Montgomery County MUD # 60 Audit 2014

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Montgomery CountyMunicipal Utility District No. 60

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

Managements 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 Information

Schedule 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 40Long-Term Debt Service Requirements by Years TSI-5 42-43

Analysis of Changes in Long-Term Bonded Debt TSI-6 44-45

Comparative 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. 60Montgomery County, Texas

We have audited the accompanying financial statements of the governmental activities andeach major fund of Montgomery County Municipal Utility District No. 60 (the District) as ofand for the year ended September 30, 2014, and the related notes to the financial statements,

which collectively comprise the Districts basic financial statements as listed in the table ofcontents.

Managements 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.

Auditors 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 auditors

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 entitys 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 theentitys 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. 60 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 themanagements 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 managements 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 Districts 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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Managements Discussion and Analysis

As management of Montgomery County Municipal Utility District No. 60 (the District), we offerreaders of the Districts 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 $4,358,734 (net position).

As of September 30, 2014, the Districts governmental funds reported an endingfund balance of $4,007,970.

The Districts cash balance at September 30, 2014 was $4,007,311, representing anincrease of $359,154 from September 30, 2013.

The District had general revenues of $7,649,111 and program revenues, net ofexpenses, of $1,080,653 for the year ended September 30, 2014.

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

General Fund was $2,040,228, or 41 percent of total General Fund expenditures.

OVERVIEW OF THE FINANCIAL STATEMENTS

The discussion and analysis is intended to serve as an introduction to the Districts basicfinancial statements. The Districts 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 Districts finances, in a manner similar to a private-sector business.

The statement of net positionpresents information on all of the Districts 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 Districts 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 governments 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 thegovernments 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 Districts 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 governments

financial position. In the case of the District, assets exceeded liabilities by $4,358,734 as ofSeptember 30, 2014.

The largest portion of the Districts net position reflects its investment in capital assets (e.g.infrastructure), less any related debt used to acquire those assets that is still outstanding. TheDistrict uses these capital assets to provide services to the individuals we serve; consequently,these assets are not available for future spending.


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

Current and other assets $ 4,847,946 $ 4,559,537

Capital assets, net 24,888,743 26,278,992

Total Assets 29,736,689 30,838,529

Long-term liabilities 24,559,575 26,607,696

Other liabilities 818,380 952,752

Total Liabilities 25,377,955 27,560,448

Net Position:

Net investment in capital assets 384,938 (441,353)

Restricted 1,695,768 1,965,611

Unrestricted 2,278,028 1,753,823

Total Net Position $ 4,358,734 $ 3,278,081

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$1,080,653. Key elements of the changes are as follows:

Revenues

Program revenues:

Water and sewer charges $ 4,016,754 $ 4,268,136

Property taxes, penalties and interest 3,547,186 3,434,221

Tap connection fees 49,125 73,700

Investment income and other 36,046 31,085

Total Revenues 7,649,111 7,807,142

ExpensesPurchased water and sewer 3,361,017 3,401,575

Professional fees, contracted services and other 802,780 775,569

Interest on long-term debt 1,304,703 1,212,817

Depreciation and amortization 1,099,958 1,119,289

Total Expenses 6,568,458 6,509,250

Change in Net Position 1,080,653 1,297,892

Net Position, beginning 3,278,081 1,980,189

Net Position, Ending $ 4,358,734 $ 3,278,081

CHANGES IN NET POSITION

For the Fiscal Year Ended September 30, 2014 and 2013

Governmental

Activities

2014 2013

2014 REVENUES

Investment

and other

0%

Water and

sewer charges

53%

Property taxes

46%

Tap connection

fees

1%


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FINANCIAL ANALYSIS OF THE DISTRICTS FUNDS

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

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

As of September 30, 2014, the Districts governmental funds, which consist of a general fund,debt service fund and capital projects fund reported an ending fund balance of $4,007,970,which is an increase of $250,682 from last years total of $3,757,288. As a measure of thegeneral funds liquidity, it may be useful to compare unreserved fund balance to total fundexpenditures. Unrestricted and unassigned fund balance represents 41 percent of total generalfund expenditures.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets - The Districts investment in capital assets as of September 30, 2014 amountsto $24,888,743 (net of accumulated depreciation). This investment in capital assets includesinfrastructure.

