mcmud 67 audit 2014

7/24/2019 Mcmud 67 Audit 2014

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Montgomery CountyMunicipal Utility District No. 67

MONTGOMERY COUNTY, TEXAS

FINANCIAL REPORT

September 30, 2014

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C O N T E N T S

Exhibits PageFINANCIAL SECTION

Independent Auditors’ Report 1-2

Management’s Discussion and Analysis 3-8

Basic Financial StatementsGovernment-wide and Fund Financial Statements

Statement of Net Position and Governmental Funds BalanceSheet B(1) 10-11Statement of Activities and Governmental Funds Revenues,Expenditures and Changes in Fund Balance B(2) 12-13

Notes to Financial Statements B(3) 15-32

Required Supplementary InformationSchedule of Revenues, Expenditures and Changes in Fund Balance

- Budget and Actual - General Fund C(1) 34

SchedulesTEXAS SUPPLEMENTARY INFORMATIONSchedule of Services and Rates TSI-1 36-37Schedule of General Fund Expenditures TSI-2 38Schedule of Temporary Investments TSI-3 39

Analysis of Taxes Levied and Receivable TSI-4 41Long-Term Debt Service Requirements by Years TSI-5 42-43

Analysis of Changes in Long-Term Bonded Debt TSI-6 44-45Comparative Schedule of Revenues and Expenditures - Generaland Debt Service Funds TSI-7 46-47Board Members, Key Personnel, and Consultants TSI-8 48-49

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Independent Auditors’ Report

Board of DirectorsMontgomery County Municipal Utility District No. 67Montgomery County, Texas

We have audited the accompanying financial statements of the governmental activities andeach major fund of Montgomery County Municipal Utility District No. 67 (the “District”) as ofand for the year ended September 30, 2014, and the related notes to the financial statements,

which collectively comprise the District’s basic financial statements as listed in the table ofcontents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with accounting principles generally accepted in the United States of

America; this includes the design, implementation, and maintenance of internal control relevantto the preparation and fair presentation of financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders 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 thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of significantaccounting estimates made by management, as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinions.

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Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects,the respective financial position of the governmental activities and each major fund ofMontgomery County Municipal Utility District No. 67 as of September 30, 2014, and therespective changes in financial position for the year then ended in accordance with accountingprinciples generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that themanagement’s discussion and analysis and budgetary comparison information on pages 3through 8 and 34, respectively, be presented to supplement the basic financial statements.Such information, although not a part of the basic financial statements, is required by theGovernmental 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, orhistorical context. We have applied certain limited procedures to the required supplementaryinformation in accordance with auditing standards generally accepted in the United States of

America, which consisted of inquiries of management about the methods of preparing theinformation and comparing the information for consistency with management’s responses to ourinquiries, the basic financial statements, and other knowledge we obtained during our audit ofthe basic financial statements. We do not express an opinion or provide any assurance on theinformation because the limited procedures do not provide us with sufficient evidence toexpress an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements thatcollectively comprise the District’s basic financial statements. The Texas SupplementaryInformation (TSI) listed in the table of contents is presented for purposes of additional analysisand is not a required part of the financial statements. This information has been subjected tothe auditing procedures applied in the audit of the financial statements and certain additionalprocedures, including comparing and reconciling such information directly to the underlyingaccounting and other records used to prepare the financial statements or to the financialstatements themselves, and other additional procedures in accordance with auditing standardsgenerally accepted in the United States of America. In our opinion, the information is fairlystated in all material respects in relation to the financial statements as a whole.

Sugar Land, TexasJanuary 7, 2015

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Management’s Discussion and Analysis

As management of Montgomery County Municipal Utility District No. 67 (the District), we offerreaders of the District’s financial statements this narrative overview and analysis of the financialactivities of the District for the year ended September 30, 2014.

FINANCIAL HIGHLIGHTS

The assets of the District exceeded its liabilities at the close of the most recent fiscalyear by $3,790,007 (net position).

As of September 30, 2014, the District’s governmental funds reported an endingfund balance of $2,117,673.

The District’s cash balance at September 30, 2014 was $2,123,925, representing adecrease of $479,761 from September 30, 2013.

The District had general revenues of $5,664,648 and program revenues, net ofexpenses, of $1,003,430 for the year ended September 30, 2014.

At the end of the fiscal year, unrestricted and unassigned fund balance for the

General Fund was $1,464,381, or 37 percent of total General Fund expenditures.

OVERVIEW OF THE FINANCIAL STATEMENTS

The discussion and analysis is intended to serve as an introduction to the District’s basicfinancial statements. The District’s basic financial statements include three components: 1)government-wide financial statements, 2) fund financial statements, and 3) notes to thefinancial statements.

GOVERNMENT-WIDE FINANCIAL STATEMENTS

The government-wide financial statements are designed to provide readers with a broadoverview of the District’s finances, in a manner similar to a private-sector business.

The statement of net position presents information on all of the District’s assets and liabilities,with the difference between the two reported as net position. Over time, increases ordecreases in net position may serve as a useful indicator of whether the financial position of theDistrict is improving or deteriorating.

The statement of activities presents information showing how the District’s net position changedduring the most recent fiscal year. All changes in net position are reported as soon as theunderlying event giving rise to the change occurs, regardless of the timing of related cashflows. Thus, revenues and expenses are reported in this statement for some items that will

only result in cash flows in future fiscal periods (e.g., depreciation).

The government-wide financial statements present functions of the District that are providedfrom funding sources (governmental activities). The government-wide financial statements canbe found on pages 10-13 of this report.

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FUND FINANCIAL STATEMENTS

A fund is a grouping of related accounts that is used to maintain control over resources thathave been segregated for specific activities or objectives. The District, like other state and localgovernments, uses fund accounting to ensure and demonstrate compliance with finance-relatedlegal requirements. The funds of the District consist solely of governmental funds (the GeneralFund, Debt Service Fund and Capital Projects Fund).

Governmental Funds - Governmental funds are used to account for essentially the same

function reported as governmental activities in the government-wide financial statements.However, unlike the government-wide financial statements, governmental fund financialstatements focus on near-term inflows and outflows of spendable resources, as well as onbalances of spendable resources available at the end of the fiscal year. Such information maybe useful in evaluating a government’s near-term financing requirements.

Because the focus of the governmental funds is narrower than that of the government-widefinancial statements, it is useful to compare the information presented in the governmental

funds with similar information presented for governmental activities in the government-widefinancial statements. By doing so, readers may better understand the long-term impact of thegovernment’s near-term financial decisions. Both the governmental funds balance sheet andthe governmental funds statement of revenues, expenditures, and changes in fund balancesprovide an adjustments column to facilitate this comparison between the governmental fundsand governmental activities . The basic governmental fund financial statements can be found onpages 10-13 of this report.

NOTES TO THE FINANCIAL STATEMENTS

The notes to the financial statements provide additional information that is essential to a fullunderstanding of the data provided in the government-wide and fund financial statements. Thenotes to the financial statements can be found on pages 15 through 32 of this report.

OTHER INFORMATION

In addition to the basic financial statements and accompanying notes, this report also presentscertain required supplementary information concerning the District’s General Fund budget.Required supplementary information can be found on page 34 of this report.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

As noted earlier, net position may serve over time as a useful indicator of a government’s

financial position. In the case of the District, assets exceeded liabilities by $3,790,007 as ofSeptember 30, 2014.

The largest portion of the District’s net position reflects its investment in capital assets (e.g.land and infrastructure), less any related debt used to acquire those assets that is stilloutstanding. The District uses these capital assets to provide services to the individuals weserve; consequently, these assets are not available for future spending.

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Additionally, a portion of the District’s net position represents unrestricted financial resourcesavailable for future operations.

