverage Name StoNMutualCo-insuranc DISTRICT Director and Officers Liability $ 5,000,000 Kemper Indemnity Ins. Mutual None Building &Contents and Water System 5,944,000 New Hampshire Ins. Stock 100% Extra expense 50,000 Comprehensive General and Contractual Liability: New Hampshire Ins. Stock None General Aggregate 3,000,000 Products & Completed Operations Aggregate 1,000,000 Personal & Advertising Injury 1 ,M]O.OOO Fire Damage 50,000 Medical Expense 5,000 Each Occurance (3) 1 ,WO,OOO Crime Dedarations Blanket Employee Dishonesty and Bond 100.000 New Hampshire Ins. Stock None Forgery or Alteration 50,WO Contractor's equipment 300,573 New Hampshire Ins. Stock 80% Umbrella Liability New Hampshire Ins. Stock None General Aggregate 5,000,000 Products & Completed Operations Aggregate 5,000,000 Pollution liability 1,000,000 New Hampshire Ins. Stock None Commeraal Automobile Liability 1 ,000,000 New Hampshire Ins. Stock None Workers' Compensation Based on Salary Texas Muniapal League Mutual None TROPHY CLUB MUNICIPAL UTlLlN DISTRICT NO. 1 (N) BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL AND CONSULTANTS September 30,2002 Complete District Mailing Address: District Business Telephone Number: 100 Municipal Drive, Trophy Club, Texas 76262 Metro (817) 430-191 1 Fees and Term of Office Expense Tale Resident ElectedlExpires Reimbursement at of Name and address or Date Hired 9'3012002 Year End District? Board Members Canstance S. White 11 9 Trophy Club Drive Trophy Club, TX76262 5/02 - 5'06 $1,700 Diredor Yes Jim Hase 209 lnvemess Secretary1 Trophy Club, TX 76262 5/00 - 5/04 3,2W Treasurer Yes Dean Henry 308 Oakmont Drive Trophy Club, TX76262 5/00 - 5/04 2.4W President Yes Dave Robison 2 Crickett Court Trophy Club, TX 76262 5's - 5/02 1,5W Diredor Yes Wesley W. Obermeier 207 Oakmont Trcphy Club, TX 76262 5/02 - 5/05 2,800 Vice-president Yes Jim Liles 105 Oakmont Trophy Club, TX 76262 5/02 - 6/02 200 Diredor Yes Ted Neidenberger 1033 Sunset Appointed Trophy Club. TX 76262 6/02 - Vffi 0 Director Yes Note: No director is disqualified from serving on this board under the Texas Water Code. (Continued) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (N) BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL AND CONSULTANTS (Continued) September 30, 2002 Fees and Term of Office Expense I Resident ElectecVExpires Reimbursement at of Name and address or Date Hired 913W2W2 Year End District? Key Administrative Personnel Cathy Morgas 21 58 Wedgewwd Drive District Grapevine, TX 76051 2/1/1991 $ - Manager No * Assumed responsibility of District Manager on 3W2000 Denton County Appraisal Diitrid P.O. Box 2816 Denton, TX 76202 Rutledge Crain 8 Company. PC 2401 Garden Park Court. Suite B Arlington, TX 76013 Carter & Burgess P.O. Box 985006 Fort Worth, TX 761855006 Freese & Nichols, Inc. 4055 lntl Plaza, Suite 200 Fort Worth, TX 76109 Camp. Dresser & McKee, Inc. P.O. Box 74594 Dept. Member 44 Chicago, lL 60690 Mitaker. Chalk, Swindle &Sawyer. LLP 3500 City Center, Tower Ii Fort Worth, TX 761 02 413 11 981 9,630 Appraiser No Consulting 1983 - Engineer No Consulting 7/1/2001 - Engineer No Consulting Engineer No Legal 10/1/1999 37.336 Counsel No ANNUAL FILING AFFIDAVIT THE STATE OF TEXAS 1 1 COUNTY OF DENTON 1 I, (Name of Duly Authorized District Representative) of the Troohv Club Municipal Utilitv District No. 1 (Name of District) hereby swear, or affirm, that the district named above has reviewed and approved at a meeting of the Board of Directors of the District on the -day of , 20- its annual audit report of the fiscal year or period ended Seotember 30. 2002 and that copies of the annual audit report have been filed in the district office. located at 100 Municipal Drive, Troohv Club. Texas, 76262. This annual filing affidavit and the attached copy of the annual audit report are being submitted to the Texas Natural Resource conservation Commission in satisfaction of all annual filing requirements within Section 49.194 of the Texas Water Code. Date: ,20- (Signature of District Representative) (Typed Name and Title of District Official) Sworn to and subscribed to before me this - day of .20-. (Seal) (Signature of Notary) My Commission Expires On: , 20-. Notary Public in and for the State of Texas ANNUAL FILING AFFIDAVIT THE STATE OF TEXAS COUNTY OF DENTON is Cathy M. Morgas (Name of Duly Authorized District Representative) of the Troohv Club Municioal Utility District No. 1 (Name of District) hereby swear, or affirm, that the district named above has reviewed and approved at a meeting of the Board of Directorj of the District on the ZMay of January , 2001 its annual audit report of the fiscal year or period ended September 30, 2002 and that copies of the annual audit report have been filed in the district office, located at 100 Municipal Drive, Trophy Club. Texas. 76262. This annual filing affidavit and the attached copy of the annual audit report are being submitted to the Texas Natural Resource Conservation Commission in satisfaction of all annual filing requirements within Section 49.194 of the Texas Water Code. ~~t~: February 6 -20 - 03 Cathy M. Morgas, District Xanager pyped Name and Title of District Official) Sworn to and subscribed to before me this &&-day of February ,20K, A My Commission Expires On: J/J~ , 20a, Nota~y Public in and for the State of Texas