Capacity rights $ 7,795,744

Water system 11,329,839

Wastewater system 11,248,919

Drainage system 9,732,247

Engineering 2,553,766

Less: accumulated depreciation (17,771,772)

Total Capital Assets, Net $ 24,888,743

CAPITAL ASSETS SCHEDULE

(net of depreciation)

Additional information on the Districts 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 $16,915,000.Interest expense for the year totaled $721,813 for the 2014 fiscal year on this bonded debt.There was one new issue in 2014. These outstanding bonds have maturities ranging from 2015to 2025. Additional information on the Districts long-term debt can be found in Note 8 in thenotes to the financial statements.


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ECONOMIC FACTORS

Unrestricted and unassigned fund balance in the General Fund increased to $2,040,228.A planned increase of fund balance of $172,115 was projected.

REQUESTS FOR INFORMATION

The financial report is designed to provide a general overview of Montgomery County MunicipalUtility District No. 60s finances for all those with an interest in the Districts 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. 60: 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 $ 2,125,813 $ 689,024 $ 1,192,474 $ 4,007,311

Receivables:

Property taxes 4,378 17,218 21,596

Customer service accounts 547,065 547,065

Internal receivables 91,503 91,503

Investment in joint venture 271,974 271,974

Capital assets, net of accumulated depreciation:

Capacity rightsInfrastructure

$ 3,040,733 $ 706,242 $ 1,192,474 $ 4,939,449

Liabilities, Deferred Inflows and Fund Balances/Net Position

Liabilities

Accounts payable and accrued liabilities $ 531,353 $ 94,227 $ $ 625,580

Customer deposits 192,800 192,800

Internal payables 623 90,880 91,503

Accrued interest payable

Long-term liabilities:

Unamortized bond premium or (discount)

Due within one yearDue after one year

724,153 94,850 90,880 909,883

Deferred Inflows of Resources

Unavailable revenue - property taxes 4,378 17,218 21,596

Fund Balances/Net Position

Fund Balances:

Nonspendable investment in joint venture 271,974 271,974

Restricted for debt service 594,174 594,174

Restricted for capital projects 1,101,594 1,101,594

Unrestricted and unassigned 2,040,228 2,040,2282,312,202 594,174 1,101,594 4,007,970

$ 3,040,733 $ 706,242 $ 1,192,474 $ 4,939,449

Net Position:

Net investment in capital assets

Restricted for debt service

Restricted for capital projects

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. 60

STATEMENT OF NET POSITION AND GOVERNMENTAL FUNDS

September 30, 2014

BALANCE SHEET

Total

Total Assets

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Exhibit B(1)

$ $ 4,007,311

21,596

547,065

(91,503)

271,974

7,795,744 7,795,74417,092,999 17,092,99924,797,240 $ 29,736,689

$ $ 625,580

192,800

(91,503)

55,770 55,770

280,330 280,330

1,993,311 1,993,31122,230,164 22,230,164

24,468,072 25,377,955

(21,596)

(271,974)

(594,174)

(1,101,594)

(2,040,228)(4,007,970)

384,938 384,938

594,174 594,174

1,101,594 1,101,594

2,278,028 2,278,028$ 4,358,734 $ 4,358,734

Adjustments

(Note 2)

Statement of

Net Position

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Revenues

Water service charges $ 3,143,805 $ $ $ 3,143,805

Sewer service charges 872,949 872,949

Property taxes 769,801 2,756,565 3,526,366

Penalties and interest 24,494 24,494

Tap connection fees 49,125 49,125

Investment earnings 939 722 429 2,090

Other 29,530 4,426 33,956

4,866,149 2,786,207 429 7,652,785Expenditures/Expenses

Current:

Purchased water and sewer service 3,361,017 3,361,017

Purchased services from joint venture 588,469 31,235 619,704

Professional fees 30,566 30,566

Other 123,661 28,273 722 152,656

Capital Outlay 42,050 282,082 324,132

Debt Service:

Principal retirement 434,221 1,950,000 2,384,221

Interest and fiscal charges 352,980 729,167 1,082,147

Bond issuance costs 229,910 229,910

Depreciation and amortization

4,932,964 2,968,585 282,804 8,184,353

(66,815) (182,378) (282,375) (531,568)