Current and other assets $ 2,719,387 $ 3,327,451

Capital assets, net 23,615,390 23,900,598

Total Assets 26,334,777 27,228,049

Long-term liabilities 21,909,906 23,352,116

Other liabilities 634,864 1,089,356

Total Liabilities 22,544,770 24,441,472

Net Position:

Net investment in capital assets 1,705,484 63,826

Restricted 469,657 1,281,571

Unrestricted 1,614,866 1,441,180

Total Net Position $ 3,790,007 $ 2,786,577

SUMMARY OF STATEMENT OF NET POSITION

As of September 30, 2014 and 2013

2014 2013

Governmental Activities

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Net position of the District, all of which relate to governmental activities, increased by$1,003,430. Key elements of the changes are as follows:

Revenues

Program revenues:

Water and sewer charges $ 2,783,638 $ 2,866,212

Property taxes, penalties and interest 2,785,350 2,650,778

Tap connection fees 78,275 46,300

Investment income and other 17,385 144,114

Total Revenues 5,664,648 5,707,404

Expenses

Purchased water and sewer 2,408,199 2,246,550

Professional fees, contracted services and other 614,827 524,447

Interest on long-term debt 993,001 1,078,873

Depreciation and amortization 645,191 647,082

Total Expenses 4,661,218 4,496,952

Change in Net Position 1,003,430 1,210,452

Net Position, beginning 2,786,577 1,576,125

Net Position, Ending $ 3,790,007 $ 2,786,577

CHANGES IN NET POSITION

For the Fiscal Year Ended September 30, 2014 and 2013

2014 2013

Governmental Activities

2014 REVENUES

Investment

and other

0%

Water and

sewer charges

50%

Property taxes

49%

Tap connection

fees

1%

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FINANCIAL ANALYSIS OF THE DISTRICT’S FUNDS

As previously noted, the District uses fund accounting to ensure and demonstrate compliancewith finance-related legal requirements. The District’s governmental funds are discussed below:

Governmental Funds - The focus of the District’s governmental funds is to provideinformation on near-term inflows, outflows, and balances of spendable resources. Suchinformation is useful in assessing the District’s financing requirements. In particular, fundbalances may serve as a useful measure of a government’s net resources available for spendingfor program purposes at the end of the fiscal year.

As of September 30, 2014, the District’s governmental funds, which consist of a general fund,debt service fund and capital projects fund reported an ending fund balance of $2,117,673,which is a decrease of $643,786 from last year’s total of $2,761,459. As a measure of thegeneral fund’s liquidity, it may be useful to compare unreserved fund balance to total fundexpenditures. Unrestricted and unassigned fund balance represents 37 percent of total generalfund expenditures.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets - The District’s investment in capital assets as of September 30, 2014 amountsto $23,615,390 (net of accumulated depreciation). This investment in capital assets includesland, buildings, improvements, vehicles, furniture and equipment.

Land $ 200,000

Capacity rights 10,973,544

Water system 5,250,313

Wastewater system 6,267,091

Drainage system 9,091,997

Engineering 1,749,167

Less: accumulated depreciation (9,916,722)

Total Capital Assets, Net $ 23,615,390

CAPITAL ASSETS SCHEDULE

(net of depreciation)

Additional information on the District’s capital assets can be found in Note 7 in the notes tofinancial statements.

LONG-TERM DEBT

As of September 30, 2014, the District has a total bonded debt outstanding of $14,290,000.Interest expense for the year totaled $641,607 for the 2014 fiscal year on this bonded debt.These outstanding bonds have maturities ranging from 2015 to 2029. Additional information onthe District’s long-term debt can be found in Note 8 in the notes to the financial statements.

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ECONOMIC FACTORS

Unrestricted and unassigned fund balance in the General Fund increased by $165,964($139,190 from operations and $26,774 from a JPA distribution) to $1,464,381. Aplanned increase of fund balance of $192,171 was projected.

REQUESTS FOR INFORMATION

The financial report is designed to provide a general overview of Montgomery County MunicipalUtility District No. 67’s finances for all those with an interest in the District’s finances. Questionsconcerning any of the information provided in this report or requests for additional financialinformation should be addressed to Montgomery County Municipal Utility District No. 67: TheWoodlands Joint Powers Agency, P.O. Box 7580, The Woodlands, Texas 77380.

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FINANCIAL STATEMENTS

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Cash and temporary investments $ 1,578,225 $ 545,700 $ $ 2,123,925

Cash with fiscal agent

Receivables:

Property taxes 4,012 11,535 15,547

Customer service accounts 396,280 396,280

Internal receivables 622 622

Investment in joint venture 183,635 183,635

Capital assets, net of accumulated depreciation:

Land and capacity rightsInfrastructure

$ 2,162,774 $ 557,235 $ $ 2,720,009

Liabilities, Deferred Inflows and Fund Balances/Net Position

Liabilities

Accounts payable and accrued liabilities $ 382,441 $ 75,421 $ $ 457,862

Customer deposits 128,305 128,305

Internal payables 622 622

Accrued interest payable

Long-term liabilities:

Unamortized bond premium or (discount)

Due within one yearDue after one year

510,746 76,043 586,789

Deferred Inflows of Resources

Unavailable revenue - property taxes 4,012 11,535 15,547

Fund Balances/Net Position

Fund Balances:

Nonspendable investment in joint venture 183,635 183,635

Restricted for debt service 469,657 469,657

Restricted for capital projects

Unrestricted and unassigned 1,464,381 1,464,3811,648,016 469,657 2,117,673

$ 2,162,774 $ 557,235 $ $ 2,720,009

Net Position:

Net investment in capital assets

Restricted for debt service

Unrestricted

See Notes to Financial Statements.

Total Net Position

Total Liabilities

Debt

General Service

Capital

Projects

Total Liabilities and Fund BalancesTotal Fund Balances

Assets

Montgomery County Municipal Utility District No. 67

STATEMENT OF NET POSITION AND GOVERNMENTAL FUNDS

September 30, 2014

BALANCE SHEET

Total

Total Assets

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Exhibit B(1)

$ $ 2,123,925

15,547

396,280

(622)

183,635

11,173,544 11,173,54412,441,846 12,441,84623,614,768 $ 26,334,777

$ $ 457,862

128,305

(622)

48,697 48,697

439,632 439,632

1,497,759 1,497,75919,972,515 19,972,515

21,957,981 22,544,770

(15,547)

(183,635)

(469,657)

(1,464,381)(2,117,673)

1,705,484 1,705,484

469,657 469,657

1,614,866 1,614,866$ 3,790,007 $ 3,790,007

Adjustments

(Note 2)

Statement of

Net Position

11

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Revenues

Water service charges $ 2,123,165 $ $ $ 2,123,165

Sewer service charges 660,473 660,473

Property taxes 1,170,667 1,607,727 2,778,394

Penalties and interest 6,307 6,307

Tap connection fees 78,275 78,275

Investment earnings 766 2,761 3,527

Other 13,858 13,858

4,047,204 1,616,795 5,663,999Expenditures/Expenses

Current:

Purchased water and sewer service 2,408,199 2,408,199

Purchased services from joint venture 368,413 21,999 390,412

Professional fees 30,164 30,164

Other 137,347 22,392 25 159,764

Capital Outlay 275,655 192,777 468,432

Debt Service:

Principal retirement 336,842 1,545,000 1,881,842

Interest and fiscal charges 351,394 646,516 997,910

Depreciation and amortization

3,908,014 2,235,907 192,802 6,336,723

139,190 (619,112) (192,802) (672,724)

Other Financing Sources (Uses)

Equity in net income (loss) of joint venture 28,938 28,938

28,938 28,938

168,128 (619,112) (192,802) (643,786)

Fund Balances/Net Position - Beginning 1,479,888 1,088,769 192,802 2,761,459

$ 1,648,016 $ 469,657 $ $ 2,117,673

See Notes to Financial Statements.

