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03.25.2024 TC Agenda Packet TOWN OF TROPHY CLUB MEETING AGENDA TOWN COUNCIL 1 Trophy Wood Drive Trophy Club, Texas 76262 March 25, 2024 7:00 PM Council Chambers CALL TO ORDER AND ANNOUNCE A QUORUM INVOCATION led by Pastor Jeff Brooks, Lake Cities Church of Christ God Bless America, performed by Brian Hall PLEDGES Pledge of Allegiance to the American Flag Pledge of Allegiance to the Texas Flag PUBLIC COMMENT(S) This is an opportunity for citizens to address the Council on any matter. The Council is not permitted to discuss or take action on any presentations made. Presentations are limited to matters over which the Council has authority. Speakers have up to four (4) minutes or the time limit determined by the Presiding Officer. Each speaker must have submitted their request to speak by completing the Speaker’s Form or may email mayorandcouncil@trophyclub.org COMMUNITY SPOTLIGHT 1. Presentation from Animal Shelter Advisory Board 2. Working for You... Trophy Club a) Update from Town Council Members b) Update from Town Manager (Brandon Wright, Town Manager) c) Quick Civic Tip (Dean Roggia, Town Attorney) CONSENT AGENDA 3. Consider approval of the February 26, 2024, Town Council regular meeting minutes. (Tammy Dixon, Town Secretary) Page 1 of 233 4. Consider a resolution amending the Trophy Club Economic Development Corporation's Articles of Incorporation. (Tammy Dixon, Town Secretary) 5. Consider a resolution amending the Trophy Club Economic Development Corporation's Bylaws. (Tammy Dixon, Town Secretary) 6. Consider an Interlocal Cooperation Contract between the Department of Public Safety of the State of Texas and the Municipal Court of the Town of Trophy Club, Texas; and authorize the Town Manager to negotiate and execute the contract on behalf of the Town. (April Duvall, Director of Finance) INDIVIDUAL ITEMS 7. Consider accepting the Annual Comprehensive Financial Report for the Town of Trophy Club Fiscal Year 2023. (April Duvall, Director of Finance) 8. Consider a resolution adopting the Town of Trophy Club Investment Policy for Fiscal Year 2023-2024. (April Duvall, Director of Finance) 9. Consider a meritorious exception application request for special purpose banners/signs for the 2024 Trophy Club Women's Club Mother's Day Art and Garden Festival, to include a request to waive the meritorious exception fee, to be located at the Trophy Club Town Center, PD-30. (Matt Cox, Commuity Development Director) ADJOURN The Town Council may convene into executive session to discuss posted items as allowed by Texas Government Code Sections 551.071 through 551.076 and Section 551.087. CERTIFICATION I do hereby certify that the Notice of Meeting was posted on the bulletin board at the Town Hall for the Town of Trophy Club, Texas, in a place convenient and readily accessible to the general public at all times on the following date and time: March 20, 2024, at 5:10 p.m., and said Notice of Meeting was also posted concurrently on the Town’s website in accordance with Texas Government Code Ch. 551 at least 72 hours prior to the scheduled time of said meeting. /s/ Tammy Dixon __________________________________ Tammy Dixon, Town Secretary If you plan to attend this public meeting and have a disability that requires special needs, please contact the Town Secretary’s Office at 6822372900, 48 hours in advance, and reasonable accommodations will be made to assist you. Page 2 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: Tammy Dixon, Town Secretary AGENDA ITEM: Consider approval of the February 26, 2024, Town Council regular meeting minutes. (Tammy Dixon, Town Secretary) BACKGROUND/SUMMARY: The Town Council held a regular meeting on February 26, 2024. BOARD REVIEW/CITIZEN FEEDBACK: N/A FISCAL IMPACT: N/A LEGAL REVIEW: N/A ATTACHMENTS: 1. 02.26.2024 draft minutes ACTIONS/OPTIONS: Move to approve the February 26, 2024, Town Council regular meeting minutes. Page 3 of 233 Town of Trophy Club Town Council Meeting Minutes February 26, 2024, 7:00 p.m., Regular Meeting 1 Trophy Wood Drive, Trophy Club, Texas 76262 CALL REGULAR MEETING TO ORDER Mayor Tiffany called the regular meeting to order at 7:00 p.m. COUNCILMEMBERS PRESENT Jeannette Tiffany, Mayor Dennis Sheridan, Mayor Pro Tem Stacey Bauer, Councilmember Place 1 Steve Flynn, Councilmember Place 6 LuAnne Oldham, Councilmember Place 5 Jeff Beach, Councilmember Place 2 Karl Monger, Councilmember Place 4 STAFF MEMBERS PRESENT Brandon Wright, Town Manager Tammy Dixon, Town Secretary Dean Roggia, Town Attorney Jason Wise, Fire Chief Patrick Arata, Police Chief April Duvall, Finance Director Denise Deprato, Human Resources Director Jill Lind, Communications and Marketing Director Chase Ellis, Parks and Recreation Director Tamara Smith, Assistant to the Town Manager INVOCATION Rev. Bill Eason, Fellowship United Church, led the invocation. NATIONAL ANTHEM AND PLEDGES The Byron Nelson High School Choir performed the National Anthem. Councilmember Beach led the Pledge of Allegiances to the American and Texas Flags. PUBLIC COMMENTS There were none. Page 4 of 233 Town Council Regular Meeting Minutes-February 26, 2024 Page 2 COMMUNITY SPOTLIGHT 1. Working for You . . . Trophy Club a) Update from Town Council Members Mayor Pro Tem Sheridan thanked Town Manager Brandon Wright and Town Attorney Dean Roggia for attending and speaking at the Boards and Commissions meetings regarding their roles and responsibilities. Councilmember Oldham expressed her appreciation to the group of residents that attended the Trophy Club Municipal Utility District (MUD) No. 1 meeting last week requesting possible use of the former annex building as a community center. Councilmember Flynn recognized the Trophy Club Police Department for their recent Identity Theft educational workshop. He stated the workshop provided great information and was extremely helpful. He encouraged citizens to attend one of two additional upcoming workshops. Councilman Monger recognized Trophy Club Animal Hospital after losing two of his family pets recently. He stated the care, concern, and time the team provided to his family was deeply appreciated. Mayor Tiffany reminded everyone of their right to vote and to vote in the Primary Election. b) Update from Town Manager Town Manager Wright provided the following updates: •Movie Night in the Park, Friday, March 8th, at Harmony Park featuring the movie Barbie in celebration of International Women's Day. •February 27, 2024, Economic Development Board meeting. •March 7, 2024, Planning & Zoning Commission meeting. •March 18, 2024, Parks and Recreation Board meeting. •Spring Break week of March 11th. No Town Council meeting scheduled or Town Weekly to be distributed. •March 25, 2025, Town Council Meeting Town Manager Wright asked Chief Wise to speak on the Annual Fire Department Report. Page 5 of 233 Town Council Regular Meeting Minutes-February 26, 2024 Page 3 Chief Wise provided an overview of the annual report noting it provides achievements, goals, equipment and highlights department staff. He stated the report is available on the Town’s website. c) Quick Civic Tip from Town Attorney Town Attorney Roggia spoke about political advertising in conjunction with an election stating that the Texas Election Code prohibits the use of political subdivision resources to produce or distribute political advertising in connection with an election. CONSENT AGENDA This part of the agenda consists of non-controversial, or "housekeeping" items required by law. Items may be removed from Consent by any council member by making such request prior to a motion and vote. 2. Consider approval of the February 12, 2024, Town Council Work Session and Regular Meeting Minutes. (Tammy Dixon, Town Secretary) 3. Consider authorizing the Town Manager to negotiate and execute an Interlocal Agreement with the City of Southlake, Texas for the use of the Southlake Police Department firing range. (Patrick Arata, Police Chief) 4. Consider authorizing the Town Manager to negotiate and execute an agreement with Fort Worth Cleaning Services for janitorial services for Trophy Club Town Hall, Police Department, and Fire Station in an annual amount of $43,200 including three one-year renewal options. (Matt Cox, Community Development Director) 5. Consider authorizing the Town Manager to negotiate and execute a contract with EnTech Displays for the rebuild of the purchase and installation of outdoor LED message boards at the median of the intersection of Trophy Club Dr and TX 114 frontage road, in front of First Financial Bank, in the not-to-exceed amount of $32,000. (Matt Cox, Community Development Director) Councilmember Flynn moved to approve Consent Items 2-5. Councilmember Beach seconded the motion. VOTE ON THE MOTION AYES: Bauer, Flynn, Sheridan, Tiffany, Beach, Monger, Oldham NAYES:None VOTE:7-0 6. Consider accepting the Trophy Club Police Department's 2023 Racial Profiling Report. (Patrick Arata, Police Chief) Chief Arata gave a presentation on the 2023 Racial Profiling Report and answered questions from the Town Council Page 6 of 233 Town Council Regular Meeting Minutes-February 26, 2024 Page 4 Councilmember Beach moved to accept the Trophy Club Police Department’s 2023 Racial Profiling Report. Councilmember Monger seconded the motion. VOTE ON THE MOTION AYES: Bauer, Flynn, Sheridan, Tiffany, Beach, Monger, Oldham NAYES:None VOTE:7-0 Mayor Tiffany adjourned the Town Council meeting at 7:33 p.m. ____________________________ Jeannette Tiffany, Mayor Attest: _______________________________ Tammy Dixon, Town Secretary Page 7 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: Tammy Dixon, Town Secretary AGENDA ITEM: Consider a resolution amending the Trophy Club Economic Development Corporation's Articles of Incorporation. (Tammy Dixon, Town Secretary) BACKGROUND/SUMMARY: The Trophy Club Economic Development Board (EDC) was created in 1996 after citizen approval to establish a 1/2 cent sales tax to be used for the purposes set forth in and in accordance with Section 4B of article 5190.6, V.T.C.S., the Development Corporation Act of 1979 (the ACT). The initial Articles provided that no more than two board of directors shall be members of the Town Council. This provision is in conflict with Section 4.16 of the Town's Charter, which prohibits an elected position to serve on a board, commission, or corporation. Additionally, in 2009, the ACT was recodified to Local Government Code Chapters 501 through 505. With the recodification, EDCs formerly known as 4A and 4B corporations are now referred to as Type A and Type B corporations, respectively. The proposed amendments remove any reference to Town Council members being appointed to the board and reflect the changes made in 2009 when the ACT was recodified to the Local Government Code. BOARD REVIEW/CITIZEN FEEDBACK: At its February 27, 2024, meeting, the Economic Development Corporation Board approved Resolution EDC 2024-01 adopting the proposed amendments to the Articles of Incorporation. FISCAL IMPACT: N/A LEGAL REVIEW: Town Attorney, Dean Roggia, prepared the draft resolution and proposed amendments. ATTACHMENTS: 1. Articles of Incorporation Redline 2. EDC Articles of Incorporation ACTIONS/OPTIONS: Staff recommends that the Town Council move to approve the resolution amending the Trophy Club Economic Development Corporation's Articles of Incorporation. Page 8 of 233 Page 9 of 233 Articles of Incorporation – Page 1 of ARTICLES OF INCORPORATION OF TROPHY CLUB ECONOMIC DEVELOPMENT CORPORATION WE, THE UNDERSIGNED natural persons, not less than three in number, each of whom is at least 18 years of age and is qualified elector of the Town of Trophy Club, Texas (the "Town"), acting as incorporators of a public instrumentality and non-profit industrial development corporation (the "Corporation") under the Development Corporation Act of 1979, the Local Government Code, Title 12, Subtitle C1Tex. Rev. Civ. Stat. Ann. art. 5190.6, as amended (the "Act"), with the approval of the Town Council (the "Town Council") of the Town, do hereby adopt the following Articles of Incorporation of the Corporation: ARTICLE ONE NAME The name of the Corporation is “Trophy Club Economic Development Corporation.” ARTICLE TWO NON-PROFIT CORPORATION The Corporation is a non-profit industrial development corporation under the Act and is governed by Section 4 B of a Type B corporation under the Act. ARTICLE THREE DURATION Subject to the provisions of Article Eleven of these Articles, the period of duration of the Corporation is perpetual. ARTICLE FOUR PURPOSE A. The purpose of the Corporation is to promote economic development within the Town and the State of Texas in order to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by undertaking, developing, implementing, providing, and financing projects under the Act. and as defined in Section 4B of for Type 4B corporations in the Act. B. In the fulfillment of its corporate purpose, the Corporation shall have the power to provide financing to pay the costs of the projects through the issuance or execution of bonds, notes, and Page 10 of 233 Articles of Incorporation – Page 2 of other forms of debt instruments, and to acquire, maintain, operate and lease and sell property, and interests therein, all to be done and accomplished on behalf of the Town and for its benefit and to accomplish its public and governmental purposes as its duly constituted authority and public instrumentality pursuant to the Act and under. and within the meaning of, the Internal Revenue Code of 1986, as amended, and the applicable regulations of the United States Treasury Department and the rulings of the Internal Revenue Service of the United States prescribed and promulgated thereunder. C. In the fulfillment of its corporate purpose, the Corporation shall have and may exercise the powers described in paragraph B of this Article, together with all of the other powers granted to Type B corporations that are incorporated under the Act and that are governed by Section 4B thereof, and, to the extent not in conflict with the Act,. the Corporation shall additionally have and may exercise all of the rights, powers, privileges, authorities, and functions given by the general laws of the State of Texas to nonprofit corporations under the Texas Non Profit Corporation Act, Tex. Rev. Civ. Stat. Ann., article 1396 1.01, et seq.,Business Organizations Code, as amended. D. The Corporation is a corporation having the purposes and powers permitted by the Act pursuant to the authority granted in Article m, Section 52-a of the Texas Constitution, but the Corporation does not have, and shall not exercise the powers of sovereignty of the Town, including the power to tax (except for the power to receive and use the sales and use and other taxes specified in Chapter 505Section 4B of the Act) and the police power, except that the Corporation shall have any may exercise the power of eminent domain when the exercise thereof is approved by the Town Council. However, for the purposes of the Texas Tort Claims Act (Subchapter A, Chapter 101, Texas Civil Practice and Remedies Code), the Corporation is a governmental unit and its actions are governmental functions. E. No bonds, notes, or other debt instruments or other obligations, contracts, or agreements of the Corporation are or shall ever be deemed to be or constitute the contracts, agreements, bonds, notes, or other debt instruments or other obligations, or the lending of credit, or a grant of the public money or things of value, of, belonging to, or by the State of Texas, the Town, or any other political corporation, subdivision or agency of the State of Texas, or a pledge of the faith and credit of any of them. Any and all of such contracts, agreements, bonds, notes, and other debt instruments and other obligations, contracts and agreements shall be payable solely and exclusively from the revenues and funds received by the Corporation from the sources authorized by Chapter 505Section 4B of the Act and from such other sources as may be otherwise lawfully available and belonging to the Corporation from time to time. ARTICLE FIVE MEMBERSHIP/STOCK The Corporation has no members and is a non-stock corporation. Page 11 of 233 Articles of Incorporation – Page 3 of ARTICLE SIX AMENDMENT OF ARTICLES These Articles of Incorporation may be amended in either one of the methods prescribed in this Article. A. Pursuant to the powers of the Town contained in Section 17 (b) of the Act, the Town Council, by resolution, may amend these Articles of Incorporation by filing amendments hereto with the Secretary of State as provided by the Act. B. The board of directors of the Corporation may file a written application with the Town Council requesting approval of proposed amendments to these Articles of Incorporation, specifying in such application the proposed amendments. If the Town Council, by appropriate resolution, finds and determines that it is advisable that the proposed amendments be made, authorizes the same be made, and approves the form of the proposed amendments, the board of directors of the Corporation may proceed to amend these Articles of Incorporation in the manner provided by the Act. C. The board of directors of the Corporation shall not have any power to amend these Articles of Incorporation except in accordance with the procedures established in paragraph B of this Article. ARTICLE SEVEN INITIAL REGISTERED AGENT The street address of the initial registered office of the Corporation is 100 Municipal Drive, Trophy Club, Texas 76262, and the initial registered agent at such address is Donna Welsh. ARTICLE EIGHT BOARD OF DIRECTORS The affairs of the Corporation shall be managed by a board of directors which shall be composed of seven (7) persons appointed by the Town Council, all of who are residents of the Town and in compliance with the Bylaws. At least three (3) members of the board of directors shall be persons who are not members of the Town Council and who are not employees or officers of the Town (the "Citizenmember Class"). No more than two (2) members of the board of directors shall be members of the Town Council (the 11Councilmember Class"). The names and street addresses and date of expiration of their initial terms as directors, are as follows: NAMES ADDRESSES DATE OF EXPIRATION OF TERM CLASS OF DIRECTOR Marshall Engelbeck 111 Forest Hill, Trophy Club, Texas 05/21/98 Council Member Page 12 of 233 Articles of Incorporation – Page 4 of John Carter 2 Round Rock Ct., Trophy Club, Texas 05/21/98 Citizenmember Robert Burns 3 Meadow Creek Ct., Trophy Club, Texas 05/21/98 Citizenmember David Garlitz 1 Round Rock Ct., Trophy Club, Texas 05/21/98 Citizenmember Pam Cutes 4 Salida Drive, Trophy Club, Texas 09/17/98 Citizenmember Dan Heath 19 Meadowbrook, Trophy Club, Texas 09/17/98 Citizenmember Terry Christleb 43 Cimmaron Dr., Trophy Club, Texas 09/17/98 Citizenmember Each director shall hold office for the term for which the director is appointed unless sooner removed or resigned. Each director, including the initial directors, shall be eligible for reappointment. Directors are removable by the Town Council at will and may be removed by the Town Council at any time without cause, and must be appointed for a term of two (2) years. If a director of the Councilmember Class shall cease to be a member of the Town Council, such event shall constitute an automatic resignation as a director and such vacancy shall be filled in the same manner as for other vacancies of the same class. Any vacancy occurring on the board of directors through death, resignation or otherwise shall be filled by appointment by the Town Council to hold office until the expiration of the vacating member's ternm. ARTICLE NINE INCORPORATOR The name and street address of each incorporator is: Amy Skinner 17 Monterey Drive Trophy Club, Texas 76262 Pearl 0. Ford 2 Spring Creek Court Trophy Club, Texas 76262 P. 0. Box 381 Roanoke, Texas 76262 William Pollick 2 Crooked Creek Court Trophy Club, Texas 76262 ARTICLE TEN BYLAWS A. The initial bylaws of the Corporation shall be in the form and substance approved by the Town Council. Such bylaws shall be adopted by the Corporation's board of directors and shall, together with these Articles of Incorporation, govern the internal affairs of the Corporation until and unless amended in accordance with this Article and the Bylaws. Page 13 of 233 Articles of Incorporation – Page 5 of B. Neither the initial bylaws nor any subsequently effective bylaws of the Corporation may be amended without the consent and approval of the Town Council. The board of directors of the Corporation shall make application to the Town Council for the approval of any proposed amendments, but the same shall not become effective unless the same shall be approved by resolution adopted by the Town Council. ARTICLE ELEVEN ALTERING FORM OF CORPORATION; DISSOLUTION A. The Town Council may, in its sole discretion, and at any time, alter or change the structure, organization, programs or activities of the Corporation, and it may terminate or dissolve the Corporation, subject to the provisions of paragraphs Band C of this Article. B. The Corporation shall not be dissolved, and its business shall not be terminated, by act of the Town Council or otherwise, so long as the Corporation shall be obligated to pay any bonds, notes, or other obligations and unless the collection of the sales and use tax authorized by Section 4B of the Act is eligible for termination in accordance with the provisions of Section 4B(i) of the Act. C. No action shall be taken pursuant to paragraphs A and B of this Article or pursuant to paragraph B of Article Twelve of these Articles, in any manner or at any time that would impair any contract, lease, right, or other obligation theretofore executed, granted, or incurred by the Corporation. ARTICLE TWELVE DIVIDENDS A. No dividends shall ever be paid by the Corporation and no part of its net earnings remaining after payment of its expenses and other obligations shall be distributed to or inure to the benefit of its directors or officers, or any individual, private firm, or private corporation or association, except in reasonable amounts for services rendered. B. If, after the close of any fiscal year, the board of directors shall determine that sufficient provision has been made for the full payment of all current expenses, together with all amounts payable on the contracts, agreements, bonds, notes, and other obligations of the Corporation, and that all of the terms, provisions, and covenants therein have been met, then any net earnings of the Corporation derived from sources other than the sales and use taxes collected for the account of the Corporation pursuant to Section 4B of the Act thereafter accruing and lease payments received in connection with projects financed pursuant to Section 4B of the Act shall be paid to the Town. All sales and use taxes collected for the account of the Corporation pursuant to Section 4B of the Act, and lease payments and other revenues received in connection with projects financed pursuant to Section 4B of the Act shall be used solely for the purposes permitted by Section 4B of the Act. Page 14 of 233 Articles of Incorporation – Page 6 of C. If the Corporation ever should be dissolved when it has, or is entitled to, any interest in any funds or property of any kind, real, personal or mixed, such funds or property rights thereto shall not be transferred to private ownership, but shall be transferred and delivered to the Town after satisfaction or provision for satisfaction of all debts, claims, and contractual obligations, including any contractual obligations granting rights of purchase of property of the Corporation. D. No part of the Corporation's activities shall consist of the carrying on of propaganda, or otherwise attempting to influence legislation, and the Corporation shall not participate in any political campaign of or in opposition to any candidate for public office. ARTICLE THIRTEEN INDEMNIFICATION The Corporation may indemnify a person who was, is, or is threatened to be made a named defendant or respondent in litigation or other proceedings because the person is or was a director or officer of the Corporation for expenses and costs (including attorneys' fees) actually and necessarily incurred by him in connection with any claim asserted against him by action in court or otherwise by reason of his being or having been such director or officer, except in relation to matters as to which he shall have been guilty of negligence or misconduct in respect of the matter in which indemnity is sought. As provided in the bylaws, the Board of Directors shall have the power to define the requirements and limitations for the Corporation to indemnify directors and officers, whether present or former, of the Corporation. ARTICLE FOURTEEN ACTION BY UNANIMOUS WRITTEN CONSENT Action may be taken by the board of directors without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by all of the directors, and such written consent shall have the same force and effect as a unanimous vote of the directors. Each written consent must bear the date of signature of each person signing it. A consent signed by less than all of the directors or committee members is not effective to take the intended action. Delivery must be made by hand, or by certified or registered mail, return receipt requested. The delivery may be made to the Corporation's registered office, and addressed to the president or principal executive officer. ARTICLE FIFTEEN AUTHORIZATION BY TOWN The Town has specifically authorized the Corporation by resolution to act on its behalf to further the public purposes stated in said resolution and in these Articles of Incorporation and the Page 15 of 233 Articles of Incorporation – Page 7 of Town has by said resolution approved these Articles of Incorporation. A copy of said resolution is on file among the permanent public records of the Town and the Corporation. ________________________________________ PRESIDENT ECONOMIC DEVELOPMENT CORPORATION STATE OF TEXAS § § COUNTY OF TARRANT § Before me, (insert the name of the officer), on this day personally appeared ________________________, known to me (or proved to me on the oath of or through (description of identity card or other document) to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed. Given under my hand and seal of office this ________day of , 2024. __________________________ Notary Public's Signature Page 16 of 233 Page 17 of 233 Page 18 of 233 Page 19 of 233 Page 20 of 233 Page 21 of 233 Page 22 of 233 Page 23 of 233 Page 24 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: Tammy Dixon, Town Secretary AGENDA ITEM: Consider a resolution amending the Trophy Club Economic Development Corporation's Bylaws. (Tammy Dixon, Town Secretary) BACKGROUND/SUMMARY: The Economic Development Corporation (EDC) Bylaws were reviewed by the Town Attorney's Office in conjunction with the Articles of Incorporation. As with the Articles of Incorporation, the proposed amendments reflect the changes made in 2009, when the Development Corporation Act (ACT) was recodified to Local Government Code Chapters 501 through 505. With the recodification, EDC's formerly known as 4A and 4B corporations are now referred to as Type A and Type B corporations, respectively. Additionally, proposed grammatical amendments were made. BOARD REVIEW/CITIZEN FEEDBACK: At its February 27, 2024, meeting, the Economic Development Corporation Board approved Resolution EDC 2024-02 adopting the proposed amendments to the Bylaws. FISCAL IMPACT: N/A LEGAL REVIEW: Town Attorney, Dean Roggia, has prepared the draft resolution and amendments to the Bylaws. ATTACHMENTS: 1. EDC Bylaws Redline 2. EDC Bylaws ACTIONS/OPTIONS: Staff recommends that the Town Council move to approve the resolution amending the Trophy Club Economic Development Corporation's Bylaws. Page 25 of 233 BYLAWS OF THE TROPHY CLUB MUNICIJPAL ECONOMIC DEVELOPMENT CORPORATION ARTICLE I PURPOSE AND POWERS Section 1. Purpose. The Trophy Club Economic Development Corporation (the “Corporation”) is incorporated for the purposes set forth in Article Four of its Articles of Incorporation, the same to be accomplished on behalf of the Town of Trophy Club, Texas (the "Town") as its duly constituted authority and instrumentality in accordance with the Local Government Code, Title 12, Subtitle C1, the “Development Corporation Act” of 1979, as amended, Tex. Rev. Civ. Stat. Ann. Art. 5190.6, as amended (the "Act"), and other applicable laws. Section 2. Powers. In the fulfillment of its corporate purpose, the Corporation shall be a Type B Corporation governed by Section 4BChapter 505 of the Act, and shall have all of the powers set forth and conferred in its Articles of Incorporation, in the Act, and in other applicable law, subject to the limitations prescribed therein and herein and to the provisions thereof and hereof. ARTICLE II BOARD OF DIRECTORS Section 1. Powers, Number, and Term of Office. (a) The property and affairs of the Corporation shall be managed and controlled by a Board of Directors (the "Board") and, subject to the restrictions imposed by law, by the Articles of Incorporation, and by these Bylaws., Tthe Board shall exercise all of the powers of the Corporation subject to the Town Council’s approval of the Corporation’s annual budget. (b) The Board shall consist of seven (7) directors, each of whom shall be appointed by the Town Council (the “Council") of the Town, as provided in the Articles of Incorporation. (c) The directors constituting the first Board shall be those directors named in the Articles of Incorporation. Successor directorsAll subsequent Boards shall have the qualifications, shall be of the classes of directors, and shall be appointed to the terms set forth in the Articles of Incorporation. (d) Any director may be removed from the office by the Town Council at will. Section 2. Meetings of Directors. The directors may hold their meetings at such place or places in the Town as the Board may from time to time determine; provided, however, in the absence of any such determination by the Board, the meetings shall be held at the principal office of the Corporation as specified in Article V of these Bylaws. Page 26 of 233 Section 3. Notice of Meetings. (a) Regular meetings of the Board shall be held without the necessity of written notice to the Directors at such times and places as shall be designated from time to time by the Board. Special meetings of the Board shall be held whenever called by the president, by the secretary, by a majority of the directors, by the Mayor of the Town, or by a majority of the Town Council. Emergency meetings shall be held in accordance with the Open Meetings Act. (b) The secretary shall give notice to each director of the sSpecial mMeeting in person or by mail, telephone or telegraph, at least two (2) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all matters pertaining to the purposes of the Corporation may be considered and acted upon at a sSpecial mMeeting. At any meeting at which every director shall be present, even though without any notice, any matter pertaining to the purpose of the Corporation may be considered and acted upon consistent with applicable law. (c) Whenever any notice is required to be given to the Board, said notice shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed postpaid wrapper addressed to the person entitled thereto at his or her post office address as it appears on the books of the Corporation, and such notice shall be deemed to have been given on the day of such mailing. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any Regular or Special Meeting of the Board need to specified in the notice or waiver of notice of such meeting, unless required by the Board. A waiver of notice in writing, signed by the persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Section 4. Open Meetings Act. All meetings and deliberations of the Board shall be called, convened, held, and conducted, and notice shall be given to the public, in accordance with the Texas Open Meetings Act, Chapter 551, Tex. Gov. Code, as amended. Section 5. Quorum. A majority of the entire membership of the Board of Directors shall constitute a quorum for the conduct of official business of the Corporation. The act of a majority of the directors present at a meeting at which a quorum is in attendance shall constitu te the act of the Board of the Corporation, unless the act of a greater number is required by law. Section 6. Conduct of Business. (a) At the meetings of the Board, matters pertaining to the business of the Corporation shall be considered in accordance with rules of procedure as from time to time prescribed by the Board. (b) At all meetings of the Board, the president shall preside, and in the absence of the president, the vice president shall exercise the powers of the president. Page 27 of 233 (c) The secretary of the Corporation shall act as secretary of all meetings of the Board, but in the absence of the secretary, the presiding officer may appoint any person to act as secretary of the meeting. Section 7. Committees of the Board. The Board may designate two or more directors to constitute an official committee of the Board to exercise such authority of the Board as may be specified in. the resolution. It is provided, however, that all final, official actions of the Corporation may be exercised only by the Board. Each committee so designated shall keep regular minutes of the transactions of its meetings and shall cause such minutes to be recorded in books kept for that purpose in the principal office of the Corporation. Section 8. Compensation of Directors. Directors shall not receive any salary or compensation for their services as directors. However, they shall be reimbursed for their actual expenses incurred in the performance of their duties hereunder. ARTICLE III OFFICERS Section 1. Titles and Term of Office. (a) The officers of the Corporation shall be a president, a vice president, a secretary, and a treasurer, and such other officers as the Board may from time to time elect or appoint. One person may hold more than one office, except that the president shall not hold the office of secretary. Terms of the office shall be one (1) years with the right of an officer to be reelected. (b) All officers shall be subject to removal from al). office at any time by a vote of the majority of the entire Board. (c) A vacancy in the office of any officer shall be filled by a vote of a majority of the directors. Section 2. Powers and Duties of the President. The president shall be the chief executive officer of the Corporation, and, subject to the paramount authority of the Board, the president shall be in general charge of the properties and affairs of the Corporation, shall preside at all meetings of the Board, and may sign and execute all contracts, conveyances, franchises, deeds, assignments, and other instruments in the name of the Corporation. Section 3. Powers and Duties of the Vice President. The vice president shall have such powers and duties as may be prescribed by the Board and shall exercise the powers of the president during that officer's absence or inability to act. Any action taken by the vice president in the performance of the duties of the president shall be conclusive evidence of the absence or inability to act of the president at the time such action was taken. Page 28 of 233 Section 4. Treasurer. The treasurer shall have the responsibility to see to the handling, custody, and security of all funds and securities of the Corporation in accordance with these Bylaws. When necessary or proper, the treasurer may endorse and sign, on behalf of the Corporation, for collection or issuance, checks, and other obligations in or drawn upon such bank or banks or depositories as shall be designated by the Board consistent with these Bylaws. The treasurer shall see to the entry in the books of the Corporation full and accurate accounts of all monies received and paid out on account of the Corporation. The treasurer shall, at the expense of the Corporation, give such bond for the faithful discharge of his duties in such form and amount as the Board or the Council may require. Section 5. Secretary. The secretary shall keep the minutes of all meetings of the Board in books provided for that purpose, shall give and serve all notices, may sign with the president in the name of the Corporation, and/or attest the signature thereto, all contracts, conveyances, franchises, deeds, assignments, and other instruments of the Corporation, shall have charge of the corporate books, records, documents and instruments, except the papers as the' Board may direct, all of which shall at all reasonable times be open to public inspection upon application at the office of the Corporation during business hours, and shall in general perform all duties incident to the office of secretary subject to the control of the Board. Section 6. Naming Board Members. The president, each vice president, and the secretary shall be named from among the members of the Board. The treasurer and any assistant secretaries may, at the option of the Board, be persons other than members of the Board, but they may must be employees of the Town. Section 7. Compensation. Officers who are members of the Board shall not receive any salary or compensation for their services, except that they shall be reimbursed for their actual expenses incurred in the performance of their duties hereunder. Other officers may be compensated as directed by the Board. ARTICLE IV FUNCTIONAL CORPORATE DUTIES AND REQUIREMENTS Section 1. General Corporate Duties and Authority. (a) The Board shall, if directed by the Town, research, develop, prepare, finance, and implement a recreational facilities development plan. (b) In carrying out its obligations under subsection (a), the Corporation shall be authorized to exercise all rights and powers granted under the Act, including, but not limited to Page 29 of 233 Section 4BChapter 505 of the Act thereof, and with the objective and for the purpose of developing and diversifying the economy of the State of Texas and the Town, and the elimination of unemployment and underemployment in the State and the Town, and the expansion of commerce within the State. (c) The Board shall periodically submit reports to the Town Council as to the status of its activities in carrying out its obligations under this Section, and, with respect to each project undertaken by the Corporation, shall submit quarterly annual reports on the status and finances of such project. (d) Any and all agreements between the Corporation and other parties shall be authorized, executed, approved, and delivered in accordance with applicable law, provided, that, prior to the authorization or execution of any such agreement a copy thereof shall be provided to the Town. (e) All construction and other contracts let or entered into by the Corporation shall be let or entered into in accordance with the laws applicable to the letting or entering into of contracts by the Town, unless applicable law and the Town permit otherwise. Section 2. Annual Corporate Budget. At least ninety (90) days prior to the commencement of each fiscal year of the Corporation, the Board shall adopt a proposed budget of expected revenues and proposed expenditures of the next ensuing fiscal year. The budget shall contain such classifications and shall be in such form as may be prescribed from time to time by the Town Council. The budget shall not be effective until the same has been approved by the Town Council. Section 3. Books, Records, Audits. (a) The Corporation shall keep and properly maintain, in accordance with generally accepted accounting principles, complete books, records, accounts, and financial statements pertaining to its corporate fund activities and affairs. The Town shall at all times have access to the books and records of the Corporation. (b) At the direction of the Town Council, the books, records, accounts, and financial statements of the Corporation may be maintained for the Corporation by the accountants, staff and personnel of the Town. (c) The Corporation, or the Town if the option described in subsection (b) of this Section is selected, shall cause its books, records, accounts, and financial statements to be audited at least once each fiscal year by an outside, independent auditing and accounting firm selected by the Corporation and approved by the Town Council. Such audit shall be at the expense of the Corporation. Page 30 of 233 Section 4. Deposit and Investment of Corporate funds. (a) All proceeds from loans or from the issuance of bonds, notes, or other debt instruments ("Obligations") issued by the Corporation shall be deposited and invested as provided in the resolution, order, indenture, or other documents authorizing or relating to their execution or issuance. (b) Subject to the requirements of contracts, loan agreements, indentures or other agreements securing Obligations, all other monies of the Corporation, if any, shall be deposited, secured, and/or invested in the manner provided for the deposit, security, and/or investment of the public funds of the Town. The Board shall designate the accounts and depositories to be created and designated for such purposes, and the methods of withdrawal of funds therefrom for use by and for the purposes of the Corporation upon the signature of its treasure and such other persons as the Board shall designate. The accounts, reconciliation, and investment of such funds and accounts shall be performed by the finance director/treasurer of the Town. Section 5. Expenditures of Corporate Money. (a) The monies of the Corporation, including sales and use taxes collected pursuant to Section 4BChapter 505 of the Act, monies derived from the rents received from the lease or use of property, the proceeds from the investment of funds of the Corporation, the proceeds from the sale of property, and the proceeds derived from the sale of Obligations, may be expended by the Corporation for any of the purposes authorized by the Act, subject to the following limitations: (i) Expenditures from the proceeds of Obligations shall be identified and described in the orders, resolutions, indentures, or other agreements submitted to and approved by the Town Council prior to the execution of loan or financing agreements or the sale and delivery of Obligations to the purchasers thereof required by Section 6 of this Article; (ii) Expenditures that may be made from a fund created with the proceeds of Obligations, and expenditures of monies derived from sources other than the proceeds of Obligations may be used for the purposes of financing or otherwise providing one or more "Projects”, 11 as defined in Section 4BChapter 501 and other Sections of the Act. The specific expenditures shall be described in a resolution or order of the Board and shall be made only after the approval thereof by the Council; (iii) All other proposed expenditures shall be made in accordance with and shall be set forth in the annual budget required by Section 2 of this Article or in contracts meeting the requirements of Section 1 ( d(d) of this Article. Page 31 of 233 Section 6. Issuance of Obligations. No Obligations, including refunding Obligations, shall be authorized or sold and delivered by the Corporation unless the Town Council shall approve such Obligations by action taken no more than sixty (60) days prior to the date of delivery of such Obligations or refunding Obligations. ARTICLE V MISCELLANEOUS PROVISIONS Section 1. Principal Office. (a) The principal office of the Corporation shall be the registered office of the Corporation specified in the Articles of Incorporation. (b) The Corporation shall have and shall continually designate a registered agent at its registered office, as required by the Act. Section 2. Fiscal Year. The fiscal year of the Corporation shall be the same as the fiscal year of the Town. Section 3. Seal. The seal of the Corporation shall be as determined by the Board. Section 4. Resignations. Any director or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time is specified, at the time of its receipt by the president or secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Section 5. Approval or Advice and Consent of the Council. To the extent that these Bylaws refer to any approval by the Town or the Council or refer to advice and consent by the Council, such approval, or advice and consent, shall be evidenced by a certified copy of a resolution, order, or motion duly adopted by the Council. Section 6. Indemnification of Directors, Officers and Employees. (a) As provided in the Act, the Corporation is, for the purposes of the Texas Tort Claims Act (Subchapter A, Chapter 101, Texas Civil Practices and Remedies Code), a governmental unit and its actions are governmental functions. (b) The Corporation shall indemnify each and every member of the Board, its officers, and its employees, and each member of the Council and each employee of the Town, to the fullest extent permitted by law, against any and all liability or expense, including attorneysattorney’s fees, incurred by any of such persons by reason of Page 32 of 233 any actions or omissions that may arise out of the functions and activities of the Corporation. ARTICLE VI EFFECTIVE DATE, AMENDMENTS Section 1. Effective Date. These Bylaws shall become effective upon the occurrence of the following events: (a) the adoption of these Bylaws by the Board; and (b) the approval of the Bylaws by the Town Council. Section 2. Amendments to the Articles of Incorporation and Bylaws. The Articles of Incorporation of the Corporation and these Bylaws may be amended only in the manner provided in the Articles of Incorporation and the Act. EXECUTED this __________ day of ___________________ Page 33 of 233 Page 34 of 233 Page 35 of 233 Page 36 of 233 Page 37 of 233 Page 38 of 233 Page 39 of 233 Page 40 of 233 Page 41 of 233 Page 42 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: April Duvall, Director of Finance AGENDA ITEM: Consider an Interlocal Cooperation Contract between the Department of Public Safety of the State of Texas and the Municipal Court of the Town of Trophy Club, Texas; and authorize the Town Manager to negotiate and execute the contract on behalf of the Town. (April Duvall, Director of Finance) BACKGROUND/SUMMARY: The Trophy Club Municipal Court participates in the Texas Department of Public Safety's, Failure to Appear/Failure to Pay program. Under the Failure to Appear/Failure to Pay program, the Department of Public Safety may deny the renewal of a driver's license if an individual has failed to appear for a citation or failed to satisfy a judgment ordering the payment of a fine. The individual may be denied renewal until the reported citations or violations are cleared and reported by the court to the Department of Public Safety. Due to changes that occurred during the 88th Legislative Session, the Texas Department of Public Safety revised the Failure to Appear/Failure to Pay program's Interlocal Cooperation Contract (ICC) and requires that a new contract be approved and executed in order to continue participation in this program. The changes in the ICC include: • Language and restructuring of the original ICC to provide clarity regarding the specific responsibilities held by each party. • Inclusion of indigency into the program as mandated by House Bill 291, 88th Legislative Session. • Language to account for future changes to the current statute, either federal or state, ensuring that the ICC remains in compliance with the latest legal requirements until a revised ICC is available. BOARD REVIEW/CITIZEN FEEDBACK: N/A FISCAL IMPACT: The Interlocal Cooperation Contract designates $4.00 from every Failure to Appear/Failure to Pay program fee to be allocated to the general fund of the municipality. LEGAL REVIEW: Town Attorney, Dean Roggia, has reviewed the contract as to form and legality. Page 43 of 233 ATTACHMENTS: 1. DPS ICC FTA Program ACTIONS/OPTIONS: Staff recommends that the Town Council move to approve the Interlocal Cooperation Contract between the Department of Public Safety of the State of Texas and the Municipal Court of the Town of Trophy Club, Texas; and authorize the Town Manager to negotiate and execute the contract on behalf of the Town. Page 44 of 233 Page 45 of 233 Page 46 of 233 Page 47 of 233 Page 48 of 233 Page 49 of 233 Page 50 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: April Duvall, Director of Finance AGENDA ITEM: Consider accepting the Annual Comprehensive Financial Report for the Town of Trophy Club Fiscal Year 2023. (April Duvall, Director of Finance) BACKGROUND/SUMMARY: The Town of Trophy Club's financial records have been prepared and audited by FORVIS, LLP, Certified Public Accountants, as required by the Town Charter. The Town's financial performance for FY 2023 is presented in the attached Annual Financial Report based on the audited records. The goal of the independent audit is to provide reasonable assurance that the financial statements of the Town are presented fairly, in all material respects, for the fiscal year ended September 30, 2023. This independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Below are highlights from the FY 2023 Annual Comprehensive Financial Report: 1. The Town's auditor, FORVIS, LLP, has issued an unmodified opinion to the Town's financial records, indicating that the Town's financial records are fairly represented in all material aspects for the fiscal year ending September 30, 2023. 2. General Unassigned Fund Balance increased by $2,064,596 to $9,981,221 in FY 2023 compared to FY 2022. 3. Fund Balances across all Governmental Funds increased by almost $8.5 million, which includes bonds issued near the end of the fiscal year. 4. Cash and cash equivalents in Business-Type Funds increased from $1,500,845 to $1,994,279. The Town of Trophy Club's financial position remains strong and continued to improve during FY 2023. BOARD REVIEW/CITIZEN FEEDBACK: N/A FISCAL IMPACT: The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town’s financial statements for the fiscal year ended September 30, 2023 are fairly presented in conformity with Generally Accepted Accounting Principles. An unmodified opinion is a type of auditor's opinion that indicates that the financial statements are prepared according to accounting standards in all material respects. Page 51 of 233 LEGAL REVIEW: N/A ATTACHMENTS: 1. Trophy Club ACFR Draft - 3-20-24 ACTIONS/OPTIONS: Staff recommends that the Town Council move to accept the Annual Comprehensive Financial Report for the Town of Trophy Club Fiscal Year 2023. Page 52 of 233 DRAFT - 3.20.2024 Page 53 of 233 Town of Trophy Club, Texas Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2023 Prepared by Town of Trophy Club Finance Department DRAFT - 3.20.2024 Page 54 of 233 DRAFT - 3.20.2024 Page 55 of 233 Town of Trophy Club, Texas September 30, 2023 Contents Introductory Section (Unaudited) Letter of Transmittal ......................................................................................................................... i-v Organizational Chart ......................................................................................................................... vi Elected Officials and Administrative Officers ................................................................................. vii GFOA Certificate of Achievement .................................................................................................. viii Financial Section Independent Auditor’s Report ............................................................................................... 1 Management’s Discussion and Analysis ............................................................................. 4 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position ................................................................................................................. 15 Statement of Activities ..................................................................................................................... 16 Fund Financial Statements Balance Sheet – Governmental Funds .............................................................................................. 18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ...... 19 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...... 20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities .......................................... 21 Statement of Net Position – Proprietary Funds ................................................................................ 22 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds .................... 23 Statement of Cash Flows – Proprietary Funds ................................................................................. 24 Notes to Financial Statements .......................................................................................................... 25 DRAFT - 3.20.2024 Page 56 of 233 Town of Trophy Club, Texas September 30, 2023 Required Supplementary Information (Unaudited) Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund ............................................................................................................................... 67 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – PID No. 1 Fund ........................................................................................................................... 68 Schedule of Changes in the Town’s Net Pension Liability/(Asset) and Related Ratios - Texas Municipal Retirement System ........................................................................................... 69 Schedule of Employer Contributions – Texas Municipal Retirement System ................................. 70 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios – Texas Municipal Retirement System – Supplemental Death Benefits Fund ............................... 71 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios – Retiree Health Care Plan ............................................................................................................. 72 Combining and Individual Fund Financial Statements and Schedules (Unaudited) Nonmajor Governmental Funds Combining Balance Sheet – Nonmajor Governmental Funds .......................................................... 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds. .................................................................................................................... 74 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual Hotel Occupancy Tax .................................................................................................................. 75 Street Maintenance Sales Tax ..................................................................................................... 76 Court Technology ........................................................................................................................ 77 Court Security ............................................................................................................................. 78 Recreation Programs ................................................................................................................... 79 Park Land Dedication .................................................................................................................. 80 Tax Increment Reinvestment Zone No. 1 ................................................................................... 81 Crime Control and Prevention District ........................................................................................ 82 DRAFT - 3.20.2024 Page 57 of 233 Town of Trophy Club, Texas September 30, 2023 Discretely Presented Component Unit Balance Sheet – Trophy Club 4B Economic Development Corporation ......................................... 