Other Financing Sources (Uses)

Proceeds from the sale of bonds 3,994,910 3,994,910

Payment to refunding bond escrow agent (3,800,000) (3,800,000)

Return of capital from SJRA 545,144 545,144

Equity in net income (loss) of joint venture 42,196 42,196

587,340 194,910 782,250

520,525 12,532 (282,375) 250,682

Fund Balances/Net Position - Beginning 1,791,677 581,642 1,383,969 3,757,288

$ 2,312,202 $ 594,174 $ 1,101,594 $ 4,007,970

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

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Exhibit B(2)

$ $ 3,143,805

872,949

(3,674) 3,522,692

24,494

49,125

2,090

33,956

(3,674) 7,649,111

3,361,017

(146) 619,558

30,566

152,656

(324,132)

(2,384,221)

(7,354) 1,074,793

229,910

1,099,958 1,099,958

(1,615,895) 6,568,458

1,612,221

(3,994,910)

3,800,000

(545,144)

(42,196)

(782,250)

(250,682)

1,080,653 1,080,653

(479,207) 3,278,081

$ 350,764 $ 4,358,734

Adjustments

(Note 2) Activities

Statement of

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Montgomery County Municipal Utility District No. 60Exhibit 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. 60 (the District) was created pursuantto an order of the Texas Commission on Environmental Quality dated September 19,1984. The District operates under the terms and provisions of Chapters 49 and 54 of theTexas Water Code. The Board of Directors held its first meeting on October 6, 1984. Thefirst bonds were sold on July 16, 1986.

The District has contracted with various consultants to provide services to operate and

administer 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 on

these 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 primarygovernment are that it has a separately elected governing body; it is legally separate; and

it 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 Districts equityinterest. See Note 9 for additional disclosures regarding the Agencys operations.

B. Financial Statement Presentation

In June 1999, GASB issued Statement No. 34, Basic Financial Statements andManagements 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:

Managements Discussion and Analysis - GASB Statement No. 34 requires thatfinancial statements be accompanied by a narrative introduction and analytical overview ofthe governments financial activities in the form of managements 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 governments 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 Districts 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 unitsfor 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 focusand 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 focusand the modified accrual basis of accounting. Revenues

are recognized as soon as they are both measurable and available. Revenues areconsidered to be availablewhen 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 Districts 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 Districts 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, bankers acceptances and U.S. Treasury and agencyobligations. The District values its money market investments at cost, which isconsidered to approximate market value. The Districts 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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21

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 Managements Review

Subsequent events have been evaluated through January 7, 2015, which is the date thefinancial statements 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 $ 4,007,970

Capital assets used in governmental activities

are not financial resources and are not reported in the funds. 24,888,743

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

period expenditures and, therefore, are deferred in the funds. 21,596

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

payable in the current period, and therefore are not reported

in the funds. (24,559,575)

Net Position of Governmental Activities $ 4,358,734


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22

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 $ 250,682

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. (1,363,020)

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. 2,196,665

Revenue in the statement of activities that do not provide current

financial resources are not reported as revenues in the funds. (3,674)

Change in Net Position of Governmental Activities $ 1,080,653

NOTE 3 - CASH AND TEMPORARY INVESTMENTS

Cash consists of interest bearing checking accounts and temporary investments consist ofTexpool, Texstar and 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 $ 187,855 $ 1,051,600 $ 629,219 $ 257,139 $ 2,125,813

Debt Service 7,053 589,470 92,501 689,024

Capital Projects 4,852 599,522 588,100 1,192,474

$ 199,760 $ 2,240,592 $ 1,309,820 $ 257,139 $ 4,007,311

TotalChecking Texpool Texstar Cert of Dep


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23

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 in depository institutions were entirely guaranteed by federaldepository 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 SECs Rule 2a7 of the Investment Company Act of 1940.

Texstar operates as a pool in accordance with the SECs Rule 2a7 of the Investment CompanyAct 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 RiskIn 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 Districts investments are in investment pools, the District is not exposed to custodialcredit risk.


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24

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 $0.2175 per $100 of assessed valuation of which $0.0475 was allocated tomaintenance and operations and $0.17 was allocated to debt service. The resulting tax levywas $3,514,790 on the adjusted taxable valuation of $1,615,995,595 for the 2013 tax year.