Total Other Financing Sources (Uses)

Excess (Deficiency) of Revenues and Other

Fund Balances/Net Position - Ending

inancing Sources Over (Under) Expenditure

and Other Financing (Uses)

Change in Net Position

Excess (Deficiency) of Revenues

Total Expenditures/Expenses

Total Revenues

Over (Under) Expenditures

Debt

General Service Total


STATEMENT OF ACTIVITIES AND GOVERNMENTAL FUNDS

REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

Year Ended September 30, 2014

Capital

Projects

12

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Exhibit B(2)

$ $ 2,123,165

660,473

649 2,779,043

6,307

78,275

3,527

13,858

649 5,664,648

2,408,199

34,487 424,899

30,164

159,764

(468,432)

(1,881,842)

(4,909) 993,001

645,191 645,191

(1,675,505) 4,661,218

1,676,154

(28,938)

(28,938)

643,786

1,003,430 1,003,430

25,118 2,786,577

$ 1,672,334 $ 3,790,007

Adjustments

(Note 2) Activities

Statement of

13

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(This Page Intentionally Left Blank)

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Montgomery County Municipal Utility District No. 67Exhibit B(3)

NOTES TO FINANCIAL STATEMENTS

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the District conform with generally accepted accounting principles.The following is a summary of the most significant policies:

A. Reporting Entity

Montgomery County Municipal Utility District No. 67 (the “District”) was created by HouseBill 2211 of the 69th Legislature, State of Texas, Chapter 756, as a conservation andreclamation district under Article 16, Section 59 of the Constitution of Texas. The bill wassigned by the Governor of Texas on June 14, 1985. The District operates under the termsand provisions of Chapters 49 and 54 of the Texas Water Code. The first bonds were soldon December 16, 1993.

The District has contracted with various consultants to provide services to operate andadminister the affairs of the District. The District has no employees or related payrollcosts. The District is empowered, among other things, to purchase, construct, operateand maintain all works, improvements, facilities and plants necessary for the supply ofwater; the collection, transportation and treatment of wastewater; and the control anddiversion of storm water.

The District is a political subdivision of the State of Texas governed by an elected fivemember board and is considered a primary government. As required by generallyaccepted accounting principles, these general purpose financial statements have beenprepared based on considerations regarding the potential for inclusion of other entities,

organizations, or functions as part of the District's financial reporting entity. Based onthese considerations, no other entities, organizations, or functions have been included inthe District's financial reporting entity. Additionally, as the District is considered a primarygovernment for financial reporting purposes, its activities are not considered a part of anyother governmental or other type of reporting entity.

Considerations regarding the potential for inclusion of other entities, organizations, orfunctions in the District's financial reporting entity are based on criteria prescribed bygenerally accepted accounting principles. These same criteria are evaluated inconsidering whether the District is a part of any other governmental or other type ofreporting entity. The overriding elements associated with prescribed criteria considered ifdetermining that the District's financial reporting entity status is that of a primary

government are that it has a separately elected governing body; it is legally separate; andit is fiscally independent of other state and local governments. Although not consideredsignificant in the District's reporting entity evaluation, other prescribed criteria undergenerally accepted accounting principles include considerations pertaining to organizationsfor which the primary government is financially accountable; and considerations pertainingto other organizations for which the nature and significance of their relationship with theprimary government are such that exclusion would cause the reporting entity's financialstatements to be misleading or incomplete. The District participates in a joint venture

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with other area municipal utility districts as more fully described in Note 9 of thesefinancial statements.

The District's primary activities include construction, maintenance, and operation of waterand sewer system facilities and debt service on bonds issued to construct the facilities.

As noted above, the District participates in a joint venture with other area municipal utilitydistricts (collectively the “Participating Districts”). As provided in interlocal contracts byand among the Participating Districts, an independently governed agency known as TheWoodlands Joint Powers Agency (the “Agency”) provides administrative services and utilitysystem maintenance and operating services for the Participating Districts. The Agency isgoverned by a Board of Trustees made up of members appointed by the governing Boardsof the Participating Districts. The District records and accounts for its interest in the

Agency in its General Fund by the equity method, as do all of the Participating Districts,

with a portion of General Fund equity reserved in the amount of the District’s equityinterest. See Note 9 for additional disclosures regarding the Agency’s operations.

B. Financial Statement Presentation

In June 1999, GASB issued Statement No. 34, Basic Financial Statements – andManagement’s Discussion and Analysis – for State and Local Governments. Thisstatement, known as the “Reporting Model” statement, affects the way the Districtprepares and presents financial information. State and local governments traditionallyhave used a financial reporting model substantially different from the one used to prepareprivate-sector financial information.

GASB Statement No. 34 establishes new requirements and a new reporting model for theannual financial reports of state and local governments. The Statement was developed tomake annual reports easier to understand and more useful to the people who usegovernmental financial information to make decisions.

Some of the significant changes of GASB Statement No. 34 include the following:

Management’s Discussion and Analysis - GASB Statement No. 34 requires thatfinancial statements be accompanied by a narrative introduction and analytical overview ofthe government’s financial activities in the form of “management’s discussion andanalysis” (MD&A). This analysis is similar to the analysis that private sector companies

provide in their annual reports.

Government-wide Financial Statements - The reporting model includes financialstatements prepared using full accrual accounting for all of the government’s activities.This approach includes not just current assets and liabilities, but also capital assets andlong-term liabilities (such as buildings and infrastructure and general obligation debt).

Accrual accounting reports all of the revenues and costs of providing services each year,not just those received or paid in the current or soon thereafter, as is the case with the

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modified accrual basis of accounting. Governments report all capital assets, includinginfrastructure, in the government-wide Statement of Net position and report related

depreciation expense, the cost of “using up” capital assets, in the Statement of Activities.The net position of a government are broken down into three categories: 1) invested incapital assets, net of related debt; 2) restricted; and 3) unrestricted.

Fund Financial Statements - These statements focus on the District’s major funds andare prepared using the modified accrual basis of accounting.

C. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e. the statement of net position and thestatement of activities) report information on all the non-fiduciary activities of the primarygovernment and its component units, as applicable. The effect of interfund activity has

been removed from these statements. Governmental activities , which normally aresupported by taxes and intergovernmental revenues, are reported separately frombusiness-type activities , which rely to a significant extent on fees and charges for support.Likewise, the primary government is reported separately from certain legally separatecomponent units for which the primary government is financially accountable. The Districthad no business-type activities or component units as of and for the year endedSeptember 30, 2014.

The governmental funds financial statements consist of the balance sheet and statementof revenues, expenditures and changes in fund balance. These financial statements havebeen adjusted to arrive at the government-wide financial statement balances (statement

of net position and statement of activities). Major individual governmental funds arereported as separate columns in the fund financial statements.

D. Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements are reported using the economic resourcesmeasurement focus and the accrual basis of accounting . Revenues are recorded whenearned and expenses are recorded when a liability is incurred, regardless of the timing ofrelated cash flows.

Governmental funds financial statements are reported using the current financialresources measurement focus and the modified accrual basis of accounting . Revenues

are recognized as soon as they are both measurable and available. Revenues areconsidered to be available when they are collectible within the current period or soonenough thereafter to pay liabilities of the current period. For this purpose, thegovernment considers revenue to be available if collected within 60 days of the end of thecurrent fiscal period. Revenues accrued include interest earned on investments andincome from District operations. Expenditures generally are recorded when a liability isincurred, as under accrual accounting. However, debt service requirements, as well asexpenditures related to compensated absences and claims and judgments, are recorded

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only when payment is due.

The Governmental Accounting Standards Board has issued Statement No. 54, FundBalance Reporting and Governmental Fund Type Definitions (GASB 54). This Statementdefines the different types of fund balances that a governmental entity must use forfinancial reporting purposes. GASB 54 requires the fund balance amounts to be properlyreported within one of the following fund balance categories:

Nonspendable:To indicate fund balance associated with inventories, prepaids, long-term loans and notesreceivable and property held for resale (unless the proceeds are restricted, committed orassigned).

Restricted:To indicate fund balance that can be spent only for the specific purposes stipulated by

constitution, external resource providers or through enabling legislation.

Committed:To indicate fund balance that can be used only for the specific purposes determined by aformal action of the Board of Directors (the District’s highest level of decision-makingauthority).

Assigned:To indicate fund balance to be used for specific purposes but do meet the criteria to beclassified as restricted or committed.

Unassigned:

To indicate the residual classification of fund balance in the General Fund and includes allspendable amounts not contained in the other classifications.

In circumstances where an expenditure is made for a purpose for which amounts areavailable in multiple fund balance classifications, fund balance is generally depleted inthe order of restricted, committed, assigned and unassigned.

GASB 54 requires disclosure of any formally adopted minimum fund balance policies.The District does not currently have any such policies.