83 Reconciliation of the Balance Sheet Fund to the Statement of Net Position – Trophy Club 4B Economic Development Corporation ........................................................................................... 84 Statement of Revenues, Expenditures, and Changes in Fund Balance – Trophy Club 4B Economic Development Corporation ............................................................................................................ 85 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities – Trophy Club 4B Economic Development Corporation ................................................................................................................................... 86 Statistical Section (Unaudited) Financial Trends Net Position by Component .............................................................................................................. 87 Changes in Net Position ................................................................................................................... 88 Fund Balances of Governmental Funds ............................................................................................ 90 Changes in Fund Balances of Governmental Funds ......................................................................... 91 Revenue Capacity Assessed Value and Estimated Actual Value of Taxable Property .................................................. 92 Direct and Overlapping Property Tax Rates ..................................................................................... 93 Principal Property Taxpayers ........................................................................................................... 94 Property Tax Levies and Collections ................................................................................................ 95 Debt Capacity Ratios of Outstanding Debt by Type ................................................................................................ 96 Ratios of Net General Bonded Debt Outstanding ............................................................................. 97 Direct and Overlapping Governmental Activities Debt ................................................................... 98 Pledged-Revenue Coverage .............................................................................................................. 99 Demographic and Economic Information Demographic and Economic Statistics ........................................................................................... 100 Principal Employers ....................................................................................................................... 101 Operating Information Full-Time Equivalent Town Government Employees by Function/Program ................................. 102 Operating Indicators by Function/Program .................................................................................... 103 DRAFT - 3.20.2024 Page 58 of 233 DRAFT - 3.20.2024 Page 59 of 233 Introductory Section (Unaudited) DRAFT - 3.20.2024 Page 60 of 233 DRAFT - 3.20.2024 Page 61 of 233 Town of Trophy Club 1 Trophy Wood Drive Trophy Club, TX 76262 Phone (682) 237-2900 Fax (682) 237-2996 i March __, 2023 To the Honorable Mayor, Members of the Town Council, and Citizens of the Town of Trophy Club, Texas The Finance Department of the Town possesses a comprehensive compilation of financial statements meticulously prepared in adherence to generally accepted accounting principles (GAAP). These statements underwent a thorough audit conducted by a licensed firm of certified public accountants, in accordance with generally accepted auditing standards. This document hereby presents the Annual Comprehensive Financial Report (ACFR) for the Town of Trophy Club, Texas, covering the fiscal year concluding on September 30, 2023. This report comprises the Town's management assertions regarding its financial status. Hence, the management accepts full accountability for the accuracy and integrity of all information presented herein. In order to substantiate these assertions, the Town's management has implemented a robust internal control framework. This framework serves the dual purpose of safeguarding the Town's assets against loss, theft, or misuse and ensuring the compilation of adequate and dependable information for the preparation of the Town's financial statements in accordance with GAAP. It is important to note that internal controls, while crucial, are designed to offer reasonable rather than absolute assurance. The Town's comprehensive internal control framework aims to strike a balance, ensuring that the financial statements are reasonably free from material misstatement. As management, we affirm that, to the best of our knowledge and belief, this financial report is both complete and reliable in all material aspects. The Town's financial records, as mandated by the Town Charter, have been meticulously prepared and audited by FORVIS, LLP, Certified Public Accountants. This Annual Comprehensive Financial Report (ACFR) is based on the outcomes of that audit. The primary objective of the independent audit was to ensure reasonable assurance that the Town's financial statements accurately and fairly represent, in all material aspects, the fiscal year ending on September 30, 2023. The independent audit encompassed a thorough examination, on a sample basis, of evidence supporting the amounts and disclosures in the financial statements. It also involved evaluating the accounting principles applied and significant estimates made by management, as well as assessing the overall presentation of the financial statements. Following this comprehensive audit, the independent auditor concluded that there exists a reasonable basis to provide unmodified opinions, affirming that the Town's financial statements for the fiscal year ended September 30, 2023, adhere to Generally Accepted Accounting Principles (GAAP). The independent auditor’s report serves as the initial component of the financial section within this report. In adherence to Generally Accepted Accounting Principles (GAAP), management is obligated to furnish a narrative introduction, overview, and analysis that accompanies the fundamental financial statements, commonly known as Management’s Discussion and Analysis (MD&A). This letter of transmittal is specifically crafted to enhance the MD&A and is intended to be reviewed in conjunction with it. For your convenience, the Town’s MD&A is situated directly after the report from the independent auditor. DRAFT - 3.20.2024 Page 62 of 233 Town of Trophy Club 1 Trophy Wood Drive Trophy Club, TX 76262 Phone (682) 237-2900 Fax (682) 237-2996 ii Profile of the Town Established in 1985 as Texas’ pioneering master planned community, the Town of Trophy Club, Texas is situated in the North Central region of the state. This locale has consistently demonstrated itself as a prominent growth hub in both Texas and the United States. Presently spanning just over 4 square miles, the Town caters to a burgeoning population of approximately 13,843 residents. Authorized to impose a property tax on real property within its borders, the Town boasts a median household income of $183,125 and a median housing value of $734,943. Since 2004, Trophy Club has functioned as a Home Rule municipality, operating under the Council- Manager form of government. Following Charter Amendments ratified in the May 11, 2013 election, the Town Council, comprising the Mayor and six council members, holds policy-making and legislative authority. The Council's duties encompass passing ordinances, approving budgets, appointing boards and committees, and selecting key roles such as the Town Manager, Town Secretary, Municipal Judge, and Town Attorney. The Council operates on a non-partisan basis. As per Charter Amendments adopted on May 9, 2009, Council members are elected at-large-by-place, serving for a term of three years or until their successors assume office. Each Council member is designated to a specific numbered Place (e.g., Place 1, Place 2, Place 3, etc.). The Charter also stipulates that neither the Mayor nor any Council member can serve for more than six consecutive years in elected full terms. The Town Manager, in turn, is responsible for executing the policies and ordinances set by the Town Council, overseeing day-to-day governmental operations, and appointing department heads within the Town's various departments. The Town of Trophy Club delivers a comprehensive array of municipal services, encompassing general government functions, public safety initiatives, street maintenance, park and recreation services, planning and zoning activities, code enforcement efforts, and drainage utilities. Water and wastewater services are managed through the Municipal Utility District #1. Local Economy Trophy Club is renowned for its rapid growth, a distinctive feature acknowledged by both the Dallas Business Journal and Fort Worth Builders Association. Positioned conveniently between DFW and Alliance Airports, Trophy Club's location proves advantageous for businesses, residents, and commuters heading to Dallas, Denton, Las Colinas, and Fort Worth. Despite its proximity to bustling metro areas, Trophy Club retains a charming small-town ambiance, providing a picturesque setting. The Town boasts an exceptional quality of life, offering excellent educational and recreational amenities. Additionally, it is home to two 18-hole premier golf courses, including the only course designed by Ben Hogan. The North Texas region is home to a wide range of research and education institutions, along with a robust presence in logistics, oil and gas, manufacturing, and industrial sectors, supported by a strong base of professional services. This diverse economic landscape has played a significant role in maintaining a relatively stable unemployment rate. Approximately half of the local workforce is engaged in management, professional, and related occupations. According to the Bureau of Labor Statistics, as of September 2023, the unemployment rate in the Dallas/Fort Worth area stands at 3.2%, slightly below the national average of 3.7%. DRAFT - 3.20.2024 Page 63 of 233 iii Trophy Club has undertaken strategic efforts to position itself for a substantial future within the DFW and Alliance corridor. Over the past ten years, the Town has approved more than 578 building permits for high-end homes, showcasing its commitment to growth and development. In the fiscal year 2023, there were 3 new residential building permits, amounting to a total of $2,567,455, and 0 commercial building permits. The fiscal year 2023 also witnessed 11 commercial projects valued at $3,408,200 and over 91 remodel/update residential projects totaling $3,572,556. Furthermore, the Town's tax base surpassed $1 billion in net taxable value in 2020. The thriving business landscape in Trophy Club and the Highway 114 region remains robust, with the Town directly benefiting from businesses choosing to establish themselves within its borders or professionals relocating to the area and contributing to the local workforce. Long-Term Financial Planning In FY23 the Town issued $7 million in debt for long term needs of Streets, Parks and Drainage. Budgeting Process The Town of Trophy Club uses a program-based budgeting process. Each budgeting unit provides for the expenditures associated with services and supplies appropriated for in the prior year budget. Personnel expenditures are compiled by the Finance department. Any funding request that represents new expenditures and programs must be submitted as a separate supplemental request. Capital items are funded based on a replacement schedule, need, and available resources. Revenue Projection The budget revenue projections for the new fiscal year begin early in the current fiscal year. The projections are made by the departments responsible for the revenues with help from the Finance staff. Projections are based upon consultations with state and local agencies, trend analysis, anticipated changes in the local and regional economy, and discussions with directly associated staff members. Although revenue projections are prepared early in the budget process, the budget revenue analysis continues with departmental budget development and extends until the budget is adopted based upon any new information. Proposed Budget Analysis/Compilation The Finance Department reviews and compiles a preliminary departmental budget to present to the Budget Team, which is comprised of the Town Manager and Director of Finance. During Budget Team discussions, each department director answers questions from the entire group concerning their budget. Given revenue projections and baseline funding requirements, budget funding changes are made according to necessity and priority. A total recommended funding level is determined and is weighed against available resources. Proposed Budget Development The Town Manager shall prepare and submit to the Town Secretary, the annual budget covering the next fiscal year. The Town Manager’s proposed budget should assume, for each fund, operating revenues and resources that are equal to, or exceed operating expenditures. The Town Manager’s budget message summarizes funding requirements, major changes in programs, and alternatives for funding. Town Council Budget Study The Council receives comprehensive details about each fund, supplementary materials, capital replacement data, and the five-year capital improvement program from May until the budget's adoption. DRAFT - 3.20.2024 Page 64 of 233 iv This procedure enables the Council to deliberate on various items and provide guidance before the proposed budget is formally submitted. Capital Program The Town Manager shall prepare and submit to the Council a five (5) year capital program no later than three months before the final date for submission of the budget. The capital program shall be revised and extended each year with regard to capital improvements still pending or in process of construction or acquisition (Charter Section 9.08). Public Hearing/Budget Adoption A public hearing on the proposed budget and the tax rate (if applicable) are held in August and September prior to final budget consideration. At the public hearings, citizens may make formal comments concerning the proposed budget. The public also has the opportunity to attend Town Council budget work sessions from May through budget adoption. Budget adoption occurs in September after Town Council deliberations and the public hearing(s). The Town Council adopts a tax rate to support adopted funding levels. Pursuant to Town Charter, the budget in place for the preceding year shall remain in place on a month-to-month basis until such time as a new budget has been adopted if no Town Council action is taken before the end of the fiscal year, September 30. Compilation of Adopted Budget/Budget Maintenance The adopted budget is compiled and published during the first months of the new fiscal year. The adopted budget in the form of an amended proposed budget is available for public inspection in October. Ledger accounts are prepared for the new fiscal year prior to October 1. Budget maintenance is a year-round activity of divisions/departments and Finance Department staff. Other spending control mechanisms include monthly review of expenditures by Finance Department staff. During the budget process, departments make revenue and expenditure estimates for the current year. Finally, program goals, objectives, and measures are evaluated during budget implementation to determine the effectiveness of program activities and levels of appropriate funding for subsequent years. Relevant Financial Policies Staff created the Town’s Investment Policy. The purpose of the investment policy was to comply with Chapter 2256 of the Government Code (“Public Funds Investment Act”), which requires the Town of Trophy Club to adopt a written investment policy regarding the investment of its funds and funds under its control. The Investment Policy addresses the methods, procedures, and practices that must be exercised to ensure effective and judicious fiscal management of Trophy Club’s funds. The investment policy received the Government Treasurers’ of Texas Certificate of Distinction for Investment Policy in June 2011. The Town Council adopted a fund balance policy in September 2011 which established new fund balance categories (as recommended by Statement No. 54 by the Governmental Accounting Standards Board) and established a minimum unassigned fund balance goal (30% of annual operating expenditures). In September 2016 the Town implemented revised purchasing and travel and training policies. DRAFT - 3.20.2024 Page 65 of 233 v Major Initiatives The Town Council has continued its strategic planning process to identify goals and objectives for long range planning. Each year, the Council meets in strategic planning retreats to review and refine those goals. Management Team members utilize the strategic planning documents to help guide their budget planning and service/program implementation. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Trophy Club for its ACFR for the fiscal year ended September 30, 2022. This was the thirteenth consecutive year that the Town has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized ACFR. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current ACFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The creation of this report owes much to the unwavering commitment of the entire Finance Department staff. We extend our sincere gratitude to all team members who played a role in the preparation of this report. Additionally, we express our appreciation to the representatives of FORVIS LLP, Certified Public Accountants, for their valuable contributions. A special note of recognition is reserved for the Mayor and the Town Council members, whose steadfast support has been instrumental in upholding the utmost standards of professionalism in the management of the Town of Trophy Club's finances. Their dedication has greatly contributed to the successful Respectively submitted, Brandon Wright April Duvall Town Manager Director of Finance DRAFT - 3.20.2024 Page 66 of 233 DRAFT - 3.20.2024 Page 67 of 233 vi DRAFT - 3.20.2024Page 68 of 233 DRAFT - 3.20.2024 Page 69 of 233 DRAFT - 3.20.2024 Page 71 of 233 viii DRAFT - 3.20.2024 Page 72 of 233 DRAFT - 3.20.2024 Page 73 of 233 Financial Section DRAFT - 3.20.2024 Page 74 of 233 DRAFT - 3.20.2024 Page 75 of 233 DRAFT - 3.20.2024 Page 76 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 4 As management of the Town of Trophy Club, Texas (Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended September 30, 2023. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i-v of this report. Financial Highlights  The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $66,525,978 (net position). The unrestricted net position, which represents the amounts available to meet the Town’s ongoing obligations to citizens and creditors, was a $10,357,861.  The Town’s total net position increased $1,456,356 primarily because of increases in property tax valuations and increased investment earnings.  At the close of the current fiscal year, the Town’s governmental funds reported combined fund balances of $29,027,002, an increase of $8,498,067 in comparison with the prior year. Of this amount, $9,788,862, or 34%, is available for spending at the government’s discretion (unassigned fund balance). The increase in combined fund balance is primarily due to increased property tax valuations and increased investment earnings.  At the end of the current fiscal year, unrestricted fund balance for the general fund was $9,981,221, or approximately 72% of total general fund expenditures.  At the close of the current fiscal year, the Town’s enterprise funds reported combined net position balances of $3,660,234, an increase of $654,643 in comparison with the prior year. The increase is due primarily to operations and to transfers in from the governmental funds for debt service payments. Overview of the Financial Statements The discussion and analysis provided here are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements consist of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) the notes to financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-Wide Statements The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business. Two statements, the Statement of Net Position and the Statement of Activities, are utilized to provide this financial overview. DRAFT - 3.20.2024 Page 77 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 5 The statement of net position presents information on all of the Town’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources. The difference between the four is reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. Other non-financial factors, such as the Town’s property tax base and the condition of the Town’s infrastructure, need to be considered in order to assess the overall health of the Town. The statement of activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, police, emergency medical services, community development, parks and recreation, streets, court, council, and administration. Normally, these operations are financed by property taxes, sales taxes, and franchise fees. The business-type activities of the Town include Trophy Club Park and Storm Drainage Utility operations. The government-wide financial statements include not only the Town itself (known as the primary government), but also the legally separate component unit, 4B Economic Development Corporation, which the Town is financially accountable. Financial information for the component unit is reported separately from the financial information presented for the primary government itself. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into two categories: governmental funds and proprietary funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in assessing a government’s near-term financing requirements. DRAFT - 3.20.2024 Page 78 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 6 Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town maintains thirteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the debt service fund, the capital projects fund, and the PID No. 1, which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in a separate section of the report. The Town adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. Proprietary Funds The Town’s proprietary funds are all enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses an enterprise fund to account for its Trophy Club Park and Storm Drainage operations. All activities associated with providing such services are accounted for in these funds, including salaries and benefits, supplies and materials, repairs and maintenance, utilities, and other operating expenses. The Town’s intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. Proprietary financial statements provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for Trophy Club Park, and Storm Drainage Utility. The Storm Drainage Utility is considered to be a major fund of the Town. Component Unit The Town maintains the accounting and financial statements for one discretely presented component unit, the 4B Economic Development Corporation, which is displayed separately on the government-wide financial statements. Notes to Financial Statements The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. DRAFT - 3.20.2024 Page 79 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 7 Other Information In addition to the basic financial statements, MD&A, and accompanying notes, this report also presents certain Required Supplementary Information (RSI). The required RSI includes a budgetary comparison schedule for the general fund and Public Improvement District No. 1 fund. In addition, it includes information concerning the Town’s progress in funding its obligations to provide pension and OPEB benefits to its employees. Required supplementary information can be found immediately after the notes to the financial statements. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information on pensions and OPEB. Government-wide Overall Financial Analysis As noted earlier, net position over time may serve as a useful indicator of a government’s financial position. In the case of the Town, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $66,525,978, at the close of the most recent fiscal year. Statement of Net Position: The following table reflects the condensed Statement of Net Position. FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 Current and other assets 51,194,650$ 44,998,729$ 2,030,858$ 1,538,311$ 53,225,508$ 46,537,040$ Capital and lease assets, net 63,709,700 65,095,038 1,853,641 1,847,243 65,563,341 66,942,281 Total assets 114,904,350 110,093,767 3,884,499 3,385,554 118,788,849 113,479,321 Deferred outflows of resources 4,249,963 2,831,600 - - 4,249,963 2,831,600 Other liabilities 4,755,975 4,528,487 48,797 30,477 4,804,772 4,558,964 Long-term liabilities 51,094,293 44,398,609 175,468 349,486 51,269,761 44,748,095 Total liabilities 55,850,268 48,927,096 224,265 379,963 56,074,533 49,307,059 Deferred inflows of resources 438,301 1,934,240 - - 438,301 1,934,240 Net investment in capital assets 28,947,808 28,391,158 1,678,173 1,497,757 30,625,981 29,888,915 Restricted 25,542,136 27,278,448 - - 25,542,136 27,278,448 Unrestricted 8,375,800 6,394,425 1,982,061 1,507,834 10,357,861 7,902,259 Total net position 62,865,744$ 62,064,031$ 3,660,234$ 3,005,591$ 66,525,978$ 65,069,622$ Governmental Activities Business-type Activities Totals DRAFT - 3.20.2024 Page 80 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 8 Current and other assets increased by $6.2 million from the prior year due primarily to increased cash received as a result of the issuance of new certificates of obligation bonds. Other liabilities in governmental activities increased $227 thousand from the previous year due to normal operations. Long‐term liabilities, which consist of bonds, compensated absences, net pension liability, and other postemployment benefit obligations, increased by $6.5 million from the previous year for governmental and business‐type activities combined. The Town issued $6.9 million in certificates of obligation bonds to finance various capital projects throughout the Town. The increase is primarily due to thew outstanding bonds. A portion of the Town’s net position, $30,625,981, reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, vehicles, lease assets, and infrastructure), net of accumulated depreciation and amortization and less any related outstanding debt that was used to acquire those assets. The Town uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. Although the Town’s investment in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town’s net position, $25,542,136 represents resources that are subject to external restrictions on how they may be used. As of the end of the current year, the Town’s unrestricted net position was a balance of $10,357,861. The Town’s overall net position increased $1,456,356, from the prior fiscal year. The reasons for this overall increase are discussed in the following sections for governmental activities and business‐type activities. DRAFT - 3.20.2024 Page 81 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 9 Statement of Activities: The following table provides a summary of the Town’s changes in net position. FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 Revenues: Program revenues: Charges for services 3,821,273$ 3,795,652$ 705,922$ 724,895$ 4,527,195$ 4,520,547$ Operating grants and contributions 92,029 173,599 31,750 125,268 123,779 298,867 Total program revenues 3,913,302 3,969,251 737,672 850,163 4,650,974 4,819,414 General revenues: Property taxes 11,180,838 10,255,223 - - 11,180,838 10,255,223 Sales and mixed beverage taxes 2,358,255 2,290,748 - - 2,358,255 2,290,748 Franchise and local taxes 1,016,222 908,033 - - 1,016,222 908,033 Occupancy tax 822,484 781,831 - - 822,484 781,831 Other revenues 313,150 197,903 - - 313,150 197,903 Investment Income 1,289,627 244,451 64,244 8,264 1,353,871 252,715 Total general revenues 16,980,576 14,678,189 64,244 8,264 17,044,820 14,686,453 Total revenues 20,893,878 18,647,440 801,916 858,427 21,695,794 19,505,867 Expenses: General government 899,894 663,394 - - 899,894 663,394 Manager's office 782,210 567,704 - - 782,210 567,704 Human resources 278,174 205,246 - - 278,174 205,246 Finance 518,064 549,792 - - 518,064 549,792 Information services 673,596 543,189 - - 673,596 543,189 Legal 159,807 189,141 - - 159,807 189,141 Municipal court 92,313 258,489 - - 92,313 258,489 Police 3,820,517 3,128,814 - - 3,820,517 3,128,814 Fire 1,657,640 1,389,959 - - 1,657,640 1,389,959 Emergency medical services 1,598,261 1,489,248 - - 1,598,261 1,489,248 Facilities management 1,425,387 1,455,292 - - 1,425,387 1,455,292 Parks and recreation 3,093,727 2,864,327 - - 3,093,727 2,864,327 Community development 552,382 471,539 - - 552,382 471,539 Tourism 653,518 396,974 - - 653,518 396,974 Public works 2,358,623 2,315,082 - - 2,358,623 2,315,082 Interest and fiscal charges on long-term debt 1,371,710 1,278,873 - - 1,371,710 1,278,873 Storm Drainage Utility - - 176,590 144,131 176,590 144,131 Trophy Club Park - - 127,025 169,456 127,025 169,456 Total expenses 19,935,823 17,767,063 303,615 313,587 20,239,438 18,080,650 Increase in net position before transfers 958,055 880,377 498,301 544,840 1,456,356 1,425,217 Transfers (156,342) (142,194) 156,342 142,194 - - Change in net position 801,713 738,183 654,643 687,034 1,456,356 1,425,217 Net Position, Beginning 62,064,031 61,325,848 3,005,591 2,318,557 65,069,622 63,644,405 Net Position, Ending 62,865,744$ 62,064,031$ 3,660,234$ 3,005,591$ 66,525,978$ 65,069,622$ Governmental Activities Business-type Activities Totals DRAFT - 3.20.2024 Page 82 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 10 Governmental Activities For the year ended September 30, 2023, revenues from governmental activities totaled $20,924,070. Property tax, grants and contributions, special assessments and sales tax are the Town’s largest general revenue sources. Overall revenue increased $2.3 million or 12% from the prior year. Property taxes remain the largest source of revenue at $11.2 million in the current fiscal year. The rate charged to property tax owners has remained consistent, however, the assessed valuation has risen from approximately $2.8 billion in 2022 to $3.1 billion in the current year. Investment income increased by $1,045,176 or 428% due to the impact of the market and realization of higher interest rates. All other revenues remained relatively stable when compared to the previous year. For the year ended September 30, 2023, expenses for governmental activities totaled $19.9 million. This represents an increase of $2.2 million or 12% from the prior year. The Town’s largest expense category is public safety (police, fire and emergency medical services), which totaled $7.1 million at year-end and increased $1.1 million from prior year due primarily to workers compensation adjustments, salary increases, and overtime. General Government increased by $237 thousand primarily due to salary increases that resulted from a market study. Manager’s Office increased by $214 thousand primarily due to executive team recruitments (Tow Manager and Town Secretary). All other expenses remained relatively consistent when compared to the previous year. Business-type Activities Business-type activities are shown comparing operating costs to revenues generated by related services. For the year ended September 30, 2023, charges for services by business-type activities totaled $706 thousand and remained relatively consistent when compared to the previous year. Intergovernmental revenues decreased by $94 thousand or 75% due to nonrecurring funds received from the Texas Department of Parks and Wildlife for various parks improvement projects in 2022. Total business-type activity expenses remained relatively consistent when compared to the previous year. The Storm Drainage Utility increased expenses by $32 thousand for various small equipment purchase and the Trophy Club Park decreased their expenses by $42 thousand primarily due to staff vacancies. DRAFT - 3.20.2024 Page 83 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 11 Financial Analysis of the Town’s Funds As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance-related legal requirements. Governmental Funds – The focus of the Town’s governmental funds is to provide information of near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the Town’s net resources available for discretionary use as it represents the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the Town itself, or a group or individual that has been delegated authority to assign resources for use for particular purposes by the Town’s Council. At September 30, 2023, the Town’s governmental funds reported combined fund balances of $29 million, an increase of $8.5 million, in comparison with the prior year. Approximately 34% of this amount, $9.7 million, constitutes unassigned fund balance, which is available for spending at the Town’s discretion. The remainder of the fund balance is either nonspendable, restricted, or committed to indicate that it is: 1) not in spendable form $435 thousand; 2) restricted for particular purposes $18.8 million; or 3) committed for a particular purpose $21 thousand. Analysis of Individual Funds The general fund is the chief operating fund of the Town. At the end of the current fiscal year, unassigned fund balance of the general fund was $10.0 million, while total fund balance increased to $10.4 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures. Unassigned fund balance represents 72% of total general fund expenditures, while total fund balance represents 75% of that same amount. The fund balance of the Town’s general fund increased by $2.1 million during the current fiscal year. This increase is due to higher property valuations, the impact of the market and realization of higher interest rates and sales tax revenue coming in higher than anticipated. The debt service fund had an ending fund balance of $206 thousand at September 30, 2023, an increase of $98 thousand when compared to the previous year. This increase is due to higher property valuations, the impact of the market and realization of higher interest rates. During the year, the fund recorded total principal and interest payments of $2.4 million and property tax revenue of $2.6 million. The fund also recorded $178 thousand in transfers to other funds related to debt service payments. The capital projects fund had an ending fund balance of $10.6 million. The capital projects fund increased by $5.7 million when compared to the previous year. The increase was due to the issuance of new debt during the current fiscal year. The PID No. 1 fund reflected an ending fund balance of $4.1 million. The fund balance increased $112 thousand, which is a result of property assessments and other revenues exceeding debt service expenditures. DRAFT - 3.20.2024 Page 84 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 12 Proprietary Funds – The Town’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Net position in the Town’s largest proprietary fund, the Storm Drainage Utility fund, totaled $3.1 million, an increase of $440 thousand from prior year. Unrestricted net position at the close of the fiscal year for the Town’s utility fund amounted to $1.6 million. Total investment in capital assets, net of related debt was $1.4 million. General Fund Budgetary Highlights Total budgeted revenues of $13,292,134 were less than actual revenues of $15,777,485 resulting in a positive revenue variance of $2,485,351. The positive variance was primarily the result of greater than estimated revenues from sales tax, intergovernmental revenues, and charges for services. Sales tax was over budget as the economy continues to recover from the pandemic. Intergovernmental revenue increased $468,883, primarily due increases in both the fire assessments related to the Public Improvement District and transfers from the Municipal Utility District. Charges for services were more than estimated due to the inclusion of sanitation charges received during the year, previously netted with expenses. Total budgeted expenditures of $13,063,123 were less than actual expenditures of $13,832,385, resulting in a negative expenditure variance of $769,262. The variance in total expenditures primarily related to facilities management and capital outlay expenditures for unbudgeted expenditures related to emergency repairs/replacement. Capital and Lease Assets As of the end of the year, the Town’s governmental activities funds had invested $63,709,700 in a variety of capital and lease assets and infrastructure, net of accumulated depreciation and amortization. The Town’s business-type activities funds had invested $1,853,641 in a variety of capital assets and infrastructure, net of accumulated depreciation. This investment in capital assets includes land, buildings, vehicles, machinery and equipment, storm drainage system, and infrastructure. FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 Land 10,487,119$ 10,487,119$ -$ -$ 10,487,119$ 10,487,119$ Construction in progress 2,197,624 999,245 - - 2,197,624 999,245 Buildings 8,080,711 8,467,500 - - 8,080,711 8,467,500 Improvements other than buildings 30,882,200 32,511,327 172,480 171,886 31,054,680 32,683,213 Machinery and equipment 712,808 794,501 73,289 16,402 786,097 810,903 Vehicles 1,108,397 1,039,778 - - 1,108,397 1,039,778 Water system 3,161,697 3,337,572 - - 3,161,697 3,337,572 Infrastructure 6,982,134 7,346,425 1,607,872 1,658,955 8,590,006 9,005,380 Lease Assets 97,010 111,571 - - 97,010 111,571 Totals 63,709,700$ 65,095,038$ 1,853,641$ 1,847,243$ 65,563,341$ 66,942,281$ Governmental Activities Business-type Activities Totals DRAFT - 3.20.2024 Page 85 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 13 Major capital asset events during the current year include the following:  Purchase of new vehicles for police.  Purchase of new equipment for parks and recreation and streets department.  Construction related to Indian Creek and Junction Way projects More detailed information about the Town’s capital assets is presented in the Note 5 to the financial statements. Long-Term Debt The Town’s outstanding general obligation bonds, certificate of obligation bonds, and special assessment bonds, net of all premiums and discounts increased by $3.5 million for governmental activities and decreased by $174 thousand for business-type activities, from the prior year. FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 General obligation bonds 5,890,000$ 6,595,000$ -$ -$ 5,890,000$ 6,595,000$ Certificates of obligation 18,040,000 12,298,000 175,000 345,000 18,215,000 12,643,000 Special assessment bonds 19,776,000 21,245,000 - - 19,776,000 21,245,000 Premiums on bonds 3,423,086 3,482,143 468 4,486 3,423,554 3,486,629 Lease liability 85,745 99,617 - - 85,745 99,617 Totals 47,214,831$ 43,719,760$ 175,468$ 349,486$ 47,390,299$ 44,069,246$ Governmental Activities Business-type Activities Totals More detailed information about the Town’s long-term liabilities is presented in Note 6 to the financial statements. Economic Factors and Next Year’s Budget and Rates The Town is approximately 90% residential and 10% commercial, with both residential and commercial development substantially built out. The Town issued 3 residential construction permits in fiscal year 2023 and 0 new commercial permits. The Town estimates only 65-75 additional residential permits will be pulled in the future and 4-6 large commercial permits. The Town’s 2024 budget will raise more total property taxes than last year's budget by $904,831 or 8.7%, and of that amount, $44,835 is the tax revenue raised from new property added to the roll this year. Budgeted Capital Expenditures include funds for new Pickleball Courts, a Town Comprehensive Plan as well as improvements to Trophy Club Park’s entrance and payment kiosk system. DRAFT - 3.20.2024 Page 86 of 233 Town of Trophy Club, Texas Management’s Discussion and Analysis (Unaudited) For the Year Ended September 30, 2023 14 In fiscal year 2024, General Fund revenues are budgeted to increase 8.82% over fiscal year 2023 estimated revenues, while expenditures are budgeted to increase by 11.79% over fiscal year 2023 estimated expenditures. The fiscal year 2024 budget decreased the ad valorem tax rate to 0.415469 per hundred dollars of assessed value. Contacting the Town’s Financial Management This financial report is designed to provide a general overview of the Town’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Town of Trophy Club Director of Finance, 1 Trophy Wood Drive, Trophy Club, Texas, 76262. This information can also be accessed on the Town of Trophy Club’s website at www.trophyclub.org. DRAFT - 3.20.2024 Page 87 of 233 DRAFT - 3.20.2024 Page 88 of 233 Basic Financial Statements DRAFT - 3.20.2024 Page 89 of 233 DRAFT - 3.20.2024 Page 90 of 233 Town of Trophy Club, Texas Statement of Net Position September 30, 2023 See Notes to Financial Statements 15 Component Unit 4B Economic Governmental Business-type Development Activities Activities Total Corporation Assets Cash and cash equivalents 32,664,803$ 1,994,279$ 34,659,082$ 1,504,186$ Taxes receivable, net 562,614 - 562,614 127,771 Special assessments receivable 17,356,338 - 17,356,338 - Receivables, net 301,395 36,103 337,498 - Due from other governments 7,505 - 7,505 - Due from primary government - - - 22,334 Notes receivable - - - 150,000 Prepaid and other assets 2,387 476 2,863 - Lease receivable 299,608 - 299,608 - Capital assets not being depreciated 12,684,743 - 12,684,743 2,538,765 Capital and lease assets, net of accumulated depreciation/amortization 51,024,957 1,853,641 52,878,598 261,335 Total assets 114,904,350 3,884,499 118,788,849 4,604,391 Deferred Outflows of Resources Pension related 2,358,140 - 2,358,140 - OPEB related 45,489 - 45,489 - Deferred charge on refunding 1,846,334 - 1,846,334 - Total deferred outflows of resources 4,249,963 - 4,249,963 - Liabilities Accounts payable 1,115,697 48,360 1,164,057 - Accrued liabilities 231,387 - 231,387 - Unearned revenue 3,088,232 - 3,088,232 - Due to component unit 22,334 - 22,334 - Accrued interest payable - bonds 298,325 437 298,762 6,455 Noncurrent liabilities Due within one year: Bonds payable 3,514,000 175,468 3,689,468 120,000 Leases payable 36,451 - 36,451 - Compensated absences 294,448 - 294,448 - Due in more than one year: Bonds payable 43,615,086 - 43,615,086 1,704,123 Leases payable 49,294 - 49,294 - Compensated absences 32,717 - 32,717 - Total OPEB liability 287,685 - 287,685 - Net pension liability 3,264,612 - 3,264,612 - Total liabilities 55,850,268 224,265 56,074,533 1,830,578 Deferred Inflows of Resources OPEB related 157,989 - 157,989 - Lease related 280,312 - 280,312 - Total deferred inflows of resources 438,301 - 438,301 - Net Position Net investment in capital assets 28,947,808 1,678,173 30,625,981 975,977 Restricted for: Municipal court 61,194 - 61,194 - Debt service 4,299,885 - 4,299,885 89,568 Economic development - - - 1,708,268 Public safety 267,457 - 267,457 - PID activities 17,356,338 - 17,356,338 - Street maintenance 426,989 - 426,989 - Tourism 2,722,338 - 2,722,338 - Parks 407,935 - 407,935 - Unres tricted 8,375,800 1,982,061 10,357,861 - Total net position 62,865,744$ 3,660,234$ 66,525,978$ 2,773,813$ Primary Government DRAFT - 3.20.2024 Page 91 of 233 Town of Trophy Club, Texas Statement of Activities For the Year Ended September 30, 2023 See Notes to Financial Statements 16 Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities General government 899,894$ 269,132$ -$ -$ Manager's office 782,210 - - - Human resources 278,174 - - - Finance 518,064 - - - Information services 673,596 - - - Legal 159,807 - - - Municipal court 92,313 219,645 - - Police 3,820,517 142,470 21,525 - Fire 1,657,640 1,492,123 70,504 - Emergency medical services 1,598,261 193,982 - - Facilities management 1,425,387 - - - Parks and recreation 3,093,727 397,773 - - Community development 552,382 5,805 - - Tourism 653,518 - - - Sanitation - 1,091,668 - - Public works 2,358,623 8,675 - - Interest and fiscal charges on long-term debt 1,371,710 - - - Total governmental activities 19,935,823 3,821,273 92,029 - Business-type Activities Storm Drainage Utility 176,590 437,219 31,750 - Trophy Club Park 127,025 268,703 - - Total business-type activities 303,615 705,922 31,750 - Total primary government 20,239,438$ 4,527,195$ 123,779$ -$ Component Unit 4B Economic Development Corporation 130,748$ -$ -$ -$ Total component unit 130,748$ -$ -$ -$ General Revenues and Transfers General revenues: Taxes Property taxes Sales and mixed beverage taxes Franchise and local taxes Occupancy tax Other revenues Investment Income Transfers Total general revenues and transfers Change in net position Net Position, Beginning Net Position, Ending Program Revenues DRAFT - 3.20.2024 Page 92 of 233 Town of Trophy Club, Texas Statement of Activities (Continued) For the Year Ended September 30, 2023 See Notes to Financial Statements 17 Component Unit 4B Economic Governmental Business-Type Development Activities Activities Total Corporation (630,762)$ -$ (630,762)$ -$ (782,210) - (782,210) - (278,174) - (278,174) - (518,064) - (518,064) - (673,596) - (673,596) - (159,807) - (159,807) - 127,332 - 127,332 - (3,656,522) - (3,656,522) - (95,013) - (95,013) - (1,404,279) - (1,404,279) - (1,425,387) - (1,425,387) - (2,695,954) - (2,695,954) - (546,577) - (546,577) - (653,518) - (653,518) - 1,091,668 - 1,091,668 - (2,349,948) - (2,349,948) - (1,371,710) - (1,371,710) - (16,022,521) - (16,022,521) - - 292,379 292,379 - - 141,678 141,678 - - 434,057 434,057 - (16,022,521) 434,057 (15,588,464) - (130,748) (130,748) 11,180,838 - 11,180,838 - 2,358,255 - 2,358,255 767,911 1,016,222 - 1,016,222 - 822,484 - 822,484 - 313,150 - 313,150 - 1,289,627 64,244 1,353,871 43,606 (156,342) 156,342 - - 16,824,234 220,586 17,044,820 811,517 801,713 654,643 1,456,356 680,769 62,064,031 3,005,591 65,069,622 2,093,044 62,865,744$ 3,660,234$ 66,525,978$ 2,773,813$ Net (Expenses) Revenues and Changes in Net Position Primary Government DRAFT - 3.20.2024 Page 93 of 233 Town of Trophy Club, Texas Balance Sheet – Governmental Funds September 30, 2023 See Notes to Financial Statements 18 Nonmajor Total Debt Capital PID Governmental Governmental General Service Projects No. 1 Funds Funds Assets Cash and cash equivalents 13,559,995$ 205,668$ 10,768,487$ 4,129,303$ 4,001,350$ 32,664,803$ Taxes receivable, net 328,405 11,137 - 223,072 562,614 Special assessment receivable - - - 17,356,338 - 17,356,338 Accounts receivable, net 301,395 - - - - 301,395 Leases receivable 299,608 - - - - 299,608 Due from other governments 7,505 - - - - 7,505 Prepaid and other assets 2,387 - - - - 2,387 Advances from other funds 432,726 - - - - 432,726 Total assets 14,932,021$ 216,805$ 10,768,487$ 21,485,641$ 4,224,422$ 51,627,376$ Liabilities Accounts payable 845,516$ -$ 161,882$ -$ 108,299$ 1,115,697$ Accrued liabilites 231,387 - - - - 231,387 Unearned revenue 3,088,232 - - - - 3,088,232 Due to component unit 7,443 - - - 14,891 22,334 Advances to other funds - - - 46,223 386,503 432,726 Total liabilities 4,172,578 - 161,882 46,223 509,693 4,890,376 Deferred Inflows of Resources Unavailable revenue - property taxes 35,323 10,551 - - - 45,874 Unavailable revenue - emergency medical services 2,157 - - - - 2,157 Unavailable revenue - special assessments - - - 17,356,338 - 17,356,338 Unavailable revenue - property liens 25,317 - - - - 25,317 Leases related 280,312 - - - - 280,312 Total deferred inflows of resources 343,109 10,551 - 17,356,338 - 17,709,998 Fund Balances/(Deficits) Nonspendable: Prepaid items 2,387 - - - - 2,387 Long ‐term interfund advances 432,726 - - - - 432,726 Restricted Debt service - 206,254 - 4,083,080 - 4,289,334 Capital projects - - 10,606,605 - - 10,606,605 Municipal court - - - - 61,194 61,194 Public safety - - - - 267,457 267,457 Street maintenance - - - - 426,989 426,989 Tourism - - - - 2,722,338 2,722,338 Parks - - - - 407,935 407,935 Committed for: Recreation programs - - - - 21,175 21,175 Unassigned 9,981,221 - - - (192,359) 9,788,862 Total fund balances/(deficits)10,416,334 206,254 10,606,605 4,083,080 3,714,729 29,027,002 Total liabilities, deferred inflows of resources, and fund balances (deficits)14,932,021$ 216,805$ 10,768,487$ 21,485,641$ 4,224,422$ 51,627,376$ DRAFT - 3.20.2024 Page 94 of 233 Town of Trophy Club, Texas Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position September 30, 2023 See Notes to Financial Statements 19 Amounts reported for governmental activities in the statement of net position are different because: Total fund balance per balance sheet 29,027,002$ Capital and lease assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds. 63,709,700 Other long-term assets less related uncollectibles are not available to pay for current period expenditures and therefore are reported as unavailable revenues in the governmental funds. 17,429,686 Accrued interest payable on long-term debt does not require current financial resources and therefore is not reported as a liability in the balance sheet of governmental funds. (298,325) Long-term liabilities, including bonds payable, leases payable, net pension liability, and total OPEB liability (and the related deferred inflows and deferred outflows) are not due and payable in the current period and therefore are not reported as liabilities, deferred outflows or deferred inflows in the governmental funds. Long-term liabilities consist of: General obligation bonds payable (5,890,000)$ Certificate of obligation bonds payable (18,040,000) Special Assessment Bonds (19,776,000) Deferred charge on refunding 1,846,334 Unamortized premiums on bonds (3,423,086) Leases payable (85,745) Net pension liability (3,264,612) Total other postemployment benefit (OPEB) liability (287,685) Deferred outflows of resources – pension 2,358,140 Deferred outflows of resources – OPEB 45,489 Deferred inflows of resources – OPEB (157,989) Accrued compensated absences (327,165) (47,002,319) Net position of governmental activities 62,865,744$ DRAFT - 3.20.2024 Page 95 of 233 Town of Trophy Club, Texas Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds For the Year Ended September 30, 2023 See Notes to Financial Statements 20 Nonmajor Total Debt Capital PID Governmental Governmental General Service Projects No.1 Funds Funds Revenues Property tax 8,630,785$ 2,570,418$ -$ -$ 6,648$ 11,207,851$ Sales and mixed beverage taxes 1,613,746 - - - 744,509 2,358,255 Franchise and local taxes 1,016,222 - - - - 1,016,222 Occupancy tax - - - - 822,484 822,484 Special assessments - - - 2,267,110 - 2,267,110 License and permits 253,027 - - - - 253,027 Intergovernmental 1,545,538 - - - 21,525 1,567,063 Charges for services 1,519,212 - - - 4,825 1,524,037 Fines and fees 412,199 - - - 20,306 432,505 Lease revenue 107,834 - - - - 107,834 Interest revenue - leases 20,188 - - - - 20,188 Investment income 639,154 77,230 274,355 177,679 121,209 1,289,627 Other revenue 19,580 - 84,423 - 112,729 216,732 Total revenues 15,777,485 2,647,648 358,778 2,444,789 1,854,235 23,082,935 Expenditures Current: General government 216,004 - 39,013 48,701 79,500 383,218 Manager's office 758,661 - - - - 758,661 Human resources 268,107 - - - - 268,107 Finance 504,727 - - - - 504,727 Information services 641,317 - - - - 641,317 Legal 159,807 - - - - 159,807 Municipal court 90,063 - - - 2,250 92,313 Police 3,371,490 - - - 150,617 3,522,107 Fire 1,571,944 - - - - 1,571,944 Emergency medical services 1,453,750 - - - - 1,453,750 Facilities management 1,425,314 - - - - 1,425,314 Parks and recreation 2,302,847 - - - 5,200 2,308,047 Community development 483,392 - - - 41,282 524,674 Tourism 256,975 - - - 387,712 644,687 Public works - - - - 231,437 231,437 Debt Service: Principal 10,165 1,888,000 - 1,469,000 30,090 3,397,255 Interest and fiscal charges - 483,776 180,408 814,923 - 1,479,107 Capital outlay 317,822 - 1,667,818 - 339,613 2,325,253 Total expenditures 13,832,385 2,371,776 1,887,239 2,332,624 1,267,701 21,691,725 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,945,100 275,872 (1,528,461) 112,165 586,534 1,391,210 Other Financing Sources (Uses) Transfers in 151,500 - - - 95,254 246,754 Transfers out (95,254) (177,588) - - (130,254) (403,096) Issuance of general obligation bonds - - 6,925,000 - - 6,925,000 Premium on general obligation bonds issued - - 257,608 - - 257,608 Sale of general capital assets 44,208 - - - 10,000 54,208 Issuance of leases 26,383 - - - - 26,383 Total other financing sources (uses)126,837 (177,588) 7,182,608 - (25,000) 7,106,857 Net Change in Fund Balances 2,071,937 98,284 5,654,147 112,165 561,534 8,498,067 Fund Balances, Beginning 8,344,397 107,970 4,952,458 3,970,915 3,153,195 20,528,935 Fund Balances, Ending 10,416,334$ 206,254$ 10,606,605$ 4,083,080$ 3,714,729$ 29,027,002$ DRAFT - 3.20.2024 Page 96 of 233 Town of Trophy Club, Texas Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended September 30, 2023 See Notes to Financial Statements 21 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balance - total governmental funds 8,498,067$ Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation and amortization expense. This is the amount by which capital outlay exceeds depreciation and amortization in the current period. Capital outlay expenditures 2,325,253$ Depreciation and amortization expense (3,594,874) (1,269,621) The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade‐ins, and donations) is to decrease net position. Loss on sale of assets (115,717) Certain revenues in the government-wide statement of activities that do/(do not) provide current financial resources and (are)/are not reported as revenues in the governmental funds. This amount is the net change in deferred inflows of resources. (2,243,265) The issuance of long-term debt (e.g. bond proceeds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Principal amount of debt issued (6,925,000)$ Amortization of bond premium 316,665 Principal amount of debt paid to bondholders and lessors 3,397,255 Lease financing for leases issued (26,383) Net change in accrued interest payable 7,820 Premium on bonds issued (257,608) Net deferred offering charges and related debt issuance items (217,088) (3,704,339) Some expenditures reported in the statement of revenues, expenditures, and changes in fund balances do/(do not) require the use of current financial resources but (are)/are not reported as expenses in the statement of activities. This adjustment is to reflect the net change in accrued compensated absences.(55,761) Current year OPEB expenditures are reported on the fiscal year basis in the governmental statement of revenues, expenditures and changes in fund balance and as actuarially determined in the government-wide statement of activities. These differences are reflected in total OPEB liability and related deferred outflows and inflows of resources balances.(14,765) Current year pension expenditures are reported on the fiscal year basis in the governmental statement of revenues, expenditures and changes in fund balance and as actuarially determined in the government-wide statement of activities. These differences are reflected in net pension liability and related deferred outflows and inflows of resources balances.