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

2013 Levy $ 1,478 $ 5,288 $ 6,766

2012 Levy 933 3,534 4,467

2011 Levy 489 1,724 2,213

2010 Levy 196 660 856

2009 and prior 1,282 6,012 7,294

$ 4,378 $ 17,218 $ 21,596

TotalGeneralFund

Debt

ServiceFund


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25

NOTE 5 - RECEIVABLES

Receivables as of year-end for the governments individual major funds are as follows:

Receivables:

Taxes $ 4,378 $ 17,218 $ 21,596

Accounts 547,065 547,065

$ 551,443 $ 17,218 $ 568,661Total 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 ofthe current fiscal year, the various components of deferred revenue reported in the

governmental funds were as follows:

Delinquent property taxes receivable - general fund $ 4,378 $

Delinquent property taxes receivable - debt service fund 17,218

Total Deferred Revenue for Governmental Funds $ 21,596 $

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 $ (84,682) $ (48,390) $ (4,032) $ (44,358)

Series 2006 Refunding (52,249) (31,350) (2,612) (28,738)

Series 2009 (26,100) (18,424) (1,535) (16,889)

Series 2010 Refunding 287,473 210,813 19,165 191,648

Series 2014 Refunding 194,910 16,243 178,667

$ 319,352 $ 112,649 $ 27,229 $ 280,330

Original

(Discount) Oct. 1, 2013

Total

Balance at

Sept 30, 2014Amortization

Bond Premium Balance at Current Year


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26

NOTE 7 - CAPITAL ASSETS

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

Governmental Activities:Non-depreciable Assets:

Capacity rights $ 8,058,806 $ 282,082 $ (545,144) $ 7,795,744

Depreciable Assets:Water system 11,329,839 11,329,839Wastewater system 11,248,919 11,248,919Drainage system 9,732,247 9,732,247Engineering 2,553,766 2,553,766

Total Depreciable Assets 34,864,771 34,864,771

Less Accumulated Depreciation (16,644,585) (1,127,187) (17,771,772)

$ 26,278,992 $ (845,105) $ (545,144) $ 24,888,743Totals

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

Depreciation expense for the year ended September 30, 2014, totaled $1,127,187.

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 incomerealized 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 $ 18,865,000

Bonds sold 3,800,000

Bonds refunded (3,800,000)

Bonds retired (1,950,000)

Bonds payable, Sept. 30, 2014 $ 16,915,000


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27

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

AmountsOutstanding

InterestRate

DateSeriallyBegin/End

MaturityInterestDates

CallableDate

2005 $ 50,000 4.0 5.0%

Sept. 1,2012/2025

March 1/Sept. 1

Sept. 1,2014*

2006R

$7,285,000 4.0 6.0%

Sept. 1,2011/2025

March 1/Sept. 1

Sept. 1,2014*

2009 $1,355,000 2.0 3.2%

Sept. 1,2011/2025

March 1/Sept. 1

Sept. 1,2018*

2010

R

$4,425,000 2.0

4.0%

Sept. 1,

2011/2024

March 1/

Sept. 1

Sept. 1,

2018*

2014

R

$3,800,000 2.0

3.5%

Sept. 1,

2015/2025

March 1/

Sept. 1

Sept. 1,

2022*

* 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 2025 are as follow:

ear

2015 $ 1,540,000 $ 669,240 $ 2,209,240

2016 1,640,000 594,640 2,234,6402017 1,295,000 534,240 1,829,240

2018 1,380,000 471,980 1,851,980

2019 1,435,000 420,930 1,855,930

2020-2024 8,075,000 1,242,385 9,317,385

2025 1,550,000 57,030 1,607,030

$ 16,915,000 $ 3,990,445 $ 20,905,445

Principal Interest Total

At September 30, 2014, the District had voted and unissued tax bonds in the amount of$8,540,000.

The Debt Service Fund has $594,174 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 (theAgency). The contracts provide for the Agency to purchase certain equipment and supplies,to install taps and connections to the Participating Districts 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 Agencys Board ofTrustees annually. The Agencys Board of Trustees controls the operations of the Agency,which includes adopting operating and capital budgets.