The accounting system is organized on a fund basis. A fund is defined as a fiscal andaccounting entity with a self-balancing set of accounts, which comprise its assets,

liabilities, fund equity or deficit, revenues and expenditures.

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The District reports the following governmental funds:

General FundThe General Fund is used to account for the operations of the District's water andsewer system and all other financial transactions not properly includable in otherfunds. The principal sources of revenue are related to water and sewer serviceoperations. Expenditures include all costs associated with the daily operations of theDistrict.

Debt Service FundThe Debt Service Fund is used to account for the payment of interest and principal onthe District's general long-term debt. The primary source of revenue for debt serviceis property taxes pursuant to requirements of the District's bond resolutions.Expenditures include costs incurred in assessing and collecting these taxes.

Capital Projects FundThe Capital Projects Fund is used to account for the expenditure of bond proceeds forthe construction of the District’s water and sewer facilities.

E. Deferred Inflows of Resources

Deferred inflows of resources represent an acquisition of net position that applies to afuture period(s) and so will not be recognized as an inflow of resources (revenue) untilthat time. Deferred inflows of resources consist of unearned tax revenues.

F. Budget

An unappropriated budget is adopted for the General Fund. The budget is prepared usingthe same method of accounting as for financial reporting and serves as a planning tool.Encumbrance accounting is not utilized.

G. Investments

The District classifies investments that have a remaining maturity of one year or less atthe date of purchase as “money market investments” in accordance with Governmental

Accounting Standards Board Statement No. 31, “Accounting and Reporting for CertainInvestments and External Investment Pools” (Statement No. 31). Statement No. 31

defines “money market investments” as short-term, highly liquid debt instrumentsincluding commercial paper, banker’s acceptances and U.S. Treasury and agencyobligations. The District values its “money market investments” at cost, which isconsidered to approximate market value. The District’s certificates of deposit, if any, arerecorded at cost in accordance with Statement No. 31.

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H. Short-Term Internal Receivables/Payables

During the course of operations, transactions occur between individual funds for specifiedpurposes. These receivables and payables are classified as internal receivables andpayables on the combined balance sheet. These amounts are eliminated for government-wide presentation.

I. Unamortized Bond Premium or (Discount)

Included within long term liabilities are the unamortized bond premium or (discount).They are being amortized over the life of the related obligation on the straight-linemethod. Results obtained are not materially different from the interest method.

J. Capital Assets

Capital assets, which include property, plant, equipment, and infrastructure assets arereported in the government-wide financial statements. Capital assets, other thaninfrastructure items, are defined by the government as assets with an initial, individualcost of more than $5,000 and an estimated useful life in excess of one year. Such assetsare recorded at historical cost or estimated historical cost if purchased or constructed.Donated capital assets are recorded at estimated fair market value at the date ofdonation.

Property, plant, and equipment of the primary government, as well as the componentunits, is depreciated using the straight-line method over the following estimated useful

lives:

Asset DescriptionEstimatedUseful Life

Land N/A Capacity rights N/A Water system 30 yearsWastewater system 30 yearsDrainage system 30-50 yearsEngineering 30 years

K. Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-termobligations are reported as liabilities in the governmental activities statement of netposition. Bond premiums or discounts, as well as issuance costs, are deferred andamortized over the life of the bonds. Bonds payable are reported net of any applicablebond premium or discount.

In the fund financial statements, governmental fund types recognize bond premiums or

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discounts, as well as bond issuance costs, during the current period. The face amount ofnew debt issued is reported as other financing sources. Premiums are reported as other

financing uses. Issuance costs, whether or not withheld from the actual debt proceedsreceived, are reported as debt service expenditures.

L. Fund Equity

Reserved/restricted equity balances represent those portions of fund balance/net positionnot appropriable for expenditures/expenses or legally segregated for a specific future use.Designated fund balances represent tentative plans for future use of financial resources.Undesignated/unrestricted fund balances/net position represent available balances for theDistrict's future use.

M. Date of Management’s Review

In preparing the financial statements, the District has evaluated events and transactionsfor potential recognition or disclosure through January 7, 2015, the date that the financialstatements were available to be issued.

NOTE 2 – RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

A. Explanation of certain differences between the governmental fund balancesheet and the government-wide statement of net positionThe governmental fund balance sheet includes an adjustments column to arrive at thegovernment-wide statement of net position balances. Amounts reported in the statement

of net position are different because:

Total fund balances - governmental funds $ 2,117,673

Capital assets used in governmental activities

are not financial resources and are not reported in the funds. 23,615,390

Other long-term assets are not available to pay for current

period expenditures and, therefore, are deferred in the funds. 15,547

Long-term liabilities, including bonds payable, are not due and

payable in the current period, and therefore are not reported

in the funds. (21,958,603)

Net Position of Governmental Activities $ 3,790,007

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B. Explanation of certain differences between the governmental fund statementof revenues, expenditures and changes in fund balances and the government-

wide statement of activities

The governmental fund statement of revenues, expenditures and changes in fundbalances includes an adjustments column to arrive at changes in net position as reportedin the government-wide statement of activities. Amounts reported in the statement ofactivities are different because:

Net change in fund balances - total governmental funds $ (643,786)

Governmental funds report capital outlays as expenditures.

However, in the statement of activities, the cost of those assets

is allocated over their estimated lives and reported as depreciation

expense. This is the amount by which depreciation and

amortization exceeded capital outlay in the current period. (240,184)

Repayment of bond principal is reported as an expenditure in the

governmental funds, but the repayment reduces long-term

liabilities in the Statement of Net Position. 1,886,751

Revenue in the statement of activities that do not provide current

financial resources are not reported as revenues in the funds. 649

Change in Net Position of Governmental Activities $ 1,003,430

NOTE 3 - CASH AND TEMPORARY INVESTMENTS

Cash consists of checking accounts and temporary investments consist of interest bearingTexpool, Texstar and two certificates of deposit.

The carrying amounts for cash and temporary investment balances, which approximate fairvalues, by fund at September 30, 2014, are as follows:

General $ 141,164 $ 571,802 $ 608,120 $ 257,139 $ 1,578,225

Debt Service 5,557 4,827 28,567 506,749 545,700

$ 146,721 $ 576,629 $ 636,687 $ 763,888 $ 2,123,925

TotalChecking Texpool Texstar Cert of Dep

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Investment PoliciesThe District has adopted a written investment policy regarding the investment of its funds as

defined in the Public Funds Investment Act, Chapter 2256, Texas Government Code. Theinvestments of the District are in compliance with its investment policy.

Applicable state laws and regulations allow the District to invest its funds in direct or indirectobligations of the United States, the State, or any county, city, school district, or otherpolitical subdivision of the State. Funds may also be placed in certificates of deposit of stateor national banks or savings and loan associations (depository institutions) domiciled withinthe State. Related state statutes and provisions included in the District's bond resolutionsrequire that all funds invested in depository institutions be guaranteed by federal depositoryinsurance and/or be secured in the manner provided by law for the security of public funds.Balances in checking accounts, money market accounts and certificates of deposit indepository institutions were entirely guaranteed by federal depository insurance or security as

provided by statutes and bond provisions at September 30, 2014.

Investment PoolsThe State Comptroller of Public Accounts exercises oversight responsibility of Texpool, theTexas Local Government Investment Pool. Oversight includes the ability to significantlyinfluence operations, designation of management and accountability for fiscal matters.

Additionally, the State Comptroller has established an advisory board composed of bothparticipants in Texpool and other persons who do not have a business relationship withTexpool. The advisory board members review the investment policy and management feestructure. Texpool is rated AAAm by Standard & Poors. Texpool operates in a mannerconsistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940.

Texstar operates as a pool in accordance with the SEC’s Rule 2a7 of the Investment Company Act of 1940.

Both Texpool and Texstar use amortized cost rather than market value to report net positionto compute share prices. Accordingly, the fair value of the position of each pool is the sameas the value of the underlying shares.

Interest Rate Risk In accordance with its investment policy, the District manages its exposure to declines in fairvalues by limiting the weighted average maturity of its investment portfolio to less than twoyears to meet cash requirements for ongoing operation.

Credit Risk – InvestmentsIn accordance with its investment policy, the District minimized credit risk losses due todefault of a security issuer or backer, by limiting investments to the safest types of securities.