(292,886) Change in net position of governmental activities 801,713$ DRAFT - 3.20.2024 Page 97 of 233 Town of Trophy Club, Texas Statement of Net Position – Proprietary Funds September 30, 2023 See Notes to Financial Statements 22 Nonmajor Fund Storm Drainage Trophy Utility Club Park Total Assets Current assets Cash and cash equivalents 1,635,294$ 358,985$ 1,994,279$ Accounts receivable 36,103 - 36,103 Prepaid items - 476 476 Total current assets 1,671,397 359,461 2,030,858 Noncurrent assets Capital assets: Net depreciable capital assets 1,607,872 245,769 1,853,641 Total noncurrent assets 1,607,872 245,769 1,853,641 Total assets 3,279,269 605,230 3,884,499 Liabilities Current liabilities Accounts payable 28,364 19,996 48,360 Accrued interest 437 - 437 Long-term debt due within one year 175,468 - 175,468 Total liabilities 204,269 19,996 224,265 Net Position Net investment in capital assets 1,432,404 245,769 1,678,173 Unrestricted 1,642,596 339,465 1,982,061 Total net position 3,075,000$ 585,234$ 3,660,234$ Business-type Activities DRAFT - 3.20.2024 Page 98 of 233 Town of Trophy Club, Texas Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds For the Year Ended September 30, 2023 See Notes to Financial Statements 23 Nonmajor Fund Storm Drainage Trophy Utility Club Park Total Operating Revenues Charges for services 437,219$ 268,703$ 705,922$ Total operating revenues 437,219 268,703 705,922 Operating Expenses Salaries and benefits - 25,902 25,902 Supplies and materials - 3,729 3,729 Repairs and maintenance 6,660 18,916 25,576 Utilities 1,700 9,763 11,463 Contractual services 113,967 54,248 168,215 Depreciation 51,083 14,467 65,550 Total operating expenses 173,410 127,025 300,435 Operating Income 263,809 141,678 405,487 Nonoperating Revenues (Expenses) Intergovernmental - 31,750 31,750 Investment income 62,760 1,484 64,244 Interest expense (3,180) - (3,180) Total nonoperating revenues (expenses)59,580 33,234 92,814 Income Before Transfers 323,389 174,912 498,301 Transfers in 177,588 55,015 232,603 Transfers out (61,261) (15,000) (76,261) Change in Net Position 439,716 214,927 654,643 Net Position, Beginning 2,635,284 370,307 3,005,591 Net Position, Ending 3,075,000$ 585,234$ 3,660,234$ Business-type Activities DRAFT - 3.20.2024 Page 99 of 233 Town of Trophy Club, Texas Statement of Cash Flows – Proprietary Funds For the Year Ended September 30, 2023 See Notes to Financial Statements 24 Nonmajor Fund Storm Drainage Trophy Utility Club Park Total Cash Flows from Operating Activities Receipts from customers and users 437,280$ 268,703$ 705,983$ Payments to suppliers and service providers (116,969) (72,478) (189,447) Payments to employees for salaries and benefits - (25,902) (25,902) Net cash provided by operating activities 320,311 170,323 490,634 Cash Flows from Noncapital Financing Activities Transfers to other funds (61,261) (15,000) (76,261) Transfers from other funds 177,588 55,015 232,603 Operating grants - 31,750 31,750 Net cash provided by noncapital financing activities 116,327 71,765 188,092 Cash Flows from Capital and Related Financing Activities Acquisition and construction of capital assets - (71,948) (71,948) Interest paid on capital debt (7,588) - (7,588) Principal paid on capital debt (170,000) - (170,000) Net cash used for capital and related financing activities (177,588) (71,948) (249,536) Cash Flows from Investing Activities Interest on investments 62,760 1,484 64,244 Net cash provided by investing activities 62,760 1,484 64,244 Net Increase in Cash and Cash Equivalents 321,810 171,624 493,434 Cash and Cash Equivalents, Beginning 1,313,484 187,361 1,500,845 Cash and Cash Equivalents, Ending 1,635,294$ 358,985$ 1,994,279$ Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income 263,809$ 141,678$ 405,487$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 51,083 14,467 65,550 Changes in operating assets and liabilities: (Increase) Decrease in: Accounts receivable 61 - 61 Prepaid items - 826 826 Increase (Decrease) in: Accounts payable 5,358 13,352 18,710 Net cash provided by operating activities 320,311$ 170,323$ 490,634$ Business-type Activities DRAFT - 3.20.2024 Page 100 of 233 Notes to Financial Statements DRAFT - 3.20.2024 Page 101 of 233 DRAFT - 3.20.2024 Page 102 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 25 Note 1: Summary of Significant Accounting Policies The Town of Trophy Club (Town) is a “home rule town” incorporated in 1985. The Town operates under a Council-Manager form of government and provides the following services as authorized by its charter: public safety (police and emergency medical services), parks, public works (public improvements, streets, planning, and zoning), and general administrative services. The financial statements of the Town have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units (hereinafter referred to as generally accepted accounting principles (GAAP)). The Governmental Accounting Standards Board (GASB) is the accepted standard‐setting body for establishing governmental accounting and financial reporting principles. The Town’s significant accounting policies are described below. Description of Government-Wide Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. The Town currently has no fiduciary activities. Governmental activities, which normally are supported by taxes, intergovernmental revenues, and other nonexchange transactions, are reported separately from business-type activities, which rely to a significant extent on fees and charges to external customers for support. Likewise, the primary government is reported separately from a legally separate component unit for which the primary government is financially accountable. Financial Reporting Entity The Town of Trophy Club is a municipal corporation governed by an elected mayor and a six- member council. The accompanying financial statements present the government and its component units, entities for which the government is considered financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations. Thus, blended component units are appropriately presented as funds of the primary government. The discretely presented component unit is reported in a separate column in the government‐wide financial statements to emphasize that it is both legally and substantively separate from the primary government. DRAFT - 3.20.2024 Page 103 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 26 Public Improvement District (PID) No. 1 On May 7, 2007, the Trophy Club Town Council approved Resolution 2007-08 authorizing and providing for the creation of a Public Improvement District. Trophy Club PID No.1 consists of approximately 609.68 acres within the corporate limits of the Town of Trophy Club. This District was created in accordance with Chapter 372 of the Texas Local Government Code. The PID issued refunding bonds in December 2015, with the approval of Town Council. The Town Council must review and update the service plan annually for the purpose of determining the annual budget for the PID No. 1. In addition, the PID No. 1 exclusively or almost exclusively benefits the primary government. The PID No. 1 is reported as major special revenue fund and does not issue separate financial statements. Tax Increment Reinvestment Zone No. 1 (TIRZ No. 1) The Tax Increment Reinvestment Zone No. 1 is governed by a board appointed by the Town’s Council. The Town can impose its will on the TIRZ No. 1 and affect the day-to-day operations of the TIRZ No. 1 by removing appointed board members at will. The TIRZ No. 1 is funded by revenues generated through tax increment financing. Total debt outstanding is to be paid entirely with resources of the Town. Therefore, per GASB 14 paragraph 32, the primary government has an obligation to provide support to the TIRZ No. 1 (a financial burden). The TIRZ No. 1 is reported as a nonmajor special revenue fund and does not issue separate financial statements. Crime Control and Prevention District The Crime Control and Prevention District (CCPD) was formed under Chapter 363 of the Texas Local Government Code, the Crime Control and Prevention Act. The CCPD is organized exclusively to act on behalf of the Town to finance crime control within the Town. The CCPD is governed by a seven member board appointed by the Town Council. The annual budget and issuance of debt must be approved by the Town Council. The CCPD provides services entirely, or almost entirely to the primary government. The CCPD is reported as a nonmajor special revenue fund and does not issue separate financial statements. Discretely Presented Component Unit 4B Economic Development Corporation The 4B Economic Development Corporation (4B) serves all citizens of the Town and is governed by a board appointed by the Town’s elected council. The Town can impose its will on the 4B and affect the day-to-day operations of the 4B by removing appointed board members at will. The scope of public service of the 4B benefits the Town and its citizens and is operated within the geographic boundaries of the Town. Since the 4B’s governing body is not substantively the same as the governing body of the primary government, does not provide services entirely, or almost entirely to the primary government, nor does it maintain debt of any type that are repaid using Town resources, it has been reported as a discretely presented component unit. Separate financial statements for 4B component unit are not prepared. DRAFT - 3.20.2024 Page 104 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 27 Basis of Presentation – Government-Wide Financial Statements While separate government‐wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds, while business‐type activities incorporate data from the Town’s enterprise funds. Separate financial statements are provided for governmental funds and proprietary funds. As discussed earlier, the Town has one discretely presented component unit. It is shown in a separate column in the government‐wide financial statements. As a general rule, the effect of interfund activity has been eliminated from the government‐wide financial statements. Exceptions to this general rule are payments in lieu of taxes where the amounts are reasonably equivalent in value to the interfund services provided, and other charges between various other functions of the Town. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Basis of Presentation – Fund Financial Statements The fund financial statements provide information about the Town’s funds, including its blended component units. Separate statements for each fund category—governmental and proprietary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. The Town reports the following major governmental funds:  General Fund – The General Fund is the main operating fund of the Town. This fund is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund.  Debt Service Fund – The Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on long-term debt paid primarily from taxes levied by the Town. The fund balance of the Debt Service Fund is restricted to signify the amounts that are restricted exclusively for debt service expenditures.  Capital Projects Fund – The Capital Projects Fund is used to account for funds received and expended for acquisition and construction of infrastructure and other capital assets.  Public Improvement District (PID) No. 1 – This fund accounts for bond proceeds, assessments and related debt associated with the issuance of bonds issued by the Town for the Public Improvement District. DRAFT - 3.20.2024 Page 105 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 28 The Town reports the following major enterprise fund:  Storm Drainage Utility Fund – The storm drainage fund accounts for the storm drainage utility fee designated for the maintenance of the Town’s storm drainage system. During the course of operations, the Town has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. Further, certain activity occurs during the year involving transfers of resources between funds reported at gross amounts as transfers in/out. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of the government‐wide financial statements. Balances between the funds included in governmental activities (i.e., the governmental funds) are eliminated so that only the net amount is included as internal balances in the governmental activities column. Similarly, balances between the funds included in business‐type activities (i.e., the enterprise funds) are eliminated so that only the net amount is included as internal balances in the business‐type activities column. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column. Similarly, balances between the funds included in business‐type activities are eliminated so that only the net amount is included as transfers in the business‐type activities column. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of recognition in the financial statements of various kinds of transactions or events. The government‐wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. DRAFT - 3.20.2024 Page 106 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 29 The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they have been earned and they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service principal and interest expenditures on general long‐term debt, including lease liabilities, as well as expenditures related to compensated absences, and claims and judgments, and postemployment benefits are recognized later based on specific accounting rules applicable to each, generally when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long‐term debt and financing through leases are reported as other financing sources. Property taxes, sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Expenditure‐driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility requirements have been met, and the amount is received during the period or within the availability period for this revenue source (within 1 years of year-end). All other revenue items are considered to be measurable and available only when cash is received by the Town. Budgetary Information Budgetary Basis of Accounting Annual budgets are adopted on a basis consistent with Generally Accepted Accounting Principles (GAAP) for the general, PID No. 1, hotel occupancy tax, street maintenance sales tax, court technology, court security, recreation programs, park land dedication, crime control and prevention district, and TIRZ No. 1 funds. The capital projects fund is appropriated on a project‐length basis. The grants fund does not have appropriated budgets since other means control the use of these resources (e.g., grant awards) and sometimes span a period of more than one fiscal year. The original budget is adopted by the Town Council prior to the beginning of the year. The legal level of control as defined by the Town Charter is the fund level. No funds can be transferred or added which affect the total fund expenditures without Town Council approval. Appropriations in all budgeted funds lapse at the end of the fiscal year even if they have related encumbrances. Encumbrances are commitments related to unperformed (executory) contracts for goods or services (i.e., purchase orders, contracts, and commitments). Encumbrance accounting is utilized to the extent necessary to assure effective budgetary control and accountability and to facilitate effective cash planning and control. While all appropriations and encumbrances technically lapse at year end, valid outstanding encumbrances (those for which performance under the executory contract is expected in the next year) are reappropriated and become part of the subsequent year’s budget pursuant to state regulations, and the encumbrances are automatically reestablished in the next year. DRAFT - 3.20.2024 Page 107 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 30 Deposits and Investments The Town’s cash and cash equivalents includes cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Because the Town, at its option, can withdraw funds within a twenty-four hour period from TexPool and Texas Class, these investments are considered to be cash equivalents. State statutes authorize the Town to invest in: (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas or the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than A or its equivalent; (5) certificates of deposit by state and national banks domiciled in this state that are: (A) guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or, (B) secured by obligations that are described by (1) – (4); or, (6) fully collateralized direct repurchase agreements having a defined termination date, secured by obligations described by (1), pledged with third party selected or approved by the Town, and placed through a primary government securities dealer. The Town’s investments are governed by the same state statutes. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. Receivables and Interfund Transactions Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either “interfund receivables/payables” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds” in the fund financial statements. If the transactions are between the primary government and its component unit, these receivables and payables are classified as “due to/from component unit/primary government.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds are offset by a nonspendable fund balance account in the applicable governmental fund to indicate they are not available for appropriation and are not expendable available financial resources. All trade receivables are shown net of any allowance for uncollectible amounts. DRAFT - 3.20.2024 Page 108 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 31 Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government‐wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. Capital and Lease Assets Capital and lease assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business‐type activities column in the government‐wide financial statements. Capital and lease assets are defined by the Town as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. As the Town constructs or acquires capital assets each period, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs, which are amounts spent in relation to capital assets that do not increase the asset’s capacity or efficiency or increase its estimated useful life. Donated capital assets are recorded at acquisition value at the date of donation. Acquisition value is the price that would be paid to acquire an asset with equivalent service potential on the date of the donation. Land and construction in progress are not depreciated. The other property, plant, equipment, and infrastructure of the Town are depreciated/amortized using the straight‐line method over the following estimated useful lives or lease term, whichever is shorter: Buildings 30 Years Improvements other than buildings 10-30 Years Improvements other than buildings (streets) 30 Years Machinery and equipment 7-15 Years Vehicles 5-10 Years Water system 25 Years Infrastructure (storm drainage system) 40 Years DRAFT - 3.20.2024 Page 109 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 32 Lease Receivable The Town is a lessor of its multiple water towers and recognizes a related lease receivable and a deferred inflow of resources. At the commencement of a lease, the Town initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. The Town monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position includes a separate section for deferred outflows of resources. Deferred outflows of resources represent a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Town has three items that qualify for reporting in this category. The three items are the deferred charge on refunding reported in the government‐wide statement of net position, and deferred amounts related to pension and OPEB. The deferred charge on refunding resulted from the difference between the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The deferred amounts related to pension and OPEB relate to contributions after the measurement date, changes in actuarial assumptions, the difference in expected and actual economic experience, and difference between projected and actual investment earnings. In addition to liabilities, the statement of financial position includes a separate section for deferred inflows of resources. Deferred inflows of resources represent an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Town has four items that qualify for reporting in this category. Unavailable revenue is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from: property taxes, special assessments, EMS, and property liens. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. In the government‐wide financial statements the Town reports deferred amounts related to pension relating to the changes in actuarial assumptions and difference in expected and actual economic experience. In both the government-wide financial statements and governmental funds financial statements, the Town reports deferred amounts related to leases which is comprised of the initial value of the lease receivable systematically reduced and recognized as lease revenue over the term of the lease. Unearned Revenue Governmental funds report a liability, unearned revenue, in connection with resources that have been received, but not yet earned, which consists primarily of grant dollars received in advance of incurring eligible expenditures. DRAFT - 3.20.2024 Page 110 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 33 Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities statement of net position. Long-term debt for governmental funds is not reported as liabilities in the fund financial statements until due. The debt proceeds are reported as other financing sources, net of the applicable premium or discount and payments of principal and interest reported as expenditures. In the governmental fund types, issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. Long-term debt and other obligations, financed by proprietary funds, are reported as liabilities in the appropriate funds. For proprietary fund types, bond premiums and discounts are deferred and amortized over the life of the bonds, if material. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs are expensed when incurred. Lease Liability The Town is a lessee for noncancellable leases. The Town recognizes a lease liability and an intangible right-to-use lease asset (lease asset) in the financial statements. The Town recognizes lease liabilities with an initial, individual value of $5,000 or more. At the commencement of a lease, the Town initially measures the lease liability at the present value of payments expected to be made during the lease term. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight-line basis over its useful life or the lease term, whichever is shorter. The Town monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS’s Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. DRAFT - 3.20.2024 Page 111 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 34 Other Postemployment Benefits (OPEB) The Town has two single-employer defined benefit other postemployment benefit (OPEB) plans (Plans). For purposes of measuring the total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB and OPEB expense have been determined on the same basis as they are reported by the Plans. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Net Position For government‐wide reporting as well as in proprietary funds, the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources is called net position. Net position is comprised of three components: net investment in capital assets, restricted, and unrestricted.  Net investment in capital assets consists of capital and lease assets, net of accumulated depreciation and amortization and reduced by outstanding balances of bonds, notes, leases, and other debt that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are included in this component of net position.  Restricted net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Assets are reported as restricted when constraints are placed on asset use either by external parties or by law through constitutional provision or enabling legislation.  Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that does not meet the definition of the two preceding categories. Sometimes the Town will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government‐wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is Town’s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Fund Balance In governmental fund types, the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources is called “fund balance.” The Town’s governmental funds report the following categories of fund balance, based on the nature of any limitations requiring the use of resources for specific purposes.  Nonspendable fund balance represents amounts that are either not in a spendable form or are legally or contractually required to remain intact. DRAFT - 3.20.2024 Page 112 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 35  Restricted fund balance includes amounts that can be spent only for the specific purposes stipulated by external resource providers such as grantors or enabling federal, state, or local legislation. Restrictions may be changed or lifted only with the consent of the resource providers.  Committed fund balance represents amounts that can be used only for the specific purposes determined by of the adoption of an ordinance committing fund balance for a specified purpose by the Town’s Council prior to the end of the fiscal year. Once adopted, the limitation imposed by the ordinance remains in place until the resources have been spent for the specified purpose or the Council adopts another ordinance to remove or revise the limitation.  Assigned fund balance represents amounts that are intended to be used by the Town for specific purposes but do not meet the criteria to be classified as committed. The Council has by resolution authorized the finance director and town manager to assign fund balance. The Council may also assign fund balance, as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment.  