The Agencys summary financial position at September 30, 2014 is presented below:

Total Assets $ 3,155,821

Total Liabilities 181,277

$ 2,974,544

The Participating Districts account for their share of the Agencys 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 Agencys 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 Districts 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 Agencys summary operating results for the year ended September 30, 2014 arepresented below along with the Districts related share:

Total Revenues $ 5,428,816 $ 665,819

Total Expenses 5,084,767 623,623

Revenues Over (Under) Expenses 344,049 42,196

Participant distributions (333,536) (42,242)

Participants' Equity - Beginning 2,964,031 272,020

Participants' Equity - Ending $ 2,974,544 $ 271,974

Agency District

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

Tax administration $ 31,235

Administration 274,596

Engineering 24,294

Meter reading 44,625

Water repair and maintenance 88,026

Sewer repair and maintenance 19,655

Billing income 12,207

Large ditch repair and maintenance 33,162

Storm sewer repair and maintenance 49,217

Postage 17,246

Other 12,657Capital budget contribution 12,784

Water tap installation 26,500

Inspections and connections 15,550

$ 661,754


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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 RiverAuthority (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 Districts 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 theDistricts interest in the portion of project financed.

The Districts proportionate share of the total revenue bond obligations of the SJRA varies by

project. During the year ended September 30, 2014, the District funded $787,201 from theGeneral Fund relating to the obligations of which $434,221 was for principal and $352,980was for interest.

The following reflects the Districts 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 $ 453,311 $ 343,712 $ 797,023

2016 331,021 325,898 656,919

2017 341,124 311,003 652,1272018 355,788 295,419 651,207

2019 371,119 278,845 649,964

2020-2024 1,890,557 1,129,305 3,019,862

2025-2029 2,324,073 617,122 2,941,195

2030-2033 1,241,482 107,343 1,348,825

$ 7,308,475 $ 3,408,647 $ 10,717,122


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 Districts GeneralFund. During the year ended September 30, 2014, the District paid $3,361,017 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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32

Under these circumstances, the Districts relationship with the SJRA is not considered to

constitute either a shared facilities agreement or a joint venture arrangement. Disclosure hasbeen made that a substantial portion of water and sewer facility costs in the Districts generalfixed assets consist of the Districts 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

33


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Exhibit C(1)

Revenues

Water service $ 3,908,944 $ 3,908,944 $ 3,143,805 $ (765,139)

Sewer service 994,594 994,594 872,949 (121,645)

Property taxes 767,383 767,383 769,801 2,418

Tap connection fees 15,975 15,975 49,125 33,150

Interest on investments 2,593 2,593 939 (1,654)

Other 5,700 5,700 29,530 23,830

5,695,189 5,695,189 4,866,149 (829,040)

Expenditures

Current:

Purchased water and sewer 3,984,183 3,984,183 3,361,017 (623,166)

Purchased services 574,507 574,507 588,469 13,962

Professional fees 31,200 31,200 30,566 (634)

Other 113,543 113,543 123,661 10,118

Capital Outlay 13,950 13,950 42,050 28,100

Debt Service:Principal retirement 533,768 533,768 434,221 (99,547)

Interest and fiscal charges 271,923 271,923 352,980 81,057

5,523,074 5,523,074 4,932,964 (590,110)

172,115 172,115 (66,815) (238,930)

Other Financing Sources (Uses)

Return of capital from SJRA 545,144 545,144

Equity in net income (loss) of JV 42,196 42,196

Total Other Fin. Sources (Uses) 587,340 587,340

172,115 172,115 520,525 348,410

Fund Balances - Beginning 1,791,677 1,791,677 1,791,677

$ 1,963,792 $ 1,963,792 $ 2,312,202 $ 348,410

Original


Final

Fund Balances - Ending

(Under)

Total Expenditures

Over (Under) Expenditures

Actual

and Other Financing Sources

and Other Financing (Uses)

Total Revenues

Over

Over (Under Expenditures


SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL -

GENERAL FUND

xcess (Deficiency) of Revenue

xcess (Deficiency) of Revenue

Variance

Budgeted Amounts

34


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ADDITIONAL INFORMATION

35


40/54

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 20

Multi-Family

Commercial 49

Other - recreational centers,

government & VFD 108 470

TOTAL 20

* 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

3,000 $ 3.45

$93.21

$ 2.75

$ 4.15

$ 5.50


SCHEDULE OF SERVICES AND RATES


4,211 4,737

4,054 4,054

213

$ 1.38

Connections ESFC

N/A

N/A

Connections**

619,064

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

(other than emergency interconnect)

36


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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?