As the District’s investments are in investment pools, the District is not exposed to custodialcredit risk. The certificates of deposit are covered by FDIC insurance and pledged collateral.

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NOTE 4 - PROPERTY TAXES

The voters of the District have authorized the District's Board of Directors to levy maintenancetaxes annually for use in financing general operations limited to $0.25 per $100 of assessedvalue. The District's bond resolution requires that ad valorem taxes be levied for use inpaying interest and principal on long-term debt and for use in paying the cost of assessingand collecting taxes. Taxes levied for debt service requirements are without limitation as torate or amount.

All property values are determined by the Montgomery County Appraisal District. A tax lienattaches to all properties within the District on January 1st of each year. Taxes are generallylevied on October 1 and are due upon receipt of the tax bill by the property owner. Penaltiesand interest are charged if taxes are not paid by the succeeding January 31st. There is anadditional twenty percent penalty charged on accounts delinquent after July 1st of each year

which generally is payable to the District's delinquent tax attorney.

Property taxes are prorated between operations and debt service based on the respectiverates adopted for the year of the levy. For the current year, the District levied a combinedrate of $0.3025 per $100 of assessed valuation of which $0.1275 was allocated tomaintenance and operations and $0.175 was allocated to debt service. The resulting tax levywas $2,778,375 on the adjusted taxable valuation of $918,471,193 for the 2013 tax year.

Property taxes receivable at September 30, 2014, consisted of the following:

2013 Levy $ 1,397 $ 1,917 $ 3,314

2012 Levy 478 1,094 1,572

2011 Levy 279 746 1,025

2010 Levy 454 1,160 1,614

2009 and prior 1,404 6,618 8,022

$ 4,012 $ 11,535 $ 15,547

TotalGeneralFund

Debt

ServiceFund

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NOTE 5 - RECEIVABLES

Receivables as of year-end for the government’s individual major funds are as follows:

Receivables:

Taxes $ 4,012 $ 11,535 $ 15,547

Accounts 396,280 396,280

$ 400,292 $ 11,535 $ 411,827Total Receivables

TotalGeneral

Debt

Service

Governmental funds report deferred revenue in connection with receivables for revenues thatare not considered to be available to liquidate liabilities of the current period. At the end of

the current fiscal year, the various components of deferred revenue reported in thegovernmental funds were as follows:

Delinquent property taxes receivable - general fund $ 4,012 $

Delinquent property taxes receivable - debt service fund 11,535

Total Deferred Revenue for Governmental Funds $ 15,547 $

Unavailable Unearned

NOTE 6 – UNAMORTIZED BOND PREMIUM OR (DISCOUNT)

A summary of changes in unamortized bond premium or (discount) follows:

Unlimited Tax Bonds:

Series 2005 Refunding $ 18,602 $ 10,231 $ 930 $ 9,301

Series 2011 Refunding 435,554 342,221 31,111 311,110

Series 2011 (40,300) (33,937) (2,121) (31,816)

Series 2012 Refunding 196,349 166,141 15,104 151,037

$ 610,205 $ 484,656 $ 45,024 $ 439,632

Balance at Current Year Balance at

Total

Original

Sept. 1, 2014(Discount) Oct. 1, 2013 Amortization

Bond Premium

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NOTE 7 - CAPITAL ASSETS

A summary of changes in capital assets for the year ended September 30, 2014, follows:

Governmental Activities:Non-depreciable Assets:

Land $ 200,000 $ $ $ 200,000Capacity rights 10,568,537 405,007 10,973,544Total Non-depreciable Assets 10,768,537 405,007 11,173,544

Depreciable Assets:Water system 5,250,313 5,250,313Wastewater system 6,267,091 6,267,091Drainage system 9,091,997 9,091,997Engineering 1,749,167 1,749,167

Total Depreciable Assets 22,358,568 22,358,568Less Accumulated Depreciation (9,226,507) (690,215) (9,916,722)

$ 23,900,598 $ (285,208) $ $ 23,615,390Totals

Balance BalanceSept 30, 2014Oct 1, 2013 Increases (Decreases)

Depreciation expense for the year ended September 30, 2014, totaled $690,215.

NOTE 8 - LONG-TERM DEBT

Long-term debt consists of bonds payable. Payments of principal and interest on the bondsare to be provided from tax levies on properties within the District. Investment income

realized by the Debt Service Fund from investment of funds will be used to pay outstandingbond principal and interest.

The following is a summary of changes in bonds payable for the year ended September 30,2014:

Bonds payable, October 1, 2013 $ 15,835,000

Bonds sold

Bonds refunded

Bonds retired (1,545,000)

Bonds payable, Sept. 30, 2014 $ 14,290,000

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Bonds payable at September 30, 2014, are comprised of the following individual issues:

AmountsOutstanding

InterestRate

DateSeriallyBegin/End

MaturityInterestDates

CallableDate

2005R

$1,640,000 3.5 –4.3%

Sept. 1,2011/2024

March 1/Sept. 1

Sept. 1,2014*

2010R

$3,345,000 3.0 –4.5%

Sept. 1,2011/2022

March 1/Sept. 1

Sept. 1,2017*

2011R

$4,565,000 4.5 –5.0%

Sept. 1,2017/2024

March 1/Sept. 1

Sept. 1,2021*

2011 $1,775,000 2.0 –

4.25%

Sept. 1,

2012/2029

March 1/

Sept. 1

Sept. 1,

2021*

2012

R

$2,965,000 2.0 –

3.5%

Sept. 1,

2012/2024

March 1/

Sept. 1

Sept. 1,

2020*

* Or any interest payment date thereafter in accordance with redemption provisions of thebond resolution.

As of September 30, 2014, the debt service requirements on bonds outstanding for the nextfive fiscal years and thereafter through 2029 are as follow:

ear

2015 $ 1,145,000 $ 584,366 $ 1,729,3662016 1,190,000 541,466 1,731,466

2017 1,175,000 491,441 1,666,441

2018 1,220,000 447,116 1,667,116

2019 1,280,000 392,291 1,672,291

2020-2024 7,500,000 1,122,249 8,622,249

2025-2029 780,000 100,377 880,377

$ 14,290,000 $ 3,679,306 $ 17,969,306

Principal Interest Total

At September 30, 2014, the District had voted and unissued tax bonds in the amount of$4,990,000.

The Debt Service Fund has $469,657 available to service the above bonds.

The District is in compliance with all significant bond requirements and restrictions containedin the bond resolutions.

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NOTE 9 – JOINT VENTURE – THE WOODLANDS JOINT POWERS AGENCY

The District has entered into interlocal contracts with other area municipal utility districts(collectively the “Participating Districts”) to create the Woodlands Joint Powers Agency (the “Agency”). The contracts provide for the Agency to purchase certain equipment and supplies,to install taps and connections to the Participating District’s water and sewer systems, toperform required repair and maintenance work on these systems and to provide certainadministrative services for the Participating Districts.

Each Board of the Participating Districts appoints one of its members to the Agency’s Board ofTrustees annually. The Agency’s Board of Trustees controls the operations of the Agency,which includes adopting operating and capital budgets.

The Agency’s summary financial position at September 30, 2014 is presented below:

Total Assets $ 3,155,821

Total Liabilities 181,277

Net Assets $ 2,974,544

The Participating Districts account for their share of the Agency’s net position on the equitymethod in their General Funds. Each Participating Districts’ respective shares are determinedbased on their proportionate share of cash contributions and all other cash payments andcontributions made to the Agency on a cumulative basis.

At September 30, 2014, the Agency’s net position are allocated among the Participating

Districts as follows:

The Woodlands MUD No. 2 $ 65,791

Montgomery County MUD No. 6 367,950









The Woodlands Metro Center MUD 66,145

$ 2,974,544

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Each Participating District’s share of participants’ equity at September 30, 2014 includes aninitial contribution of $7,500, which will not be refunded except on withdrawal from the

Agency or termination of the interlocal contracts.