Unassigned fund balance represents the residual amount for the general fund that is not contained in the other classifications. The general fund is the only fund that reports a positive unassigned fund balance. Additionally, any deficit fund balance within the other governmental fund types is reported as unassigned. As previously mentioned, sometimes the Town will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Town’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Program Revenues Amounts reported as program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions (including special assessments) that are restricted to meeting the operational or capital requirements of a particular function or segment. All taxes, including those dedicated for specific purposes, and other internally dedicated resources are reported as general revenues rather than as program revenues. DRAFT - 3.20.2024 Page 113 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 36 Property Taxes Property taxes are levied by October 1 on the assessed value listed as of the prior January 1 for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. Under state law, property taxes levied on real property constitute a lien on the real property which cannot be forgiven without specific approval of the State Legislature. The lien expires at the end of twenty years. Taxes levied on personal property can be deemed uncollectible by the Town. Property taxes at the fund level are recorded as receivables and unearned revenues at the time the taxes are assessed. Revenues are recognized as the related ad valorem taxes are collected. Additional amounts estimated to be collectible in time to be a resource for payment of obligations incurred during the fiscal year and therefore susceptible to accrual in accordance with Generally Accepted Accounting Principles have been recognized as revenue. Accumulated Vacation, Compensated Time, and Sick Leave It is the Town’s policy to permit employees to accumulate earned, but unused vacation pay benefits. No liability is reported for unpaid accumulated sick leave. All vacation pay is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they are expected to be liquidated with expendable available financial resources, for example, as a result of employee resignations and retirements. Proprietary Funds Operating and Nonoperating Revenues and Expenses Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the utility fund and storm water utility funds are charges to customers for sales and services. The utility fund also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. DRAFT - 3.20.2024 Page 114 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 37 Adoption of New Accounting Standards During fiscal year 2023, the Town adopted the following GASB standards: GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. This standard addresses the gap in current accounting guidance related to public- private and public-public partnerships (both referred to as PPPs) that do not meet the definition of a service concession arrangement. The adoption of this standard had no impact on the Town. GASB Statement No. 96, Subscription-Based Information Technology Arrangements. The implementation of this standard establishes a single model for subscription-based information technology arrangements (SBITAs) accounting based on the principle that contracts are financings of the right to use an underlying information technology software asset. The standard requires recognition of certain right-to-use subscription assets and subscription liabilities. The adoption of this standard had no impact on the Town. Future Financial Reporting Requirements GASB Statement No. 100, Accounting Changes and Error Corrections. The objective of this statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. The requirements of this statement will take effect for the Town’s fiscal year 2024. Management has not yet determined the impact of this Statement on its financial statements. GASB Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The requirements of this Statement will take effect for the Tow’s fiscal year 2025. Management has not yet determined the impact of this Statement on its financial statements. GASB Statement No. 102, Certain Risk Disclosures. The objective of this statement is to provide users of governmental financial statements with essential information about risks related to a government's vulnerabilities due to certain concentrations or constraints. The requirements of this Statement will take effect for the Town’s fiscal year 2025. Management has not yet determined the impact of this Statement on its financial statements. DRAFT - 3.20.2024 Page 115 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 38 Note 2: Stewardship, compliance, and accountability Deficit Fund Equity At September 30, 2023, the Tax Increment Reinvestment Zone No. 1 fund had a deficit fund balance of $192,359. The deficit balances will be eliminated in the future as assessed values continue to increase as a result of growth and development within the TIRZ. Note 3: Cash and Investments The Town utilizes a pooled cash and investment concept for all its funds, to maximize its investment program. Investment income from this internal pooling is allocated to the respective funds based upon the sources of funds invested. Deposits At September 30, 2023, the carrying amount of the Town’s demand deposits, including its component unit, totaled $23,750,293 and the bank balance was $23,705,627. Cash on hand for the Town was $400 and the carrying amount and bank balance of cash for the Public Improvement District No. 1 was $4,129,303. Custodial Credit Risk In the case of deposits, this is the risk that, in the event of a bank’s failure, the Town’s deposits may not be returned to it. Pursuant to provisions of both the Texas Public Funds Investment Act and the Public Funds Investment Policy of the Town, deposits of the Town that exceed the federal depository insurance coverage levels are materially collateralized with securities held by a third party custodian in the Town’s name. Investments, other than investments that are obligations of the U.S. government, its agencies, and instrumentalities, are insured or registered in the Town’s name and held by a third party custodian. Investments The Town’s investment policies are governed by state statutes. The Town’s investment policies further limit state statutes such that eligible investments include the following: 1. Obligations, including letters of credit, of the United States, its agencies, and instrumentalities, including the Federal Home Loan Banks. 2. Direct obligations of the State of Texas, its agencies and instrumentalities or obligations of agencies, counties, cities, and other political subdivisions of this State rated as to investment quality by a nationally recognized investment rating firm of not less than "A" or its equivalent. 3. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, including obligations that are fully DRAFT - 3.20.2024 Page 116 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 39 guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States. 4. Certificates of Deposit and other forms of deposit issued by a depository institution that has its main office or a branch office in Texas. The certificate of deposit must be guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor or secured by obligations in a manner and amount as provided by law. In addition, deposits obtained through a depository institution that has its main office or a branch office in Texas and that contractually agrees to place the funds in federally insured depository institutions in accordance with the conditions prescribed in Section 2256. 01 0(b) of the Public Funds Investment Act are authorized investments. Additionally, funds invested by the Town through a broker that has a main office or branch office in Texas and is selected from a list approved by the Town as required by section 2656.025 of the Public Funds Investment Act or a depository institution that has a main office or branch office in Texas and is selected by the Town are authorized investments if the following conditions are met: a. the broker or depository institution selected by the Town as specified above arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the Town; b. the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; and c. the Town appoints a depository bank, or a clearing broker registered with the Securities and Exchange Commission Rule 15c-3 (17CFR, Section 240 15c3-3) as custodian for the Town with respect to the certificates of deposit issued for account to the Town. 5. Fully collateralized direct repurchase agreements with a defined termination date secured by obligations of the United States or its agencies and instrumentalities. These shall be pledged to the Town of Trophy Club, held in an account in the Town of Trophy Club’s name, and deposited at the time the investment is made with the Town of Trophy Club or with a third-party selected and approved by the Town of Trophy Club. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas. A Master Repurchase Agreement, or similar agreement, must be signed by the bank/dealer prior to investment in a repurchase agreement. All repurchase agreement transactions will be on a delivery versus payment basis. Securities received for repurchase agreements must have a market value greater than or equal to 102 percent at the time funds are disbursed. (This section pertains to Sweep Accounts and/or Bond Proceeds) 6. No-Load Money Market Mutual funds that: 1) are registered and regulated by the Securities and Exchange Commission and provide a prospectus and other information required by the Securities and Exchange Act of 1934 (15 U.S.C. Section 78a) or the DRAFT - 3.20.2024 Page 117 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 40 Investment Company Act of 1940 (15 U.S.C. Section 80a-1), and 2) seek to maintain a stable net asset value of $1.0000 per share. 7. Local government investment pools, which: 1) meet the requirements of Chapter 2256.016 of the Public Funds Investment Act, 2) are rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service, and 3) are authorized by resolution or ordinance by the Town Council. In addition, a local government investment pool created to function as a money market mutual fund must mark its portfolio to the market daily and, to the extent reasonably possible, stabilize at a $1.0000 net asset value. Investment Pools TexPool was established as a trust company with the Treasurer of the State of Texas as trustee, segregated from all other trustees, investments, and activities of the trust company. The State Comptroller of Public Accounts exercises oversight responsibility over TexPool. Oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. The advisory board members review the investment policy and management fee structure. Finally, Standard & Poor’s rate TexPool AAAm. As a requirement to maintain the rating, weekly portfolio information must be submitted to Standard & Poor’s, as well as to the office of the Comptroller of Public Accounts for review. At September 30, 2023, the fair value of the position in TexPool approximates fair value of the shares. There were no limitations or restrictions on withdrawals. Texas CLASS is a local government investment pool emphasizing safety, liquidity, convenience, and competitive yield. Since 1996, Texas CLASS has provided Texas public entities a safe and competitive investment alternative. Texas CLASS invests only in securities allowed by the Texas Public Funds Investment Act. The pool is governed by a board of trustees, elected annually by its participants. Texas CLASS is rated ‘AAAm’ by Standard and Poor’s Ratings Services. The ‘AAAm’ principal stability fund rating is the highest assigned to principal stability government investment pools and is a direct reflection of Texas CLASS’s outstanding credit quality and management. At September 30, 2023, the fair value of the position in Texas CLASS approximates fair value of the shares. There were no limitations or restrictions on withdrawals. Interest rate risk Interest rate risk is the risk that changes in the market interest rates will adversely affect the fair value of an investment. In accordance with its investment policy, the Town manages its exposure to declines in fair values by limiting the maximum maturity length of investments to three years. DRAFT - 3.20.2024 Page 118 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 41 As of September 30, 2023, the Town had the following investments: Investment Maturities (in Years) Investment Type Fair Value Less Than 1 Year Texas CLASS 3,039,619$ 3,039,619$ TexPool 5,243,653 5,243,653 Total 8,283,272$ 8,283,272$ Credit Risk The Town’s investment policy limits investments to obligations of the United States, State of Texas, or their agencies and instrumentalities with an investment quality rating of not less than “A” or its equivalent, by a nationally recognized investment rating firm. Other obligations must be unconditionally guaranteed (either express or implied) by the full faith and credit of the United States Government or the issuing U.S. agency and investment pools with an investment quality not less than AAA or AAAm, or equivalent, by at least one nationally recognized rating service. As of September 30, 2023, all of the Town’s purchased investments in U.S. Agencies Obligations were rated AA+, AAA and Aaa by Standard & Poors, Fitch and Moody’s, respectively Concentration of Credit Risk The concentration of credit risk is the risk of loss that may be caused by the Town’s investment in a single issuer. The Town’s investment policy states that the investment portfolio shall be diversified so that potential losses on individual issuers will be minimized. At September 30, 2023, the Town’s investments are 100% in investment pools. Fair Value of Investments The Town measures and records its investments using, as appropriately, fair value measurement guidelines established by generally accepted accounting principles (GAAP). These guidelines recognize a three‐tiered fair value hierarchy as follows:  Level 1: Quoted prices for identical investments in active markets;  Level 2: Observable inputs other than those in Level 1; and  Level 3: Unobservable inputs. DRAFT - 3.20.2024 Page 119 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 42 Debt and equity securities classified as Level 1 are valued using prices quoted in active markets for those securities. Debt and equity securities classified in Level 2 are valued using the following approaches: debt securities are normally valued based on price data obtained from observed transactions and market price quotations from broker dealers and/or pricing vendors; equity securities are valued using fair value per share for each fund. Certificates of deposit classified in level 2 are valued using broker quotes that utilize observable market inputs. Securities classified as Level 3 have limited trade information, these securities are priced or using the last trade price or estimated using recent trade prices. At September 30, 2023, the Town had no investments in the fair value hierarchy. Certain investments that are measured using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts included below approximate net asset value for the applicable external investment pool balances. Additionally, the Town has investments in governmental pools as listed below, which are recorded at amortized cost, and excluded from the fair value hierarchy. At September 30, 2023, the Town had the following investments: Investments measured at net asset value Texas Class 3,039,619$ Investments measured at amortized cost TexPool 5,243,653 Total investments 8,283,272$ DRAFT - 3.20.2024 Page 120 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 43 Note 4: Receivables Below is the detail of receivables for the Town’s major and nonmajor funds, including the applicable allowances for doubtful accounts: Storm Debt PID Nonmajor Drainage General Service No. 1 Governmental Utility Total Receivables Property taxes 35,323$ 11,137$ -$ -$ -$ 46,460$ Sales Tax 251,137 - - 123,598 - 374,735 Franchise taxes 41,945 - - - - 41,945 Hotel occupancy - - - 109,974 - 109,974 Special assessments - - 17,356,338 - - 17,356,338 Due from other governments 7,505 - - - - 7,505 Municipal court 162,802 - - - - 162,802 EMS 179,126 - - - - 179,126 Storm drainage - - - - 36,103 36,103 Leases 299,608 - - - - 299,608 Other 113,382 - - - - 113,382 Gross receivables 1,090,828 11,137 17,356,338 233,572 36,103 18,727,978 Less: allowance for doubtful accounts (153,915) - - (10,500) - (164,415) Net receivables 936,913$ 11,137$ 17,356,338$ 223,072$ 36,103$ 18,563,563$ Based on the payment schedule for special assessment receivables, approximately $15,060,000 of the amount reported in the PID No. 1 fund is not expected to be collected within the next year. Leases Receivable The Town leases several water towers to third parties, terms of which expire in various years through 2027. The Town recognized approximately in $108,000 in lease revenue and $20,000 in interest revenue during the current fiscal year related to the leases. As of September 30, 2023, the Town’s receivable for lease payments was $299,608. Also, the Town has a deferred inflow of resources associated with this lease that will be recognized as revenue over the lease term. As of September 30, 2023, the balance of the deferred inflow of resources was $280,312. DRAFT - 3.20.2024 Page 121 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 44 Note 5: Capital and Lease Assets Capital and lease assets activity for the year ended September 30, 2023, was as follows: Beginning Sales/Ending Balance Additions Disposals Transfers Balance Governmental Activities Capital assets, not being depreciated: Land 10,487,119$ -$ -$ -$ 10,487,119$ Construction in progress 999,245 1,198,379 - 2,197,624 Total capital assets, not being depreciated 11,486,364 1,198,379 - - 12,684,743 Capital and lease assets, being depreciated/amortized: Buildings 10,659,919 - - 10,659,919 Improvements other than buildings 65,461,454 550,503 - 66,011,957 Machinery and equipment 2,859,634 259,232 (152,032) - 2,966,834 Vehicles 2,157,698 290,756 (62,881) - 2,385,573 Water system 5,362,005 - - - 5,362,005 Lease asset 143,816 26,383 (19,192) 151,007 Infrastructure 14,332,062 - - - 14,332,062 Total capital and lease assets, being depreciated/amortized 100,976,588 1,126,874 (234,105) - 101,869,357 Less accumulated depreciation/amortization for: Buildings 2,192,419 386,789 - - 2,579,208 Improvements other than buildings 32,950,127 2,179,630 - - 35,129,757 Machinery and equipment 2,065,133 233,433 (44,540) - 2,254,026 Vehicles 1,117,920 222,137 (62,881) - 1,277,176 Water system 2,024,433 175,875 - - 2,200,308 Lease asset 32,245 32,719 (10,967) 53,997 Infrastructure 6,985,637 364,291 - - 7,349,928 Total accumulated depreciation/amortization 47,367,914 3,594,874 (118,388) - 50,844,400 Total capital and lease assets, being depreciated/amortized 53,608,674 (2,468,000) (115,717) - 51,024,957 Governmental activities capital and lease assets, net 65,095,038$ (1,269,621)$ (115,717)$ -$ 63,709,700$ Beginning Sales/Ending Balance Additions Disposals Transfers Balance Business-Type activities: Capital assets, being depreciated: Improvements other than Buildings 147,921$ 10,966$ -$ -$ 158,887$ Machinery and equipment 36,610 60,982 - - 97,592 Improvements 33,365 - - - 33,365 Infrastructure 2,039,766 - - - 2,039,766 Total capital assets, being depreciated 2,257,662 71,948 - - 2,329,610 Less accumulated depreciation for: Improvements other than Buildings 1,894 7,036 - - 8,930 Machinery and equipment 20,208 4,095 - - 24,303 Improvements 7,506 3,336 - - 10,842 Infrastructure 380,811 51,083 - - 431,894 Total accumulated depreciation 410,419 65,550 - - 475,969 Total capital assets, being depreciated, net 1,847,243 6,398 - - 1,853,641 Business-type activities capital assets, net 1,847,243$ 6,398$ -$ -$ 1,853,641$ DRAFT - 3.20.2024 Page 122 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 45 Depreciation and amortization expense was charged to the functions/programs of the primary government as follows: Governmental Activities General government 395,255$ Emergency medical services 88,473 Information systems 32,279 Police 139,860 Fire 61,195 Parks and recreation 742,543 Community 12,517 Streets (Infrastructure)2,122,752 Total governmental activities depreciation/amortization expense 3,594,874$ Business-type Activities Trophy Club Park 14,467$ Storm Drainage Utility 51,083 Total business-type activities 65,550$ DRAFT - 3.20.2024 Page 123 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 46 Note 6: Long-term Liabilities The following is a summary of changes in the Town’s total long-term liabilities for the year ended September 30, 2023. Beginning Balance Additions Retirements Ending Balance Due Within One Year Governmental Activities General Obligation Bonds 6,595,000$ -$ 705,000$ 5,890,000$ 725,000$ Certificates of Obligation 12,298,000 6,925,000 1,183,000 18,040,000 1,240,000 Special Assessment Bonds 21,245,000 - 1,469,000 19,776,000 1,549,000 Bond Premiums 3,482,143 257,608 316,665 3,423,086 - Total bonds payable 43,620,143 7,182,608 3,673,665 47,129,086 3,514,000 Leases payable 99,617 26,383 40,255 85,745 36,451 Compensated absences 271,404 301,475 245,714 327,165 294,448 Total government activities 43,991,164$ 7,510,466$ 3,959,634$ 47,541,996$ 3,844,899$ Business-Type Activities: Certificates of Obligation 345,000$ -$ 170,000$ 175,000$ 175,000$ Bond Premiums 4,486 - 4,018 468 468 Total bonds payable 349,486 - 174,018 175,468 175,468 Total business-type activities 349,486$ -$ 174,018$ 175,468$ 175,468$ The Town intends to retire all of its governmental activities general long-term liabilities, plus accrued interest, from property taxes and other current revenues from the debt service fund as has been done in prior years. The special assessment bonds are expected to be liquidated from the PID No. 1 fund. The general fund has typically been used to liquate the liability for compensated absences for governmental activities. The proprietary fund type long-term debt will be repaid, plus accrued interest, from operating revenues of the respective fund. DRAFT - 3.20.2024 Page 124 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 47 General Obligation Bonds The Town issues general obligation bonds and certificates of obligations to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business‐type activities. General obligation bonds are direct obligations and pledge the full faith and credit of the Town. General obligation bonds and certificates of obligation outstanding at September 30, 2023, are as follows: Governmental Activities Interest Rate (%) Final Maturity Original Borrowing Outstanding at Year-End General Obligation Bonds: Refunding 2.18 2025 2,030,000$ 485,000$ Improvements 2.00-3.00 2036 5,245,000 3,610,000 Refunding 1.16 2030 3,550,000 1,795,000 5,890,000$ Certificate of Obligations: Combination Tax and Revenue Series 2004 3.50-4.75 2024 650,000 35,000$ Certificates of Obligation Series 2013 2.50-3.25 2028 1,300,000 565,000 Certificates of Obligation Series 2014 2.00-4.00 2034 2,500,000 1,555,000 Certificates of Obligation Series 2016 2.00-4.00 2036 4,210,000 3,020,000 Certificates of Obligation Series 2017 2.50-3.00 2037 4,445,000 2,855,000 Certificates of Obligation Series 2021 2.00-4.00 2041 4,305,000 3,085,000 Certificates of Obligation, Series 2023 4.00-5.00 2043 6,925,000 6,925,000 18,040,000$ Business-type Activities Interest Rate (%) Final Maturity Original Borrowing Outstanding at Year-End Certificates of Obligation Series 2013 2.50-3.00 2024 1,700,000$ 175,000$ 175,000$ Changes in Financing In fiscal year 2023, the City issued $6,925,000 of combination tax and revenue certificates of obligation, series 2023 August 15, 2023, with a premium of $257,608, bearing interest rates ranging from 4.0% to 5.0%. The certificates will be used for designing, developing, constructing, improving and renovating Town parks and green spaces including park and recreation facilities, including sports fields and the acquisition of land; designing, developing, constructing, improving, extending, and expanding streets, thoroughfares, sidewalks, bridges, and other public ways of the Town, including streetscaping, street facilities, streetlighting, right-of-way protection, utility relocation, and related storm drainage improvements; and acquiring rights-of-way in connection therewith; Town public parking facilities located at Town Hall; professional services incurred in connection with these items; and to pay the costs incurred in connection with the issuance of the certificates. DRAFT - 3.20.2024 Page 125 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 48 Special Assessment Bonds The Town also issued special assessment debt in 2015 to provide funds for improvements within Trophy Club PID No. 1 area. These bonds will be repaid from special assessments levied on the property owners benefiting from this construction. Those amounts, including interest, are 100% pledged to pay the scheduled principal and interest payments on the special assessment bonds. The Town is not obligated to pay the bonds from any funds raised from taxation or from any other revenues available to the Town. Governmental Activities Interest Rate (%) Final Maturity Original Borrowing Outstanding at Year-End Special Assessment: Special Assessment Revenue Refunding-Series 2015 2.00-4.00 2033 26,154,979$ 19,776,000$ 19,776,000$ The debt service requirements for the Town’s bonds are as follows: Year Ended September 30, 2022 Principal Interest Total Requirements Principal Interest Total Requirements 2024 3,514,000$ 1,490,203$ 5,004,203$ 175,000$ 2,625$ 177,625$ 2025 3,912,000 1,347,982 5,259,982 - - - 2026 3,218,000 1,225,121 4,443,121 - - - 2027 3,343,000 1,128,935 4,471,935 - - - 2028 3,477,000 1,027,618 4,504,618 - - - 2029-2033 18,237,000 3,276,563 21,513,563 - - - 2034-2038 5,400,000 849,588 6,249,588 - - - 2039-2043 2,605,000 222,600 2,827,600 - - - Total 43,706,000$ 10,568,610$ 54,274,610$ 175,000$ 2,625$ 177,625$ Governmental Activities Business-type Activities Lease Liability The Town has agreements as lessee for equipment and copiers, the terms of which expire in various years through 2027. The following is a schedule by year of payments under the leases as of September 30, 2023: Year Ending September 30, Principal Interest Total 2024 36,451$ 2,427$ 38,878$ 2025 37,299 1,579 38,878 2026 7,010 688 7,698 2027 4,985 147 5,132 Total 85,745$ 4,841$ 90,586$ DRAFT - 3.20.2024 Page 126 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 49 Note 7: Interfund Transactions Due to/from component unit The composition of amounts due to/from component unit as of September 30, 2023, is as follows: Receivable Payable Amount Component Unit General Fund 7,443$ Nonmajor Governmental Fund 14,891$ 22,334$ The outstanding balances between funds result mainly from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. Advances from/to other funds: Receivable Fund Payable Fund Amount General Fund PID No. 1 46,223$ General Fund Nonmajor Governmental Fund 386,503 432,726$ The amount payable to the general fund from the nonmajor governmental fund relates to a working capital loan made to a nonmajor governmental fund. None of the balance is scheduled to be collected in the subsequent year. The amount payable to the general fund from the Public Improvement District No. 1 fund relates to expenditures paid for by the general fund during prior years. The balance is expected to be paid in future years as the Public Improvement District No. 1 fund increases revenues. DRAFT - 3.20.2024 Page 127 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 50 Interfund transfers The composition of interfund transfers for the year ended September 30, 2023, is as follows: Transfer Out:General Nonmajor Governmental Funds Storm Drainage Utility Fund Nonmajor Enterprise Fund Total General Fund -$ 95,254$ -$ -$ 95,254$ Debt Service Fund - - 177,588 - 177,588 Capital Projects Fund - - - - - Nonmajor Governmental Funds 116,500 - - 13,754 130,254 Storm Drainage Utility Fund 20,000 - - 41,261 61,261 Nonmajor Enterprise Fund 15,000 - - - 15,000 Total 151,500$ 95,254$ 177,588$ 55,015$ 479,357$ Transfer In Transfers were primarily used to support debt service, capital expenditures, and to transfer funds to the general fund for budgeted administrative costs. Note 8: Risk Management The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; business interruption; errors and omissions; injuries to employees; employee health benefits; and other claims of various natures. The Town participates in the Texas Municipal League Intergovernmental Risk Pool (Pool) which provides protection for risks of loss. Premiums are paid to the Pool that retains the risk of loss beyond the Town’s policy deductibles. Any losses reported but unsettled or incurred and not reported, are believed to be insignificant to the Town’s basic financial statements. For the last three years, there have been no significant reductions of insurance coverage or insurance settlements in excess of insurance coverage. Note 9: Contingencies Federal Grant Programs The Town participates in various federal grant programs, the principal of which are subject to program compliance audits pursuant to the Single Audit Act as amended. Accordingly, the Town’s compliance with applicable grant requirements will be established at a future date. The amount of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although the Town anticipates such amounts, if any, will be immaterial. DRAFT - 3.20.2024 Page 128 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 51 Note 10: Defined Benefit Pension Plan Plan Description The Town participates as one of over 900 plans in the defined benefit cash-balance pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is a statewide public retirement plan created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for employees of Texas participating cities. The TMRS Act places the general administration and management of TMRS with a six-member, Governor-appointed Board of Trustees; however, TMRS is not fiscally dependent on the State of Texas. TMRS issues a publicly available Annual Comprehensive Financial Report (ACFR) that can be obtained at tmrs.com. All eligible employees of the Town are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the Town, within the options available in the state statutes governing TMRS. At retirement, the Member’s benefit is calculated based on the sum of the Member’s contributions, with interest, and the Town-financed monetary credits with interest. The retiring Member may select one of seven monthly benefit payment options. Members may also choose to receive a portion of their benefit as a lump sum distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the total Member contributions and interest. The plan provisions are adopted by the governing body of the Town, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Plan provisions for the Town were as follows: Member Deposit Rate 7% Town Matching Ratio 2 to 1 Updated Service Credit 100% Transfers Annuity Increases to Retirees 30% CPI-U since retirement date Vesting 5 years Service Retirement Eligibilities 5 years/age 60, 20 years/any age Employees Covered by Benefit Terms At the December 31, 2022 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 56 Inactive employees entitled to but not yet receiving benefits 116 Active employees 73 245 DRAFT - 3.20.2024 Page 129 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 52 Contributions Member contribution rates in TMRS are either 5%, 6%, or 7% of the Member’s total compensation, and the Town matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the Town. Under the state law governing TMRS, the contribution rate for each Town is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The Town’s contribution rate is based on the liabilities created from the benefit plan options selected by the Town and any changes in benefits or actual experience over time. Employees for the Town were required to contribute 7% of their annual compensation during the fiscal year. The contribution rates for the Town were 12.58% and 12.68% in calendar years 2022 and 2023, respectively. The Town’s contributions to TMRS for the year ended September 30, 2023, were $808,561 and were equal to the required contributions. Net Pension Liability The Town’s Net Pension Liability was measured as of December 31, 2022, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. The Total Pension Liability in the December 31, 2022 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50% per year Overall payroll growth 2.75% per year Investment rate of return 6.75% net of pension plan investment expense, including inflation Salary increases are based on a service-related table. Mortality rates for active members are based on the PUB(10) mortality tables with the Public Safety table used for males and the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender-distinct 2019 Municipal Retirees for Texas mortality tables. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees are used with a 4-year set-forward for males and a 3-year set-forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who became disabled. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four-year period from December 31, 2014 to December 31, 2018. They were adopted in 2019 and first used in the December 31, 2019 actuarial valuation. The post- retirement mortality assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income in order to satisfy the short-term and long-term funding needs of TMRS. DRAFT - 3.20.2024 Page 130 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 53 The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of real rates of return for each major asset class in fiscal year 2023 are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return (Arithmetic) Global Public Equity 35.00%7.70% Core Fixed Income 6.00%4.90% Non-Core Fixed Income 20.00%8.70% Other Public and Private Markets 12.00%8.10% Real Estate 12.00%5.80% Hedge Funds 5.00%6.90% Private Equity 10.00%11.80% Total 100.00% Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that Member and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan’s Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive Members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. DRAFT - 3.20.2024 Page 131 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 54 Changes in Net Pension Liability (Asset) Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability / (Asset) (a) - (b) Balance, Beginning of Year 25,191,362$ 25,401,717$ (210,355)$ Changes for the year: Service cost 1,068,025 - 1,068,025 Interest (on the Total Pension Liability) 1,707,812 - 1,707,812 Difference between expected and actual experience 26,108 - 26,108 Changes in assumptions - - - Contributions - member - 422,144 (422,144) Contributions - employer - 758,653 (758,653) Net investment income - (1,856,921) 1,856,921 Benefit payments, including refunds of member contributions (848,925) (848,925) - Administrative expense - (16,045) 16,045 Other - 19,147 (19,147) Net Changes 1,953,020 (1,521,947) 3,474,967 Balance, End of Year 27,144,382$ 23,879,770$ 3,264,612$ Sensitivity of the Net Position Liability (Asset) to Changes in the Discount Rate The following presents the net pension liability (asset) of the Town, calculated using the discount rate of 6.75%, as well as what the Town’s net pension liability (asset) would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1% Decrease in 1% Increase in Discount Rate (5.75%) Discount Rate (6.75%) Discount Rate (7.75%) Net pension liability (asset)7,421,129$ 3,264,612$ (104,178)$ Pension Plan Fiduciary Net Position Detailed information about the pension plan’s Fiduciary Net Position is available in the Schedule of Changes in Fiduciary Net Position, by Participating City/Town. That report may be obtained at tmrs.com. DRAFT - 3.20.2024 Page 132 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 55 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: For the year ended September 30, 2023, the Town recognized pension expense of $1,101,447. At September 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Difference between projected and actual investment earnings 1,655,072$ Difference in expected and actual economic experience 78,485 - Contributions subsequent to the measurement date 624,583 - 2,358,140$ -$ $624,583 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability for the year ending 2024. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended September 30, Net Deferred Outflows of Resources 2024 174,183$ 2025 409,238 2026 435,831 2027 714,305 1,733,557$ Allocation of Pension Items The Town allocates pension items to the governmental activities on the basis of employee payroll funding. The net pension liability/(asset) is liquidated by the General Fund, Street Maintenance Sales Tax Fund, and Hotel Occupancy Tax Fund. DRAFT - 3.20.2024 Page 133 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 56 Note 11: Other Postemployment Benefits (OPEB) A summary of the total OPEB liability, deferred outflows of resources, deferred inflows of resources, and OPEB expense of each plan is shown below. Detailed discussion of each plan will follow in this note. Total OPEB Deferred Outflows Deferred Inflows Liability of Resources of Resources OPEB Expense Governmental Activities Supplemental Death Benefits Plan 235,202$ 45,489$ 132,691$ 18,625$ Retiree Health Care Plan 52,483 - 25,298 1,374 Total governmental activities 287,685$ 45,489$ 157,989$ 19,999$ Texas Municipal Retirement System Supplemental Death Benefits Fund Plan Description Texas Municipal Retirement System (TMRS) administers an optional death benefit plan, the Supplemental Death Benefits Fund (SDBF), which operates like a group-term life insurance plan. This is a voluntary program in which participating member cities may elect, by ordinance, to provide supplemental death benefits for their active Members with optional coverage for their retirees. The Town has elected to participate in the SBDF for its active members, including retirees. As the SDBF covers both active and retiree participants with no segregation of assets, the SDBF is considered to be an unfunded single-employer OPEB plan (i.e. no assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75). Benefits Provided The death benefit for active Members provides a lump-sum payment approximately equal to the Member’s annual salary (calculated based on the Member’s actual earnings for the 12-month period preceding the month of death). The death benefit for retirees is considered another postemployment benefit (OPEB) and is a fixed amount of $7,500. Employees Covered by Benefit Terms At the December 31, 2022 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees currently receiving benefits 34 Inactive employees entitled to but not yet receiving benefits 32 Active employees 73 139 DRAFT - 3.20.2024 Page 134 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 57 Contributions The Town contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is based on the mortality and service experience of all employees covered by the SDBF and the demographics specific to the workforce of the Town. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. As such, contributions fund the covered active Member and retiree deaths on a pay-as-you-go basis. Due to the SDBF being considered an unfunded OPEB plan, benefit payments are treated as being equal to the Town’s yearly contributions for retirees. The retiree portion of the contribution rates for the Town to the SDBF were 0.06% and 0.08% for calendar year 2022 and 2023, respectively. The Town’s contributions to the SBDF for the year ended September 30, 2023, were $3,618, and were equal to the required contributions. Total OPEB Liability The Town’s Total OPEB Liability was measured as of December 31, 2022, and the Total OPEB Liability was determined by an actuarial valuation as of that date. Actuarial assumptions: The Total OPEB Liability in the December 31, 2022 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50% per year Salary increases 3.50% to 11.50% including inflation Discount rate 4.05% (1.84% in prior year) Retirees' share of benefit- related costs $0 All administrative expenses are paid through the Town’s Pension Trust and accounted for under reporting requirements of GASB Statement No. 68. Salary increases were based on a service- related table. Mortality rates for active members, retirees, and beneﬁciaries were based the gender- distinct 2019 Municipal Retirees of Texas mortality tables. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements. Mortality rates for disabled annuitants were based on the mortality tables for healthy retirees is used with a 4 year set- forward for males and a 3 year set-forward for females. In addition, a 3.5% and 3% minimum mortality rate will be applied to reflect the impairment for younger members who become disabled for males and females, respectively. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. The actuarial assumptions used in the December 31, 2022 valuation were based on the results of an actuarial experience study for the period December 31, 2014 to December 31, 2018. Because the Supplemental Death Benefits Fund is considered an unfunded trust under GASB Statement No. 75, the relevant discount rate for calculating the Total OPEB Liability is based on the Fidelity Index’s “20-Year Municipal GO AA Index” rate as of the measurement date. DRAFT - 3.20.2024 Page 135 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 58 Changes in the Total OPEB Liability: Total OPEB Liability Balance, Beginning of Year 361,536$ Changes for the year Service cost 26,535 Interest on Total OPEB Liability 6,863 Differences between expected and actual experience (21,220) Changes of assumptions (134,894) Benefit payments (3,618) Net changes (126,334) Balance, End of Year 235,202$ Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the Town, calculated using the discount rate of 4.05%, as well as what the Town’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3.05%) or 1-percentage- point higher (5.05%) than the current rate: 1% Decrease in 1% Increase in Discount Rate (3.05%) Discount Rate (4.05%) Discount Rate (5.05%) Total OPEB liability 285,786$ 235,202$ 196,514$ OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2023, the Town recognized OPEB expense of $18,625. At September 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Difference in expected and actual experience 2,757$ 23,279$ Changes in assumptions 38,791 109,412 Contributions made subsequent to measurement date 3,941 - 45,489$ 132,691$ DRAFT - 3.20.2024 Page 136 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 59 The Town reported $3,941 as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date that will be recognized as a reduction of the Total OPEB Liability for the year ending September 30, 2024. Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended September 30, Net Deferred Outflows of Resources 2024 (16,002)$ 2025 (18,547) 2026 (27,863) 2027 (28,731) (91,143)$ Retiree Health Care Plan Plan Description The Town offers retired employees and their dependents the option to retain health, dental, and vision insurance coverage under the Town’s insurance carrier until the age 65 through a single employer defined benefit plan. The Town does not make a direct contribution for retiree medical coverage. The retirees participate in the same plan as active employees. This effect on cost is considered to be an implicit rate subsidy. To be eligible for retiree health plan benefits, retired employees must be at least age 55 and have 10 years of service with the Town. The plan does not issue a separate report. Benefit provisions for retirees are not mandated by any form of employment agreement and the continued provision of these benefits is based entirely on the discretion of the Town Council. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75. Benefits Provided Retiree medical coverage levels for retirees are the same plans and benefits for all active employees in accordance with the terms and conditions of the Town’s current health plan. Premiums for the retiree health plans are 195% of the current contribution rate for active employees. The plans themselves are the same as well with regard to benefits and structure with no differentiation. The contributions and coverage continue until the retiree reaches age 65. DRAFT - 3.20.2024 Page 137 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 60 Employees Covered by Benefit Terms At September 30, 2023, the following employees were covered by the benefit terms: Inactive employees currently receiving benefits - Active employees 62 62 Total OPEB Liability The Town’s Total OPEB Liability was measured as of September 30, 2023, and the Total OPEB Liability was determined by an actuarial valuation as of September 30, 2022. Actuarial Assumptions: The Total OPEB Liability in the September 30, 2022 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Salary increases 3.50%, including inflation Discount rate 4.77% (4.77% in prior year) Retirees' share of benefit- related costs Retiree pays a 195% of the active employee monthly contribution rate for medical/ dental/vision coverage Health-care cost trend rates Level 4.50% Mortality rates were based on RPH-2014 Total Table with Projection MP-2019. Because the Retiree Health Care Plan is considered an unfunded trust under GASB Statement No. 75, the relevant discount rate for calculating the Total OPEB Liability is based on the S&P Municipal Bond 20-Year High Grade Rate index as of the measurement date. Changes in the Total OPEB Liability: Total OPEB Liability Balance, Beginning of Year 45,909$ Changes for the year Service cost 4,185 Interest on Total OPEB Liability 2,389 Net changes 6,574 Balance, End of Year 52,483$ DRAFT - 3.20.2024 Page 138 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 61 Rate Sensitivity of the Total OPEB Liability The following presents the total OPEB liability of the Town, calculated using the discount rate of 4.77%, as well as what the Town’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3.77%) or 1-percentage- point higher (5.77%) than the current rate: 1% Decrease in 1% Increase in Discount Rate (3.77%) Discount Rate (4.77%) Discount Rate (5.77%) Total OPEB liability 47,288$ 52,483$ 58,297$ The following presents the total OPEB liability of the Town, calculated using the healthcare cost trend rate of 4.5%, as well as what the Town’s total OPEB liability would be if it were calculated using a trend rate that is 1-percentage-point lower (3.5%) or 1-percentage- point higher (4.5%) than the current rate: 1% Decrease in Healthcare 1% Increase in Trend Rate (3.50%) Trend Rate (4.50%) Trend Rate (5.50%) Total OPEB liability 45,874$ 52,483$ 60,258$ OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2023, the Town recognized OPEB expense of $1,374. At September 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Difference in expected and actual experience -$ 12,157$ Changes in assumptions - 13,141 -$ 25,298$ DRAFT - 3.20.2024 Page 139 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 62 Amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended September 30, Net Deferred Inflows of Resources 2024 (5,200)$ 2025 (5,200) 2026 (5,200) 2027 (5,058) 2028 (4,224) Thereafter (416) (25,298)$ Allocation of OPEB Items The Town allocates OPEB items to the governmental activities on the basis of employee payroll funding. The total OPEB liability is liquidated by the General Fund, Street Maintenance Sales Tax Fund, and Hotel Occupancy Tax Fund. Note 12: Deferred Compensation Plan The Town has established a single-employer defined contribution, deferred compensation plan (457 Plan) in accordance with Internal Revenue Code, Section 457(b). The 457 Plan is available to all full-time employees of the Town. The 457 Plan is administered by ICMA Retirement Corporation doing business as Mission Square Retirement. Benefit provisions are contained in the plan document and were established and can be amended by action of the Town Council. All 457 Plan assets and income are held in trust for the exclusive benefit of participants and their beneficiaries; therefore, it is not reported in the financial statements of the Town. The 457 Plan permits employees to defer a portion of their salaries until future years. The benefits of the 457 Plan are not available to employees until termination, retirement, or unforeseeable emergency. Benefits are available to employee’s beneficiaries in case of death. The Town does not contribute to the 457 Plan. DRAFT - 3.20.2024 Page 140 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 63 Note 13: Tax Abatements The Town enters into tax abatement agreements with local businesses under Chapter 380 of the Texas Local Government Code. The Town has the authority under both Article III, Section 52-a of the Texas Constitution and Chapter 380 to make public funds available for the purposes of promoting local economic development and stimulating business and commercial activity with the Town. The Town offers individual incentive packages to attract new business to the Town. Abatements may be granted by Town Council resolution to companies or developers agreeing to relocate to the Town or to establish a new business in the Town. As part of the agreements, the Town agrees to refund a portion of incremental Local Sales and Use Tax, Type B Sales and Use Tax, and/or Property Taxes after confirmation of payment. The agreements entered into by the Town include clawback provisions should the recipient of the tax abatement fail to fully meet its commitments, such as annual sales levels or appraised values of real and personal property located on the project site. As a part of these agreements, the Town may also provide Developers financial assistance for Developer’s expenditures made towards the Project. In addition to tax abatements, the Town occasionally makes additional commitments in its economic development incentive agreements. The following additional commitments have been made:  The Town agreed to provide a loan of $200,000 to fund certain permanent improvements to a building related to a qualified project during fiscal year 2021. The loan was to be paid back with interest of 2% calculated annually within four years of the date the Certificate of Occupancy is issued. During fiscal year 2022, the payee closed operations and was in default of the agreement. The Town is currently developing a revised repayment plan with expectations of full collectability of the original outstanding amount. The current loan amount is the note receivable balance in the 4B Economic Development Corporation. For the fiscal year ended September 30, 2023, the Town has two open tax abatement agreements and abated the following amounts under these agreements: Open Agreements - Type of Tax Abatement Amount of Taxes Abated during the Fiscal Year Town of Trophy Club Property Taxes 29,043$ Sales Taxes 11,239 40,282$ DRAFT - 3.20.2024 Page 141 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 64 Note 14: 4B Economic Development Corporation (4B) The 4B Economic Development Corporation (4B) is financed with a voter approved half-cent Town sales tax, to aid, promote and further the economic development within the Town. Cash and Investments Cash and cash equivalents for the 4B as of September 30, 2023, consist of and are classified in the accompanying financial statements as follows: Cash and cash equivalents 1,504,186$ Total cash and cash equivalents 1,504,186$ Investments Because the Town provides investment services for the 4B, the Town adheres to its investment policy and all state statutes when investing available cash for the Town. The 4B’s investments balances at September 30, 2023, were $1,179,839 (included in cash and cash equivalents for financial statement purposes) and were in held in TexPool. Note Receivable In connection with an economic development incentive agreement, as noted previously, 4B agreed to provide a loan of $200,000 to fund certain permanent improvements to a building related to a qualified project during fiscal year 2021. The loan was to be paid back with interest of 2% calculated annually within four years of the date the Certificate of Occupancy is issued. During fiscal year 2022, the payee closed operations and was in default of the agreement. The Town is currently developing a revised repayment plan with expectations of full collectability of the original outstanding amount. Scheduled note receivable payments as of year-end are as follows: Year Ended September 30, Future Minimum Note Receivable Amounts 2024 62,500$ 2025 37,500 2026 50,000 Total 150,000$ DRAFT - 3.20.2024 Page 142 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 65 Capital Assets Capital asset activity for the year ended September 30, 2023, is as follows: Beginning Ending Balance Additions Deletions Balance Component Unit Activities Capital assets, not being depreciated: Land 2,538,765$ -$ -$ 2,538,765$ Total capital assets, not being depreciated 2,538,765 - - 2,538,765 Capital assets, being depreciated: Infrastructure 367,960 - - 367,960 Total capital assets, being depreciated 367,960 - - 367,960 Less accumulated depreciation for: Infrastructure 81,932 24,693 - 106,625 Total accumulated depreciation 81,932 24,693 - 106,625 Total capital assets, being depreciated, net 286,028 (24,693) - 261,335 Total capital assets 2,824,793$ (24,693)$ -$ 2,800,100$ Depreciation expense charged to the 4B component unit was $24,693. Long-term Debt A summary of long-term debt transactions, including current portion, for the year ended September 30, 2023, is as follows: Beginning Balance Additions Retirements Ending Balance Due Within One Year Component Unit Activities Sales Tax Revenue Bonds 1,955,000$ -$ 115,000$ 1,840,000$ 120,000$ Bond Discounts (17,210) - (1,333) (15,877) - Total bonds payable 1,937,790 - 113,667 1,824,123 120,000 Total component unit activities 1,937,790$ -$ 113,667$ 1,824,123$ 120,000$ Sales Tax Revenue Bonds 4B issued sales tax revenue bonds to provide funds for purchasing land within the Town to be used to promote new or expanded business enterprises including for entertainment, convention, tourist, sports and exhibition facilities, amphitheaters, concert halls, parks, open space, restaurants, retail, parking facilities, public safety facilities and related roads, street and water and sewer facilities and improvements. Sales tax revenue bonds outstanding at September 30, 2023, are as follows: Component Unit Activities Interest Rate (%) Final Maturity Original Borrowing Outstanding at Year-End Sales Tax Revenue Bonds, Taxable Series 2015 1.00-4.75 2035 2,690,000$ 1,840,000$ 2,690,000$ 1,840,000$ DRAFT - 3.20.2024 Page 143 of 233 Town of Trophy Club, Texas Notes to the Financial Statements September 30, 2023 66 The debt service requirements for the sales tax revenue bonds are as follows: Year Ended September 30,Principal Interest Total Requirements 2024 120,000$ 82,263$ 202,263$ 2025 125,000 77,463 202,463 2026 130,000 72,213 202,213 2027 135,000 66,688 201,688 2028-2032 775,000 241,050 1,016,050 2033-2035 555,000 53,675 608,675 Total 1,840,000$ 593,352$ 2,433,352$ Component Unit Activities The following is a summary of pledged revenues of 4B for the year ended September 30, 2023: Revenue Pledged Total Pledged Revenue Current Year Debt Service Requirements Percentage Portion of Pledged Revenue Stream Remaining Principal and Interest Period Revenue Will Not Be Available For Other Purposes .5% sales and use tax $ 767,911 $ 202,896 26.4% $ 2,433,352 Until 2035 DRAFT - 3.20.2024 Page 144 of 233 Required Supplementary Information (Unaudited) DRAFT - 3.20.2024 Page 145 of 233 DRAFT - 3.20.2024 Page 146 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – General Fund For the Year Ended September 30, 2023 67 Original Final Variance with Budget Budget Actual Final Budget Revenues Property tax 8,369,014$ 8,369,014$ 8,630,785$ 261,771$ Sales and mixed beverage taxes 1,480,000 1,480,000 1,613,746 133,746 Franchise and local taxes 877,500 877,500 1,016,222 138,722 License and permits 190,000 190,000 253,027 63,027 Intergovernmental 1,076,655 1,076,655 1,545,538 468,883 Charges for services 815,154 815,154 1,519,212 704,058 Fines and forfeitures 298,811 298,811 412,199 113,388 Lease revenue - - 107,834 107,834 Interest revenue - leases - - 20,188 20,188 Investment income 24,000 24,000 639,154 615,154 Other revenue 161,000 161,000 19,580 (141,420) Total revenues 13,292,134 13,292,134 15,777,485 2,485,351 Expenditures Current: General government 228,844 210,706 216,004 (5,298) Manager's office 773,531 833,531 758,661 74,870 Human resources 292,238 292,238 268,107 24,131 Finance 648,042 654,212 504,727 149,485 Information services 811,517 811,517 641,317 170,200 Legal 150,230 150,230 159,807 (9,577) Municipal court 7,240 7,240 90,063 (82,823) Police 3,287,589 3,373,991 3,371,490 2,501 Fire 1,495,176 1,531,530 1,571,944 (40,414) Emergency medical services 1,382,300 1,418,654 1,453,750 (35,096) Facilities management 355,071 370,468 1,425,314 (1,054,846) Parks and recreation 2,540,080 2,547,672 2,302,847 244,825 Community development 543,636 546,939 483,392 63,547 Tourism - - 256,975 (256,975) Sanitation 314,195 314,195 - 314,195 Debt Service: Principal - - 10,165 (10,165) Capital outlay - - 317,822 (317,822) Total expenditures 12,829,689 13,063,123 13,832,385 (769,262) Excess of Revenues Over Expenditures 462,445 229,011 1,945,100 1,716,089 Other Financing Sources (Uses) Transfers in 151,500 151,500 151,500 - Transfers out (594,907) (1,594,907) (95,254) 1,499,653 Issuance of leases - - 26,383 26,383 Sale of general capital assets - - 44,208 44,208 Total other financing sources (uses)(443,407) (1,443,407) 126,837 1,570,244 Net Change in Fund Balance 19,038$ (1,214,396)$ 2,071,937 3,286,333$ Fund Balance, Beginning 8,344,397 Fund Balances, Ending 10,416,334$ DRAFT - 3.20.2024 Page 147 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Public Improvement District No. 1 For the Year Ended September 30, 2023 68 Original and Variance with Final Budget Actual Final Budget Revenues Special assessments 2,261,888$ 2,267,110$ 5,222$ Investment income - 177,679 177,679 Miscellaneous 48,701 - (48,701) Total revenues 2,310,589 2,444,789 134,200 Expenditures General