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

Yes ___ No_X_

37


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TSI-2

Current

Purchased Water and Sewer Services from SJRA $ 3,361,017 $ 3,401,575

Purchased Services from Joint Venture 588,469 532,479

Professional Fees:

Auditing 5,200 5,200

Legal 25,366 32,619

30,566 37,819

Other Current Expenditures:

Directors' fees 12,300 12,600

Regulatory assessment 25,629 23,933

Dues and seminars 5,558 4,456

Bank charges 39,005 34,606

Bear Branch 32,084 4,812

Insurance 3,055 2,955

Miscellaneous 6,030 4,889

123,661 88,251

Capital Outlay 42,050 92,400

Debt Service:

Principal 434,221 416,226

Interest and fiscal charges 352,980 388,670

787,201 804,896

$ 4,932,964 $ 4,957,420

Number of employees employed by the District: -0- Full-time-0- Part-time

Total Expenditures

2014 2013


SCHEDULE OF GENERAL FUND EXPENDITURES

Years Ended September 30, 2014 and 2013

38


43/54

TSI-3

Balances at

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

General Fund

Checking N/A N/A $ 187,855 $

Texpool Variable N/A 1,051,600

Texstar Variable N/A 629,219

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

Total General Fund 2,125,813

Debt Service Fund

Checking N/A N/A 7,053

Texpool Variable N/A 589,470


Total Debt Service Fund 689,024

Capital Projects Fund

Checking N/A N/A 4,852

Texpool Variable N/A 599,522


Total Capital Projects Fund 1,192,474

Total - All Funds $ 4,007,311 $

SCHEDULE OF CASH AND TEMPORARY INVESTMENTS


2014


39


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(This Page Intentionally Left Blank)

40


45/54

TSI-4

Debt

General ServiceFund Fund Total

Taxes Receivable - October 01, 2013 $ 4,953 $ 20,317 $ 25,270

2013 Original Tax Roll 767,214 2,745,818 3,513,032

Additions and corrections 2,012 7,648 9,660

Adjusted tax roll 769,226 2,753,466 3,522,692

Total to be Accounted for 774,179 2,773,783 3,547,962

Tax Collections

Current year 766,120 2,741,904 3,508,024

Prior years 3,681 14,661 18,342

Total Collections 769,801 2,756,565 3,526,366

Taxes Receivable - September 30, 2014 $ 4,378 $ 17,218 $ 21,596

Taxes Receivable - By Year

2013 $ 1,478 $ 5,288 $ 6,766

2012 933 3,534 4,467

2011 489 1,724 2,213

2010 196 660 856

2009 and prior 1,282 6,012 7,294

Taxes Receivable - September 30, 2014 $ 4,378 $ 17,218 $ 21,596

Assessed

Property Valuations

Land, improvementsand personal

property $ 1,615,995,595 $ 1,505,105,516 $ 1,444,125,503 $ 1,412,300,245 $ 1,389,647,746

$ 1,615,995,595 $ 1,505,105,516 $ 1,444,125,503 $ 1,412,300,245 $ 1,389,647,746

Tax Rates Per $100

aluations

Debt service $ 0.1700 $ 0.1800 $ 0.1850 $ 0.185 $ 0.200

General operations 0.0475 0.0475 0.0525 0.055 0.040

Total Tax Rate per

$100 Valuation $ 0.2175 $ 0.2275 $ 0.2375 $ 0.240 $ 0.240

Adjusted Tax Levy $ 3,514,790 $ 3,424,115 $ 3,429,798 $ 3,389,521 $ 3,335,155

ear Ended September 30, 2014 All TaxesPercent of current taxes collected to current taxes levied (as adjusted) 99.6%

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 $ 1,540,000 $ 669,240 $ 2,209,240 $ 50,000 $ 2,000 $ 52,000