The Agency’s summary operating results for the year ended September 30, 2014 arepresented below along with the District’s related share:

Total Revenues $ 5,428,816 $ 456,618

Total Expenses 5,084,767 427,680

Revenues Over (Under) Expenses 344,049 28,938

Participant distributions (333,536) (26,774)

Participants' Equity - Beginning 2,964,031 181,471

Participants' Equity - Ending $ 2,974,544 $ 183,635

Agency District

Charges for the Agency’s operating costs are based on the Participating District’s number ofmonthly water and sewer billings, tap connections and direct costs incurred. During the yearended September 30, 2014, the District’s contribution for the Agency’s costs was made up ofthe following charges:

Tax administration $ 21,999

Administration 173,868

Engineering 14,948

Meter reading 28,284

Water repair and maintenance 53,870

Sewer repair and maintenance 4,110

Billing income 7,145

Large ditch repair and maintenance 37,315

Storm sewer repair and maintenance 25,018

Postage 11,085

Other 4,667Capital budget contribution 8,103

Water tap installation 39,600

Inspections and connections 23,825

$ 453,837

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NOTE 10 – FINANCING AGREEMENTS WITH SAN JACINTO RIVER AUTHORITY

The District has entered into a series of financing agreements with the San Jacinto River Authority (SJRA). The agreements are for design, construction and other improvements toThe Woodlands Waste Disposal System Project and The Woodlands Water Supply SystemProject. The agreements include provisions for advances to be made by the District in theinitial stages of the project under certain circumstances. The District has made no advancesin the fiscal year ended September 30, 2014.

The District’s financing agreements with the SJRA also provide for the allocation of pro ratashares of SJRA revenue bond principal and interest to the District proportionate to theDistrict’s interest in the portion of project financed.

The District’s proportionate share of the total revenue bond obligations of the SJRA varies by

project. During the year ended September 30, 2014, the District funded $688,236 from theGeneral Fund relating to the obligations of which $336,842 was for principal and $351,394was for interest.

The following reflects the District’s portion of existing debt of the SJRA for both the WasteDisposal System Project and the Water Supply System Project. The debt bears interest atvarying rates and matures in 2033.

Year

2015 $ 352,759 $ 353,048 $ 705,807

2016 264,296 337,937 602,233

2017 279,766 324,921 604,6872018 293,359 311,210 604,569

2019 306,149 296,724 602,873

2020-2024 1,772,567 1,235,104 3,007,671

2025-2029 2,259,543 727,557 2,987,100

2030-2033 1,651,835 163,590 1,815,425

$ 7,180,274 $ 3,750,091 $ 10,930,365


NOTE 11 – CONTRACT WITH SAN JACINTO RIVER AUTHORITY

The District has contracted with the SJRA to provide its customers with water and sewerutility services through planning, construction, operation and maintenance of central watersupply and waste disposal facilities. The initial contract was entered into on September 27,1983, and continues in full force and effect unless terminated by mutual agreement of theDistrict and the SJRA. Thereafter, the District retains a proportionate and equitableownership interest in such central facilities.

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Under the terms of the agreement, the District pays its proportionate share of capital andoperating costs for reserved capacity in the water supply and waste disposal facilities. Capital

payments have come from the proceeds of bonds issued by the District and are included ascapital assets. Operating costs are recorded as current expenditures in the District’s GeneralFund. During the year ended September 30, 2014, the District paid $2,408,199 for its shareof operating costs. Pursuant to the agreement and a resolution approved by the SJRA on

August 28, 2014, the SJRA maintains reserve funds for operation of the water supply andwaste disposal facilities to cover cash flow needs year round in an amount ranging betweentwo and three months of total operating costs, excluding costs related to the payment ofgroundwater reduction plan fees. This operating reserve changes during the year based onavailable funds and changes in operating conditions. No amounts have been recorded on theDistrict's financial statements to reflect the District's share of this reserve. The SJRA alsomaintains reserve funds in accordance with the agreement and resolution for the plannedrepair and replacement of water supply and waste disposal facilities having a significant

replacement value and a relatively long useful life (generally in excess of ten years). Theamount of such reserve varies from year to year based upon a five year capital improvementand construction plan developed, maintained and annually updated by the SJRA. No amountshave been recorded on the District's financial statements to reflect the District's share of thisreserve.

Pursuant to the agreement and the resolution, the SJRA also maintains an emergency reservefor purpose of providing funding for unexpected catastrophic events. The emergency reserveis funded periodically by the District and other participating districts from available sources.The amount of such reserve varies from year to year pursuant to the resolution. No amountshave been recorded on the District's financial statements to reflect the District's share of this

reserve.

The relationship between the SJRA and its customer districts is purely contractual. The SJRAis a separate functioning governmental entity whose management and Board of Directors arenot subject to the control of the customer districts. The District, together with other areamunicipal utility districts with similar contracts with the SJRA (collectively the “CustomerDistricts”), contracts directly with the SJRA for required facilities and does not have a contractwith other Customer Districts. The SJRA is not a participating facility user.

The SJRA serves as the sponsor and common provider to each of its Customer Districts offacilities and related services and has full legal title and ownership to facilities, subject only tothe contractual rights of the Customer Districts to receive services.

The SJRA invests its own capital funds in the construction and acquisition of the requiredfacilities. Each Customer District makes a payment to the SJRA to defray the costs ofconstruction of capital facilities proportionate to the contractual rights of use (or capacityrights) of such customer pursuant to its contract with the SJRA. Thus, each Customer Districthas invested from its bond proceeds capital funds in the acquisition of such contract rights;however, no Customer District owns nor has legal title to all or any portion of the physicalfacilities providing such services.

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Under these circumstances, the District’s relationship with the SJRA is not considered toconstitute either a shared facilities agreement or a joint venture arrangement. Disclosure has

been made that a substantial portion of water and sewer facility costs in the District’s generalfixed assets consist of the District’s investment in the acquisition of contractual rights of use,rather than ownership of facilities.

NOTE 12 – RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft of, damage to anddestruction of assets, errors and omissions; and natural disasters for which the District carriescommercial insurance. The District has not significantly reduced insurance coverage or hadsettlements which exceeded coverage amounts for the past three fiscal years.

NOTE 13 – ANNEXATION DEFERRAL AGREEMENT

The District and the adjacent Woodlands Municipal Utility Districts (the “Woodlands Districts”)

are located entirely within The Woodlands Township, a political subdivision of the State of

Texas which overlaps substantially all of The Woodlands. The Township has recently

concluded agreements with the City of Houston and the City of Conroe pursuant to which the

area of the Township, including the Woodlands Districts, may not be annexed for fifty (50)

years, and the area of the Township may, on or after May 29, 2014, and on request by the

Township, be excluded from the extraterritorial jurisdiction of either or both cities, and may

thereafter be incorporated as a municipality or may adopt a new form of local government.In the event of incorporation of the Township, the Township must dissolve the Woodlands

Districts and assume the assets, obligations and liabilities of the Woodlands Districts.

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REQUIRED SUPPLEMENTARY INFORMATION

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Exhibit C(1)

Revenues

Water service $ 2,549,675 $ 2,549,675 $ 2,123,165 $ (426,510)

Sewer service 755,527 755,527 660,473 (95,054)

Property taxes 1,176,361 1,176,361 1,170,667 (5,694)

Tap connection fees 19,525 19,525 78,275 58,750

Interest on investments 2,215 2,215 766 (1,449)

Other 3,775 3,775 13,858 10,083

4,507,078 4,507,078 4,047,204 (459,874)

Expenditures

Current:

Purchased water and sewer 2,816,836 2,816,836 2,408,199 (408,637)

Purchased services 412,862 412,862 368,413 (44,449)

Professional fees 30,200 30,200 30,164 (36)

Other 129,742 129,742 137,347 7,605

Capital Outlay 212,180 212,180 275,655 63,475

Debt Service:Principal retirement 518,942 518,942 336,842 (182,100)

Interest and fiscal charges 194,145 194,145 351,394 157,249

4,314,907 4,314,907 3,908,014 (406,893)


192,171 192,171 139,190 (52,981)

Other Financing Sources (Uses)

Equity in net income (loss) of JV 28,938 28,938

Total Other Fin. Sources (Uses) 28,938 28,938


192,171 192,171 168,128 (24,043)

Fund Balances - Beginning 1,479,888 1,479,888 1,479,888

$ 1,672,059 $ 1,672,059 $ 1,648,016 $ (24,043)

Original

Over

Over (Under Expenditures

Final

and Other Financing Sources


SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL -

GENERAL FUND

and Other Financing (Uses)

Variance

Total Revenues

Budgeted Amounts


Fund Balances - Ending

(Under)

Total Expenditures

Over (Under) Expenditures

Actual

34

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ADDITIONAL INFORMATION

35

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1. Services provided by the District:

X Retail Water Wholesale Water X DrainageX Retail Sewer Wholesale Sewer Irrigation

Parks/Recreation Fire Protection Security

Solid Waste/Garbage Flood Control Roads

X

Other (specify):

2. Retail rates based on 5/8" meter Retail rates not applicable

The most prevalent type of meter (if not a 5/8"):

Flat Rate per 1,000

Minimum Minimum Rate Gallons Over

Charge Usage /N Minimum Usage LevelsWater $ 5.00 N 1,000 - 3,000

Water N 4,000 - 15,000

Water N 16,000 - 30,000

Water N 31,000 - >

Waste $10.35 N per 1,000

Surcharge $ 1.75 Per 1,000 Groundwater Reduction Plan Fee

District employs winter averaging for wastewater usage? Yes X No

Total water and sewer charges per 10,000 gallons usage

(including surcharges)

3. Retail Service Providers: Number of retail water and/or wastewater*

connections within the District as of the fiscal year end. Provide actualnumbers and single family equivalents (ESFC) as noted:

Active Active Inactive

Single Family 6

Multi-Family 4

Commercial 45 2

Other - recreational centers,

government & VFD 85 388

TOTAL 8

* 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 customers:

Percent of gallons billed to pumped

$93.21

N/A

N/A

Connections**

432,674

Participates in joint venture, regional system and/or wastewater service

(other than emergency interconnect)

2,677 4,418

2,543 2,543

205

3,000 $ 3.45

Connections ESFC

$ 2.75

$ 4.15

1,282

$ 5.50


SCHEDULE OF SERVICES AND RATES


$ 1.38

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TSI-1

5. Standby Fees: Does the District assess standby fees?

For the most recent full fiscal year:Debt Service: Total levy $

Total collected $

Percentage collected %

Operation & Maintenance Total levy $

Total collected $

Percentage collected %

constituting a lien on property? Yes ___ No ___

6. Location of District:

County in which District is located. Montgomery

Is the District located entirely within one county? Yes _X_ No ___ Is the District located within a city? Entirely ___ Partly ___ Not at all X

City in which District is located.

Is the District located within a city's extra territorial jurisdiction (ETJ)?

Entirely _ X _ Partly ___ Not at all ___

ETJ's in which District is located. Houston

Is the general membership of the Board appointed by an office outside the District?

Yes ___ No _X_

If yes, by whom?

Yes ___ No_X_

Have standby fees been levied in accordance with Water Code Section 49.231, thereby

37

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TSI-2

Current

Purchased Water and Sewer Services from SJRA $ 2,408,199 $ 2,246,550

Purchased Services from Joint Venture 368,413 355,978

Professional Fees:

Auditing 4,200 4,200

Legal 25,964 32,237

30,164 36,437

Other Current Expenditures:

Directors' fees 14,700 14,250

Regulatory assessment 16,546 16,843

Bank charges 24,846 21,204

Arbitrage 500

Insurance 2,700 2,600

Bear Branch 68,799 10,320

Miscellaneous 9,756 8,122

137,347 73,839

Capital Outlay 275,655 42,125

Debt Service:

Principal 336,842 321,365

Interest and fiscal charges 351,394 390,993

688,236 712,358

$ 3,908,014 $ 3,467,287

Number of employees employed by the District: Full-time

Part-time

Total Expenditures

2014 2013


SCHEDULE OF GENERAL FUND EXPENDITURES

Years Ended September 30, 2014 and 2013

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TSI-3

Balances at

Interest Maturity September 30, AccruedFunds Rate (%) Date Interest

General Fund

Checking N/A N/A $ 141,164 $

Texpool Variable N/A 571,802

Texstar Variable N/A 608,120

Certificate of deposit 0.15 5/10/2015 257,139

Total General Fund 1,578,225

Debt Service Fund

Checking N/A N/A 5,557

Texpool Variable N/A 4,827

Texstar Variable N/A 28,567

Certificates of deposit 0.20 11/28/2014 506,749

Total Debt Service Fund 545,700

Total - All Funds $ 2,123,925 $

SCHEDULE OF CASH AND TEMPORARY INVESTMENTS


2014


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TSI-4

Debt

General ServiceFund Fund Total

Taxes Receivable - October 01, 2013 $ 3,417 $ 11,481 $ 14,898

2013 Original Tax Roll 1,176,104 1,614,260 2,790,364

Additions and corrections (4,842) (6,479) (11,321)

Adjusted tax roll 1,171,262 1,607,781 2,779,043

Total to be Accounted for 1,174,679 1,619,262 2,793,941

Tax Collections

Current year 1,169,654 1,605,407 2,775,061

Prior years 1,013 2,320 3,333

Total Collections 1,170,667 1,607,727 2,778,394

Taxes Receivable - September 30, 2014 $ 4,012 $ 11,535 $ 15,547

Taxes Receivable - By Year

2013 $ 1,397 $ 1,917 $ 3,314

2012 478 1,094 1,572

2011 279 746 1,025

2010 454 1,160 1,614

2009 and prior 1,404 6,618 8,022

Taxes Receivable - September 30, 2014 $ 4,012 $ 11,535 $ 15,547

Assessed

Property Valuations

Land, improvementsand personal

property $ 918,471,193 $ 846,261,344 $ 825,322,416 $ 788,939,584 $ 767,706,916

$ 918,471,193 $ 846,261,344 $ 825,322,416 $ 788,939,584 $ 767,706,916

Tax Rates Per $100

aluations

Debt service $ 0.1750 $ 0.2175 $ 0.2275 $ 0.230 $ 0.240

General operations 0.1275 0.0950 0.0850 0.090 0.080

Total Tax Rate per

$100 Valuation $ 0.3025 $ 0.3125 $ 0.3125 $ 0.320 $ 0.320

Adjusted Tax Levy $ 2,778,375 $ 2,644,567 $ 2,579,133 $ 2,524,607 $ 2,456,662

ear Ended September 30, 2014 All TaxesPercent of current taxes collected to current taxes levied (as adjusted) 99.9%