2016 1,640,000 594,640 2,234,640

2017 1,295,000 534,240 1,829,240

2018 1,380,000 471,980 1,851,980

2019 1,435,000 420,930 1,855,930

2020 1,480,000 367,480 1,847,480

2021 1,555,000 310,780 1,865,780

2022 1,610,000 251,055 1,861,055

2023 1,680,000 188,690 1,868,690

2024 1,750,000 124,380 1,874,3802025 1,550,000 57,030 1,607,030

Total $ 16,915,000 $ 3,990,445 $ 20,905,445 $ 50,000 $ 2,000 $ 52,000

Due During

Fiscal Year End

September 30

2015 $ 710,000 $ 307,100 $ 1,017,100 $ 95,000 $ 49,790 $ 144,790

2016 750,000 278,700 1,028,700 100,000 46,940 146,940

2017 785,000 248,700 1,033,700 105,000 43,840 148,840

2018 565,000 201,600 766,600 110,000 40,480 150,480

2019 600,000 179,000 779,000 115,000 36,630 151,630

2020 620,000 155,000 775,000 120,000 32,605 152,605

2021 660,000 130,200 790,200 130,000 28,105 158,105

2022 705,000 103,800 808,800 135,000 23,230 158,230

2023 740,000 75,600 815,600 140,000 17,965 157,965

2024 780,000 46,000 826,000 150,000 12,505 162,505

2025 370,000 14,800 384,800 155,000 6,355 161,355

Total $ 7,285,000 $ 1,740,500 $ 9,025,500 $ 1,355,000 $ 338,445 $ 1,693,445


GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS BY YEARS

September 30, 2014

All Series


Series 2005


Series 2006R Series 2009

Principal Interest Total Principal Interest Total

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Due During

Fiscal Year End

September 30

2015 $ 545,000 $ 171,550 $ 716,550 $ 140,000 $ 138,800 $ 278,800

2016 575,000 155,200 730,200 215,000 113,800 328,800

2017 185,000 132,200 317,200 220,000 109,500 329,500

2018 465,000 124,800 589,800 240,000 105,100 345,100

2019 495,000 106,200 601,200 225,000 99,100 324,100

2020 520,000 86,400 606,400 220,000 93,475 313,475

2021 550,000 65,600 615,600 215,000 86,875 301,875

2022 580,000 43,600 623,600 190,000 80,425 270,425

2023 250,000 20,400 270,400 550,000 74,725 624,725

2024 260,000 10,400 270,400 560,000 55,475 615,4752025 1,025,000 35,875 1,060,875

Total $ 4,425,000 $ 916,350 $ 5,341,350 $ 3,800,000 $ 993,150 $ 4,793,150

Series 2010R Series 2014R

Principal Interest Total Principal Interest Total

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Interest rate

Dates interest payable

Maturity dates

Original issue amount $ 5,840,000 $ 2,845,000 $ 8,215,000 $ 1,800,000 $ 7,470,000

Bonds payable, beg. of year $ 1,765,000 $ 2,745,000 $ 7,965,000 $ 1,445,000 $ 4,945,000

Bonds sold

Bonds refunded (1,155,000) (2,645,000)

Principal retirements (610,000) (50,000) (680,000) (90,000) (520,000)

Bonds Payable, End of Y $ $ 50,000 $ 7,285,000 $ 1,355,000 $ 4,425,000

Interest Retirements $ 48,430 $ 57,830 $ 334,300 $ 52,040 $ 187,150

Paying Agent/Registrar

All Series Bank of New York

Bond Authority

Amount authorized by voters $ 50,925,000 $ $

Amount issued $ 42,385,000 $ $ 27,050,000Remaining $ 8,540,000 $ $

Debt Service Fund Cash and Temporary Investment Balances at End of Year $ 689,024

Average Annual Debt Service Payment for Remaining Term of all Debt $ 1,900,495

Bond Issue

Other Refunding

9/1/25

9/1/7-


ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT


2004R

4.0-4.35%

2005

9/1/10-

2006R

2.0-3.2% 2.0-4.0%

2009 2010R

4.0-6.0%

Tax Bonds

9/1/21

9/1;3/1

9/1/12-

9/1/25

9/1;3/1

9/1/05-

Bonds Bonds

9/1;3/1

9/1/24

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

9/1/11-

9/1/25

4.0-5.0%

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TSI-6

$ 3,800,000

$ $ 18,865,000

3,800,000 3,800,000

(3,800,000)

(1,950,000)

$ 3,800,000 $ 16,915,000

$ 47,417 $ 727,167

Total2014R

2.0-3.5%

9/1;3/1

9/1/15-

9/1/25

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General Fund Revenues

Water and sewer service $ 4,016,754 $ 4,268,136 $ 4,117,282 $ 3,827,957 $ 2,579,123

Property taxes 769,801 713,614 758,845 774,217 561,673

Tap connections & culverts 49,125 73,700 142,850 37,375 49,000

Interest and other 30,469 9,712 6,424 6,666 8,300

Total Revenues 4,866,149 5,065,162 5,025,401 4,646,215 3,198,096

General Fund ExpendituresCurrent 4,103,713 4,060,124 3,820,642 3,703,598 2,503,176

Capital outlay 42,050 92,400 121,150 30,353 23,125

Debt service 787,201 804,896 804,424 830,381 798,522

Total Expenditures 4,932,964 4,957,420 4,746,216 4,564,332 3,324,823

Revenues Over (Under)

Expenditures $ (66,815) $ 107,742 $ 279,185 $ 81,883 $ (126,727)

Debt Service Fund Revenues

Property taxes $ 2,756,565 $ 2,703,988 $ 2,673,543 $ 2,604,738 $ 2,801,672

Penalty and interest 24,494 11,302 11,504 12,108 23,738Interest 5,148 19,938 2,848 3,799 6,570

Total Revenues 2,786,207 2,735,228 2,687,895 2,620,645 2,831,980

Debt Service Fund Expenditures

Tax collection 59,508 48,098 42,942 44,471 42,799

Debt service 2,909,077 2,919,970 2,702,470 3,640,397 3,099,614

Total Expenditures 2,968,585 2,968,068 2,745,412 3,684,868 3,142,413

Revenues Over (Under)

Expenditures $ (182,378) $ (232,840) $ (57,517) $ (1,064,223) $ (310,433)

20132014


COMPARATIVE SCHEDULE OF REVENUES AND EXPENDITURES -

Last Five Fiscal Years

GENERAL AND DEBT SERVICE FUNDS

Amounts

2011 20102012

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TSI-7

82.5 % 84.3 % 81.9 % 82.4 % 80.6 %

15.8 14.1 15.1 16.7 17.6

1.0 1.5 2.8 0.8 1.5

0.7 0.1 0.2 0.1 0.1

100.0 100.0 100.0 100.0 100.0

84.3 80.2 76.0 79.7 78.3

0.9 1.8 2.4 0.7 0.7

16.2 15.9 16.0 17.9 25.0

101.4 97.9 94.4 98.3 104.0

(1.4) % 2.1 % 5.6 % 1.7 % (4.0) %

98.9 % 98.9 % 99.5 % 99.4 % 98.9 %

0.9 0.4 0.4 0.5 0.80.2 0.7 0.1 0.1 0.3

100.0 100.0 100.0 100.0 100.0

2.1 1.8 1.6 1.7 1.5

104.4 106.8 100.5 138.9 109.5

106.5 108.6 102.1 140.6 111.0

(6.5) % (8.6) % (2.1) % (40.6) % (11.0) %

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

Albert Tomchesson 5/12- $ 4,200 $ 1,542 President Yes

5/16 WJPA Trustee

Ron Kostelny 5/14- 1,800 Vice- Yes

5/18 President

Sandra George 5/12- 2,700 1,611 Assistant Yes

5/16 Vice

President

Lloyd Matthews 5/12- 1,800 Secretary/ Yes

5/16 Treasurer

Robert M Lux 5/14- 750 Assistant Yes

5/18 Secretary/

Treasurer

Mancil Davis 5/10- 1,050 Term Yes

5/14 Expired

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 No

42 Gallant Oak Place Manager

The Woodlands, Texas 77381 Woodlands JPA

Consultants

Schwartz, Page & Harding, L.L.P. 3/1/88 17,524 Attorney No

1300 Post Oak Boulevard, Suite 1400

Houston, Texas 77056

Montgomery County Appraisal District 10/1/84 24,646 Central No

109 Gladstell Appraisal

Conroe, Texas 77301 District

Sandersen Knox & Co., L.L.P. 8/1/01 4,800 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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Documents

Montgomery County MUD # 60 Audit 2014