Percent of current and delinquent taxes collected to current levied

(as adjusted) and delinquent taxes outstanding at the beginning of

the year (as adjusted) 99.4%


ANALYSIS OF TAXES LEVIED AND RECEIVABLE


20092013 2012 2011 2010

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Due During

Fiscal Year End

September 30

2015 $ 1,145,000 $ 584,366 $ 1,729,366 $ 185,000 $ 67,310 $ 252,310

2016 1,190,000 541,466 1,731,466 195,000 59,910 254,910

2017 1,175,000 491,441 1,666,441 200,000 52,110 252,110

2018 1,220,000 447,116 1,667,116 210,000 44,110 254,110

2019 1,280,000 392,291 1,672,291 220,000 35,710 255,710

2020 1,520,000 337,054 1,857,054 115,000 26,910 141,910

2021 1,405,000 287,129 1,692,129 120,000 22,023 142,023

2022 1,460,000 228,373 1,688,373 125,000 16,923 141,923

2023 1,525,000 167,760 1,692,760 130,000 11,610 141,610

2024 1,590,000 101,933 1,691,933 140,000 6,020 146,020

2025 140,000 32,038 172,0382026 150,000 26,438 176,438

2027 155,000 20,438 175,438

2028 165,000 14,238 179,238

2029 170,000 7,225 177,225

Total $ 14,290,000 $ 3,679,306 $ 17,969,306 $ 1,640,000 $ 342,636 $ 1,982,636

Due During

Fiscal Year End

September 30

2015 $ 815,000 $ 139,950 $ 954,950 $ $ 221,000 $ 221,000

2016 855,000 107,350 962,350 221,000 221,000

2017 285,000 68,875 353,875 290,000 221,000 511,000

2018 275,000 56,050 331,050 600,000 206,500 806,500

2019 205,000 43,675 248,675 655,000 176,500 831,500

2020 330,000 35,988 365,988 143,750 143,750

2021 345,000 23,200 368,200 710,000 143,750 853,750

2022 235,000 9,400 244,400 740,000 111,800 851,800

2023 740,000 78,500 818,500

2024 830,000 41,500 871,500

2025

2026

2027

2028

2029

Total $ 3,345,000 $ 484,488 $ 3,829,488 $ 4,565,000 $ 1,565,300 $ 6,130,300


GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS BY YEARS

September 30, 2014

Total

Principal



All Series

Series 2010 R Series 2011 R

TotalInterest

Series 2005R

Principal Interest

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TSI-5

Due During

Fiscal Year End

September 302015 $ 90,000 $ 64,306 $ 154,306 $ 55,000 $ 91,800 $ 146,800

2016 95,000 62,506 157,506 45,000 90,700 135,700

2017 100,000 59,656 159,656 300,000 89,800 389,800

2018 105,000 56,656 161,656 30,000 83,800 113,800

2019 110,000 53,506 163,506 90,000 82,900 172,900

2020 50,206 50,206 1,075,000 80,200 1,155,200

2021 115,000 50,206 165,206 115,000 47,950 162,950

2022 120,000 46,325 166,325 240,000 43,925 283,925

2023 125,000 42,125 167,125 530,000 35,525 565,525

2024 135,000 37,438 172,438 485,000 16,975 501,975

2025 140,000 32,038 172,038

2026 150,000 26,438 176,438

2027 155,000 20,438 175,438

2028 165,000 14,238 179,238

2029 170,000 7,225 177,225

Total $ 1,775,000 $ 623,307 $ 2,398,307 $ 2,965,000 $ 663,575 $ 3,628,575

Series 2011 Series 2012R

Principal Interest Total Principal Interest Total

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Interest rate

Dates interest payable

Maturity dates

Original issue amount $ 2,450,000 $ 8,095,000 $ 4,565,000 $ 2,015,000

Bonds payable, beg. of year $ 1,815,000 $ 4,570,000 $ 4,565,000 $ 1,860,000

Bonds sold

Bonds refunded

Principal retirements (175,000) (1,225,000) (85,000)

Bonds Payable, End of Year $ 1,640,000 $ 3,345,000 $ 4,565,000 $ 1,775,000

Interest Retirements $ 74,310 $ 188,950 $ 221,000 $ 66,006

Paying Agent/Registrar

All Series Bank of New York

Bond Authority

Amount authorized by voters $ 42,880,000

Amount issued $ 29,315,000Remaining $ 13,565,000

Debt Service Fund Cash and Temporary Investment Balances at End of Year $ 545,700

Average Annual Debt Service Payment for Remaining Term of all Debt $ 1,197,954

9/1/24 9/1/24

9/1;3/1

3.5-4.3%

2005R

9/1;3/19/1;3/1

9/1/17-9/1/06-

2011R

Tax Bonds

9/1/12-

2.0-4.25%

9/1/10-

4.5-5.0%

9/1/22

9/1;3/1

9/1/29


ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT


Bond Issue

3.0-4.5%

2010R 2011

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TSI-6

$ 2,015,000

$ 3,025,000 $ 15,835,000

(60,000) (1,545,000)

$ 2,965,000 $ 14,290,000

$ 93,000 $ 643,266

9/1/12-

Total

9/1;3/1

9/1/24

2012R

2.0-3.5%

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General Fund Revenues

Water and sewer service $ 2,783,638 $ 2,866,212 $ 2,777,483 $ 2,541,663 $ 1,646,107

Property taxes 1,170,667 803,591 702,153 709,706 617,955

Tap connections & culverts 78,275 46,300 46,125 62,310 7,075

Interest and other 14,624 129,012 12,509 18,263 5,444

Total Revenues 4,047,204 3,845,115 3,538,270 3,331,942 2,276,581

General Fund ExpendituresCurrent 2,944,123 2,712,804 2,617,715 2,396,191 1,592,202

Capital outlay 275,655 42,125 41,225 68,310 4,675

Debt service 688,236 712,358 713,357 732,140 709,911

Total Expenditures 3,908,014 3,467,287 3,372,297 3,196,641 2,306,788

Revenues Over (Under)

Expenditures $ 139,190 $ 377,828 $ 165,973 $ 135,301 $ (30,207)

Debt Service Fund Revenues

Property taxes/penalties $ 1,614,034 $ 1,846,188 $ 1,887,668 $ 1,824,110 $ 1,862,020

Interest 2,761 4,345 6,766 29,134 33,507Total Revenues 1,616,795 1,850,533 1,894,434 1,853,244 1,895,527

Debt Service Fund Expenditures

Tax collection 44,391 33,342 30,165 31,315 29,953

Debt service 2,191,516 2,191,726 2,226,650 2,025,463 2,111,324

Total Expenditures 2,235,907 2,225,068 2,256,815 2,056,778 2,141,277

Revenues Over (Under)

Expenditures $ (619,112) $ (374,535) $ (362,381) $ (203,534) $ (245,750)

Amounts

2011 2010201220132014


COMPARATIVE SCHEDULE OF REVENUES AND EXPENDITURES -

Last Five Fiscal Years

GENERAL AND DEBT SERVICE FUNDS

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TSI-7

68.8 % 74.5 % 78.5 % 76.3 % 72.3 %

28.9 20.9 19.8 21.3 27.1

1.9 1.2 1.3 1.9 0.3

0.4 3.4 0.4 0.5 0.3

100.0 100.0 100.0 100.0 100.0

72.7 70.6 74.0 71.9 69.9

6.8 1.1 1.2 2.1 0.2

17.0 18.5 20.2 22.0 31.2

96.5 90.2 95.4 96.0 101.3

3.5 % 9.8 % 4.6 % 4.0 % (1.3) %

99.8 % 99.8 % 99.6 % 98.4 % 98.2 %

0.2 0.2 0.4 1.6 1.8100.0 100.0 100.0 100.0 100.0

2.7 1.8 1.6 1.7 1.6

135.5 118.4 117.5 109.3 111.4

138.2 120.2 119.1 111.0 113.0

(38.2) % (20.2) % (19.1) % (11.0) % (13.0) %

2011 2010

Percent of Total Fund Revenues

2014 2013 2012

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District's Mailing Address: 2455 Lake Robbins DriveP.O. Box 7580

The Woodlands, Texas 77380

District's Business Telephone Number: (281) 367-1271

Resident

Name Term Title of District?

Board Members

Roland Johnson 5/14- $ 2,850 $ 1,345 President No

5/18

Larry Copeland 5/12- 1,950 Vice- Yes

5/16 President

Paul Martin 5/14- 4,650 822 Assistant Yes

5/18 Vice

President

WJPA Trustee

Alan Fritsche 5/14- 2,850 1,787 Secretary/ Yes

5/18 Treasurer

Alton Wicker 5/12- 2,400 713 Assistant Yes

5/16 Secretary/

Treasurer

Note: No director is disqualified from serving on this board under the Texas Water Code.


BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS

September 30, 2014

Fees Expenses

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TSI-8

Date Resident

Name and Address Hired Title of District?

Key Administrative Personnel

Jim Stinson 7/94 $ 175,990 * General Yes

42 Gallant Oak Place Manager

The Woodlands, Texas 77381 Woodlands JPA

Consultants

Schwartz, Page & Harding, L.L.P. 3/1/88 19,983 Attorney No

1300 Post Oak Boulevard, Suite 1400

Houston, Texas 77056

Montgomery County Appraisal District 10/1/84 18,568 Central No

109 Gladstell Appraisal

Conroe, Texas 77301 District

Sandersen Knox & Co., L.L.P. 8/1/01 3,800 Independent No

130 Industrial Blvd., Suite 130 Auditor

Sugar Land, Texas 77478

RBC Capital Markets 11/13/89 0 Financial No

1001 Fannin, Suite 500 Advisor

Houston, Texas 77002

* Represents the General Manager's salary paid by the JPA.

Salaries

and Fees

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mcmud 67 audit 2014

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