government 48,701 48,701 - Debt Service: Principal 1,469,000 1,469,000 - Interest and fiscal charges 792,888 814,923 (22,035) Total expenditures 2,310,589 2,332,624 (22,035) Net Change in Fund Balances -$ 112,165 112,165$ Fund Balances, Beginning 3,970,915 Fund Balances, Ending 4,083,080$ DRAFT - 3.20.2024 Page 148 of 233 Town of Trophy Club, Texas Schedule of Changes in the Town’s Net Pension Liability / (Asset) and Related Ratios – Texas Municipal Retirement System 69 Measurement Date December 31, 201420152016201720182019202020212022Total Pension LiabilityService cost 809,057$ 804,453$ 795,448$ 789,530$ 863,553$ 980,663$ 1,044,859$ 1,059,781$ 1,068,025$ Interest (on the Total Pension Liability) 970,682 1,053,745 1,113,555 1,173,728 1,263,163 1,354,175 1,466,317 1,572,070 1,707,812 Changes of benefit terms(1,544,038) - - - - - - - - Difference between expected and actual experience (49,303) (237,279) (471,044) (62,418) (258,925) (3,497) (142,491) 191,092 26,108 Change in assumptions - 368,895 - - - (802) - - - Benefit payments, including refunds of employee contributions(450,100) (632,921) (450,496) (636,604) (589,161) (566,895) (835,638) (783,233) (848,925) Net Change in Total Pension Liability (263,702) 1,356,893 987,463 1,264,236 1,278,630 1,763,644 1,533,047 2,039,710 1,953,020 Total Pension Liability - Beginning15,231,441 14,967,739 16,324,632 17,312,095 18,576,331 19,854,961 21,618,605 23,151,652 25,191,362 Total Pension Liability - Ending14,967,739 16,324,632 17,312,095 18,576,331 19,854,961 21,618,605 23,151,652 25,191,362 27,144,382 Plan Fiduciary Net PositionContributions - employer660,364 658,543 593,840 606,585 633,832 710,975 760,116 808,487 758,653 Contributions - employee316,613 340,458 329,281 323,389 347,155 384,574 406,480 420,786 422,144 Net investment income681,774 19,357 912,155 2,061,434 (515,889) 2,642,216 1,537,272 2,883,176 (1,856,921) Benefit payments, including refunds of employee contributions(450,100) (632,921) (450,496) (636,604) (589,161) (566,895) (835,638) (783,233) (848,925) Administrative expense(7,117) (11,788) (10,296) (10,676) (9,961) (14,914) (9,935) (13,322) (16,045) Other(585) (582) (555) (541) (520) (448) (388) 91 19,147 Net Change in Plan Fiduciary Net Position1,200,949 373,067 1,373,929 2,343,587 (134,544) 3,155,508 1,857,907 3,315,985 (1,521,947) Plan Fiduciary Net Position - Beginning11,915,329 13,116,278 13,489,345 14,863,274 17,206,861 17,072,317 20,227,825 22,085,732 25,401,717 Plan Fiduciary Net Position - Ending13,116,278 13,489,345 14,863,274 17,206,861 17,072,317 20,227,825 22,085,732 25,401,717 23,879,770 Net Pension Liability / (Asset) - Ending1,851,461$ 2,835,287$ 2,448,821$ 1,369,470$ 2,782,644$ 1,390,780$ 1,065,920$ (210,355)$ 3,264,612$ Plan Fiduciary Net Position as a Percentage of Total Pension Liability87.63%82.63%85.85%92.63%85.99%93.57%95.40% 100.84% 87.97%Covered Payroll4,523,041$ 4,863,685$ 4,704,011$ 4,619,838$ 4,954,406$ 5,493,911$ 5,722,119$ 6,011,235$ 6,030,633$ Net Pension Liability / (Asset) as a Percentage of Covered Payroll40.93%58.30%52.06%29.64%56.17%25.31%18.63% -3.50% 54.13%Other Information:For the 2015 valuation, inflation used was 2.5%, investment rate of return and discount rate used was 6.75% and actuarial studies were updated through December 31, 2014.This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the Town will present information for only those years for which information is available. Information has been determined as of the Town's measurement date (December 31).For the 2019 valuation, actuarial studies were updated through December 31, 2018.DRAFT - 3.20.2024Page 149 of 233 Town of Trophy Club, Texas Schedule of Contributions Texas Municipal Retirement System 70 Fiscal Year Ended September 30, 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actuarially determined contribution 642,631$ 627,419$ 598,176$ 638,736$ 736,208$ 728,124$ 810,363$ 793,562$ 808,561$ Contribution in relation of the actuarially determined contribution 642,631 627,419 598,176 638,736 736,208 728,124 810,363 793,562 808,561 Contribution deficiency (excess)-$ -$ -$ -$ -$ -$ -$ -$ -$ Covered payroll 4,617,652$ 4,822,763$ 4,559,463$ 4,911,902$ 5,640,011$ 5,524,768$ 5,985,416$ 6,195,743$ 6,387,617$ Contributions as a percentage of covered payroll 13.92% 13.01% 13.12% 13.00% 13.05% 13.18% 13.54% 12.81% 12.66% Notes to Required Supplementary Information – TMRS Notes to Schedule of Contributions Valuation Date: Notes Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 23 years (longest amortization ladder) Asset Valuation Method 10 Year smoothed fair value; 12% soft corridor Inflation 2.50% Salary Increases 3.50% to 11.5%, including inflation Investment Rate of Return 6.75% Retirement Age Mortality Other Information: Notes This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the Town will present information for only those years for which information is available. Information has been determined as of the Town's most recent fiscal year-end (September 30). There were no benefit changes during the year. Actuarially determined contribution rates are calculated as of December 31 and become effective in January 13 months later. Pre-retirement: PUB(10) mortality tables, with the Public Safety table used for males and the General Employee table used for females. The rates are projected on a fully generational basis with scale UMP. Post-retirement: 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale UMP. Experience-based table of rates that are specific to the Town's plan of benefits. Last updated for the 2019 valuation pursuant to an experience study of the period 2014 - 2018 DRAFT - 3.20.2024 Page 150 of 233 Town of Trophy Club, Texas Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios Texas Municipal Retirement System Supplemental Death Benefits Fund 71 Measurement Date December 31, 2017 2018 2019 2020 2021 2022 Total OPEB Liability Service cost 10,164$ 12,386$ 15,383$ 21,744$ 27,652$ 26,535$ Interest (on the Total OPEB Liability) 6,033 6,400 7,252 7,204 6,517 6,863 Difference between expected and actual experience - (887) (4,443) (12,515) 4,559 (21,220) Change in assumptions 17,400 (16,237) 46,233 46,896 12,575 (134,894) Benefit payments (924) (991) (1,099) (1,144) (3,607) (3,618) Net Change in Total OPEB Liability 32,673 671 63,326 62,185 47,696 (126,334) Total OPEB Liability - Beginning 154,985 187,658 188,329 251,655 313,840 361,536 Total OPEB Liability - Ending 187,658$ 188,329$ 251,655$ 313,840$ 361,536$ 235,202$ Covered Employee Payroll 4,619,838$ 4,954,406$ 5,493,911$ 5,722,119$ 6,011,235$ 6,030,633$ Total OPEB Liability as a Percentage of Covered-Employee Payroll 4.06% 3.80% 4.58% 5.48% 6.01% 3.90% Notes to Schedule: Changes of Benefit Terms: None Changes of Assumptions: 2016 3.78% 2017 3.00% 2018 4.10% 2019 2.75% 2020 2.00% 2021 1.84% 2022 4.05% 1) Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75 to pay related benefits. This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the Town will present information for only those years for which information is available. DRAFT - 3.20.2024 Page 151 of 233 Town of Trophy Club, Texas Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios Retiree Health Care Plan 72 Measurement Date September 30,2018 2019 2020 2021 2022 2023 Total OPEB Liability Service cost 5,179$ 5,389$ 5,389$ 6,570$ 6,570$ 4,185$ Interest (on the Total OPEB Liability) 2,019 2,101 2,624 1,489 1,670 2,389 Difference between expected and actual experience - - (1,194) - (16,109) - Change in assumptions - - (6,481) - (13,868) - Net Change in Total OPEB Liability 7,198 7,490 338 8,059 (21,737) 6,574 Total OPEB Liability - Beginning 44,561 51,759 59,249 59,587 67,646 45,909 Total OPEB Liability - Ending 51,759$ 59,249$ 59,587$ 67,646$ 45,909$ 52,483$ Covered Employee Payroll 4,911,902$ 5,493,911$ 5,524,768$ 5,985,416$ 6,195,743$ 6,387,617$ Total OPEB Liability as a Percentage of Covered-Employee Payroll 1.05%1.08%1.08%1.13%0.74%0.82% Notes to Schedule: Changes of Benefit Terms:None Changes of Assumptions: 2017 4.06% 2018 4.06% 2019 2.25% 2020 2.25% 2021 2.25% 2022 4.77% 2023 4.77% 1) Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75 to pay related benefits. This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the Town will present information for only those years for which information is available. DRAFT - 3.20.2024 Page 152 of 233 Combining and Individual Fund Financial Statements and Schedules (Unaudited) DRAFT - 3.20.2024 Page 153 of 233 DRAFT - 3.20.2024 Page 154 of 233 Nonmajor Governmenta Funds Special Revenue Funds Hotel Occupancy Tax Fund – This fund is used to account for local hotel and motel occupancy tax receipts, as well as expenses (events). Street Maintenance Sales Tax Fund – Accounts for sales taxes specifically restricted for street improvements. Court Technology Fund – Accounts for court fees specifically restricted for court technology expenses. Court Security Fund – Accounts for court fees specifically restricted for court security expenses. Recreation Programs Fund – Accounts for revenues and expenditures associated with recreational programs. Park Land Dedication Fund – This fund is used to account for park revenues received by and expended by the Town. Grant Fund –This fund is used to account for certain grant monies received by and expended by the Town. Tax Increment Reinvestment Zone No. 1 – Accounts for revenues to be used in the reinvestment zone. Crime Control and Prevention District – Accounts for the funds received from a one-half one percent sales tax, which can be utilized for public safety. DRAFT - 3.20.2024 Page 155 of 233 DRAFT - 3.20.2024 Page 156 of 233 Town of Trophy Club, Texas Combining Balance Sheet Nonmajor Governmental Funds September 30, 2023 73 HotelStreetTax Increment Crime ControlOccupancyMaintenance CourtCourt Recreation Park LandReinvestment andTax Sales Tax TechnologySecurityPrograms Dedication Grant Zone No. 1 Prevention TotalAssetsCash and cash equivalents 2,648,726$ 406,272$ 7,466$ 53,728$ 21,175$ 407,935$ 9,886$ 234,426$ 211,736$ 4,001,350$ Taxes receivable, net 99,474 61,683 - - - - - - 61,915 223,072 Total assets 2,748,200 467,955 7,466 53,728 21,175 407,935 9,886 234,426 273,651 4,224,422 Liabilities:Accounts payable 25,862 26,075 - - - - - 40,282 16,080 108,299 Due to component unit - 14,891 - - - - - - - 14,891 Advances to other funds - - - - - - - 386,503 - 386,503 Total liabilities 25,862 40,966 - - - - - 426,785 16,080 509,693 Fund Balances/(Deficit)RestrictedTourism 2,722,338 - - - - - - - - 2,722,338 Public safety - - - - - - 9,886 - 257,571 267,457 Street maintenance- 426,989 - - - - - - - 426,989 Court- - 7,466 53,728 - - - - - 61,194 Parks- - - - - 407,935 - - - 407,935 CommittedRecreation programs- - - - 21,175 - - - - 21,175 Unassigned- - - - - - - (192,359) - (192,359) Total fund balances/(deficit) 2,722,338 426,989 7,466 53,728 21,175 407,935 9,886 (192,359) 257,571 3,714,729 Total liabilities and fund balances/(deficit) 2,748,200$ 467,955$ 7,466$ 53,728$ 21,175$ 407,935$ 9,886$ 234,426$ 273,651$ 4,224,422$ DRAFT - 3.20.2024Page 157 of 233 Town of Trophy Club, Texas Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2023 74 HotelStreetTax Increment Crime ControlOccupancy Maintenance CourtCourt Recreation Park LandReinvestment andTax Sales Tax Technology Security Programs Dedication Grant Zone No. 1 Prevention TotalRevenuesProperty tax-$ -$ -$ -$ -$ -$ -$ 6,648$ -$ 6,648$ Sales tax- 370,715 - - - - - - 373,794 744,509 Occupancy tax822,484 - - - - - - - - 822,484 Intergovernmental- - - - - - - - 21,525 21,525 Charges for services- - - - 4,825 - - - - 4,825 Fines and fees- - 161 20,145 - - - - - 20,306 Investment income99,941 2,038 - - - 18,259 - - 971 121,209 Other revenue14,272 - - - - 85,268 - 13,189 - 112,729 Total revenues936,697 372,753 161 20,145 4,825 103,527 - 19,837 396,290 1,854,235 ExpendituresCurrent:General- 79,500 - - - - - - - 79,500 Court- - 250 2,000 - - - - - 2,250 Police- - - - - - - - 150,617 150,617 Community development- - - - - - 41,282- 41,282 Tourism387,712 - - - - - - - - 387,712 Parks and recreation- - - - 5,200 - - - - 5,200 Public works- 231,437 - - - - - - - 231,437 Debt Service:Principal- - - - - - - - 30,090 30,090 Capital outlay7,200 37,775 - - - 46,146 - - 248,492 339,613 Total expenditures394,912 348,712 250 2,000 5,200 46,146 - 41,282 429,199 1,267,701 Excess (Deficiency) of Revenues Over (Under) Expenditures541,785 24,041 (89) 18,145 (375) 57,381 - (21,445) (32,909) 586,534 Other Financing Sources (Uses)Transfers in- - - - - - - 95,254 - 95,254 Transfers out(95,000) (33,754) - (1,500) - - - - - (130,254) Sale of general capital assets- - - - - - - - 10,000 10,000 Total other financing sources (uses)(95,000) (33,754) - (1,500) - - - 95,254 10,000 (25,000) Net Change in Fund Balances446,785 (9,713) (89) 16,645 (375) 57,381 - 73,809 (22,909) 561,534 Fund Balances/(Deficit), Beginning2,275,553 436,702 7,555 37,083 21,550 350,554 9,886 (266,168) 280,480 3,153,195 Fund Balances/(Deficit), Ending2,722,338$ 426,989$ 7,466$ 53,728$ 21,175$ 407,935$ 9,886$ (192,359)$ 257,571$ 3,714,729$ DRAFT - 3.20.2024Page 158 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Hotel Occupancy Tax Fund For the Year Ended September 30, 2023 75 Hotel Original Final Occupancy Variance with Budget Budget Tax Final Budget Revenues Taxes 600,000$ 600,000$ 822,484$ 222,484$ Investment income 5,000 5,000 99,941 94,941 Other revenue 7,500 7,500 14,272 6,772 Total revenues 612,500 612,500 936,697 324,197 Expenditures Tourism 175,500 234,000 387,712 (153,712) Capital outlay 100,000 100,000 7,200 92,800 Total expenditures 275,500 334,000 394,912 (60,912) Excess of Revenues Over Expenditures 337,000 278,500 541,785 263,285 Other Financing Sources (Uses) Transfers out (95,000) (95,000) (95,000) - Total other financing sources (uses)(95,000) (95,000) (95,000) - Net Change in Fund Balance 242,000$ 183,500$ 446,785 263,285$ Fund Balance, Beginning 2,275,553 Fund Balance, Ending 2,722,338$ DRAFT - 3.20.2024 Page 159 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Street Maintenance Sales Tax Fund For the Year Ended September 30, 2023 76 Street Original and Maintenance Variance with Final Budget Sales Tax Final Budget Revenues Taxes 351,000$ 370,715$ 19,715$ Investment income - 2,038 2,038 Total revenues 351,000 372,753 21,753 Expenditures General government - 79,500 (79,500) Public works 237,036 231,437 5,599 Capital outlay - 37,775 (37,775) Total expenditures 237,036 348,712 (111,676) Excess of Revenues Over Expenditures 113,964 24,041 133,429 Other Financing Sources (Uses) Transfers out (20,000) (33,754) (13,754) Total Other Financing Sources (Uses)(20,000) (33,754) (13,754) Net Change in Fund Balance 93,964$ (9,713) (103,677)$ Fund Balance, Beginning 436,702 Fund Balance, Ending 426,989$ DRAFT - 3.20.2024 Page 160 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Court Technology Fund For the Year Ended September 30, 2023 77 Original and Court Variance with Final Budget Technology Final Budget Revenues Fines and fees 1,000$ 161$ (839)$ Total revenues 1,000 161 (839) Expenditures Court 2,755 250 2,505 Total expenditures 2,755 250 2,505 Net Change in Fund Balance (1,755)$ (89) 1,666$ Fund Balance, Beginning 7,555 Fund Balance, Ending 7,466$ DRAFT - 3.20.2024 Page 161 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Court Security Fund For the Year Ended September 30, 2023 78 Original and Court Variance with Final Budget Securit y Final Budget Revenues Fines and fees 5,000$ 20,145$ 15,145$ Total Revenues 5,000 20,145 15,145 Expenditures Court 2,500 2,000 500 Total expenditures 2,500 2,000 500 Excess of Revenues Over Expenditures 2,500 18,145 15,645 Other Financing Sources (Uses) Transfers out (1,500) (1,500) - Total other financing sources (uses) (1,500) (1,500) - Net Change in Fund Balance 1,000$ 16,645 15,645$ Fund Balance, Beginning 37,083 Fund Balance, Ending 53,728$ DRAFT - 3.20.2024 Page 162 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Recreation Programs Fund For the Year Ended September 30, 2023 79 Original and Recreation Variance with Final Budget Programs Final Budget Revenues Charges for services 6,000$ 4,825$ (1,175)$ Total revenues 6,000 4,825 (1,175) Expenditures Recreation 6,000 5,200 800 Total expenditures 6,000 5,200 800 Net Change in Fund Balance -$ (375) (375)$ Fund Balance, Beginning 21,550 Fund Balance, Ending 21,175$ DRAFT - 3.20.2024 Page 163 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Park Land Dedication Fund For the Year Ended September 30, 2023 80 Original and Park Land Variance with Final Bud get Dedication Final Budget Revenues Investment income 1,750$ 18,259$ 16,509$ Miscellaneous - 85,268 85,268 Total Revenues 1,750 103,527 101,777 Expenditures Capital outlay 97,000 46,146 50,854 Total Expenditures 97,000 46,146 50,854 Net Change in Fund Balance (95,250)$ 57,381 152,631$ Fund Balance, Beginning 350,554 Fund Balance, Ending 407,935$ DRAFT - 3.20.2024 Page 164 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Tax Increment Reinvestment Zone No. 1 Fund For the Year Ended September 30, 2023 81 Tax Increment Original and Reinvestment Variance with Final Budget Zone No. 1 Final Budget Revenues Taxes 108,355$ 6,648$ (101,707)$ Other revenue - 13,189 13,189$ Total revenues 108,355 19,837 (88,518) Expenditures Community development 40,924 41,282 358 Total expenditures 40,924 41,282 358 Excess (Deficiency) of Revenues Over (Under) Expenditures 67,431 (21,445) (88,876) Other Financing Sources (Uses) Transfers in - 95,254 95,254 Total other financing sources (uses) - 95,254 95,254 Net Change in Fund Balance 67,431$ 73,809 6,378$ Fund Balance/(Deficit), Beginning (266,168) Fund Balance/(Deficit), Ending (192,359)$ DRAFT - 3.20.2024 Page 165 of 233 Town of Trophy Club, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Crime Control and Prevention District Fund For the Year Ended September 30, 2023 82 Crime Control Original Final and Variance with Budget Budget Prevention Final Budget Revenues Taxes 350,000$ 350,000$ 373,794$ 23,794$ Intergovernmental - 21,525 21,525 - Investment income - - 971 971 Total revenues 350,000 371,525 396,290 24,765 Expenditures Police 359,436 401,436 150,617 (250,819) Debt Service - Principal - - 30,090 30,090 Capital outlay - - 248,492 248,492 Total expenditures 359,436 401,436 429,199 27,763 Excess (Deficiency) of Revenues Over (Under) Expenditures (9,436) (29,911) (32,909) (2,998) Other Financing Sources (Uses) Sale of general capital assets - - 10,000 10,000 Total Other Financing Sources (Uses)- - 10,000 10,000 Net Change in Fund Balance (9,436)$ (29,911)$ (22,909) 7,002$ Fund Balance, Beginning 280,480 Fund Balance, Ending 257,571$ DRAFT - 3.20.2024 Page 166 of 233 Discretely Presented Component Unit 4B Economic Development Corporation – to aid, promote and further economic development within the Town. DRAFT - 3.20.2024 Page 167 of 233 DRAFT - 3.20.2024 Page 168 of 233 Town of Trophy Club, Texas Balance Sheet Trophy Club 4B Economic Development Corporation September 30, 2023 83 4B Economic Development Corporation Assets Cash and cash equivalents 1,504,186$ Taxes receivable, net 127,771 Due from primary government 22,334 Notes receivable 150,000 Total assets 1,804,291$ Fund Balance Restricted Debt Service 216,023$ Economic Development 1,588,268 Total fund balance 1,804,291$ DRAFT - 3.20.2024 Page 169 of 233 Town of Trophy Club, Texas Reconciliation of the Balance Sheet to the Statement of Net Position Trophy Club 4B Economic Development Corporation September 30, 2023 84 Amounts reported for governmental activities in the statement of net position are different because: Total fund balance – governmental fund 1,804,291$ Capital assets, net of accumulated depreciation, used in governmental activities are not financial resources and, therefore, are not reported in the fund.2,800,100 Interest payable on long-term debt does not require current financial resources, therefore interest payable is not reported as a liability in the governmental fund balance sheet.(6,455) Long-term liabilities, including b onds payable and related discount, are not due and payable in the current period and, therefore are not reported in the governmental fund financial statements.(1,824,123) Net position of governmental activities 2,773,813$ DRAFT - 3.20.2024 Page 170 of 233 Town of Trophy Club, Texas Statement of Revenues, Expenditures, and Changes in Fund Balance Trophy Club 4B Economic Development Corporation For the Year Ended September 30, 2023 85 4B Economic Development Corporation Revenues Sales and mixed beverage taxes $ 767,911 Investment income 43,606 Total revenues 811,517 Expenditures Current: Economic Development 17,581 Debt Service: Principal 115,000 Interest and fiscal charges 87,896 Total expenditures 220,477 Net Change in Fund Balances 591,040 Fund Balance, Beginning 1,213,251 Fund Balance, Ending 1,804,291$ DRAFT - 3.20.2024 Page 171 of 233 Town of Trophy Club, Texas Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities Trophy Club 4B Economic Development Corporation For the Year Ended September 30, 2023 86 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances – total governmental fund 591,040$ The governmental fund reports capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of deprecation expense recorded in the current period. (24,693) The repayment of the principal of long-term debt consumes the current financial resources of the governmental fund, but has no effect on net position. 115,000 Some expenses reported in the statement of activities do/(do not) require the use of current financial resources and, therefore, (are)/are not reported as expenditures in the governmental fund. Amortization of bond discount (1,333) Accrued interest on long‐term debt 755 Change in net position of governmental activities 680,769$ DRAFT - 3.20.2024 Page 172 of 233 Statistical Section DRAFT - 3.20.2024 Page 173 of 233 DRAFT - 3.20.2024 Page 174 of 233 Statistical Section (Unaudited) This part of the Town’s annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health. Contents Page(s) Financial Trends .......................................................................................................................... 87-91 These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. Revenue Capacity ........................................................................................................................ 92-95 These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax. Debt Capacity .............................................................................................................................. 96-99 These schedules present information to help the reader assess the affordability of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future. Demographic and Economic Information ............................................................................... 100-101 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. Operating Information ............................................................................................................. 102-103 These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the services the government provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year. DRAFT - 3.20.2024 Page 175 of 233 DRAFT - 3.20.2024 Page 176 of 233 Town of Trophy Club, Texas Net Position by Component Last Ten Fiscal Years (Unaudited) (accrual basis of accounting) Table 1 87 Fiscal Year20142015*20162017 2018** 20192020202120222023Governmental ActivitiesNet investment in capital assets53,586,441$ 27,620,857$ 26,940,643$ 27,125,337$ 51,825,867$ 52,718,444$ 51,061,357$ 27,008,067$ 28,391,158$ 28,947,808$ Restricted564,472 4,035,428 4,433,649 4,676,837 5,478,991 6,112,682 6,821,486 29,052,071 27,278,448 25,542,136 Unrestricted3,119,531 2,279,194 1,995,960 3,414,190 3,594,662 4,107,003 5,321,576 5,265,710 6,394,425 8,375,800 Total governmental activities57,270,444$ 33,935,479$ 33,370,252$ 35,216,364$ 60,899,520$ 62,938,129$ 63,204,419$ 61,325,848$ 62,064,031$ 62,865,744$ Business-type ActivitiesNet investment in capital assets560,931$ 513,930$ 680,146$ 776,097$ 877,048$ 982,997$ $1,121,475 $1,240,768 $1,497,757 1,678,173$ Unrestricted(4,845) 163,047 171,755 350,752 633,294 741,325 706,200 1,077,789 1,507,834 1,982,061 Total business-type activities556,086$ 676,977$ 851,901$ 1,126,849$ 1,510,342$ 1,724,322$ 1,827,675$ 2,318,557$ 3,005,591$ 3,660,234$ Primary GovernmentNet investment in capital assets54,147,372$ 28,134,787$ 27,620,789$ 27,901,434$ 52,702,915$ 53,701,441$ 52,182,832$ 28,248,835$ 29,888,915$ 30,625,981$ Restricted564,472 4,035,428 4,433,649 4,676,837 5,478,991 6,112,682 6,821,486 29,052,071 27,278,448 25,542,136 Unrestricted3,114,686 2,442,241 2,167,715 3,764,942 4,227,956 4,848,328 6,027,776 6,343,499 7,902,259 10,357,861 Total primary government57,826,530$ 34,612,456$ 34,222,153$ 36,343,213$ 62,409,862$ 64,662,451$ 65,032,094$ 63,644,405$ 65,069,622$ 66,525,978$ *The Town implemented GASB Statement No. 68 for the year ended September 30, 2015.** The Town implemented GASB Statement No. 75 for the year ended September 30, 2018. DRAFT - 3.20.2024Page 177 of 233 Town of Trophy Club, Texas Changes in Net Position Last Ten Fiscal Years (Unaudited) (accrual basis of accounting) Table 2 88 Fiscal Year20142015*201620172018**20192020202120222023ExpensesGovernmental activities General government 2,113,664$ 1,955,949$ 2,728,642$ 2,533,298$ 3,398,500$ 3,650,893$ 3,561,521$ 1,381,483$ 663,394$ 899,894$ Manager's office - - - - - - - 936,032 567,704 782,210 Human resources - - - - - - - 280,147 205,246 278,174 Finance - - - - - - - 512,144 549,792 518,064 Information services - - - - - - - 647,888 543,189 673,596 Legal - - - - - - - 118,756 189,141 159,807 Court - - - - - - - 49,837 258,489 92,313 Public safety 3,125,577 2,306,609 3,540,703 4,607,380 4,429,744 5,109,461 5,139,151 5,616,921 6,008,021 7,076,418 Facilities management - - - - - - - 448,538 1,455,292 1,425,387 Tourism- - - - - - - 317,005 396,974 653,518 Sanitation- - - - - - - 1,057,653 - - PID activities- 2,736,000 2,122,901 48,520 2,850 26,875 50,152 - - - Parks and recreation2,555,844 2,253,982 2,652,384 2,761,053 2,644,329 2,871,283 2,593,588 2,674,646 2,864,327 3,093,727 Community development620,209 436,090 640,404 738,659 695,637 717,215 563,312 639,321 471,539 552,382 Public works (Streets and infrastructure)1,764,396 1,716,531 1,878,119 1,728,809 1,671,692 2,371,290 2,052,018 2,308,861 2,315,082 2,358,623 Water and sewer311,677 319,054 319,054 - - - - - - - Storm drainage231,370 234,339 234,287 - - - - - - - Interest on long-term debt412,561 469,923 496,019 2,365,059 2,771,762 2,663,286 1,639,671 1,535,312 1,278,873 1,371,710 Total governmental activities expenses 11,135,298 12,428,477 14,612,513 14,782,778 15,614,514 17,410,303 15,599,413 18,524,544 17,767,063 19,935,823 Business-type activities Storm Drainage103,001 205,331 174,499 120,295 129,722 131,370 93,912 126,163 144,131 176,590 Trophy Club Park134,625 123,445 109,325 116,477 93,677 122,186 229,670 125,692 169,456 127,025 Total business-type activities expenses237,626 328,776 283,824 236,772 223,399 253,556 323,582 251,855 313,587 303,615 Total primary government expenses11,372,924$ 12,757,253$ 14,896,337$ 15,019,550$ 15,837,913$ 17,663,859$ 15,922,995$ 18,776,399$ 18,080,650$ 20,239,438$ Program RevenuesGovernmental activitiesCharges for services General government-$ -$ -$ -$ -$ -$ -$ 286,695$ 321,725$ 269,132$ Court- - - - - - - 110,550 380,427 219,645 Police- - - - - - - 123,942 101,556 142,470 Fire- - - - - - - 1,344,545 1,444,477 1,492,123 Emergency medical services- - - - - - - 95,775 130,805 193,982 Parks and recreation- - - - - - - 301,668 342,996 397,773 Community Development895,508 702,578 605,558 - - - - 1,775 6,340 5,805 Sanitation- - - - - - - 1,058,213 1,059,841 1,091,668 Public works- - - - - - - 9,670 7,485 8,675 Other783,359 2,669,738 2,593,969 3,705,774 3,982,406 3,266,108 1,797,916 - - - Operating grants and contributions423,960 550,495 141,071 581,633 443,752 1,392,787 2,056,622 37,851 173,599 92,029 Capital grants and contributions761,196 1,254,997 - - - 2,127,040 - 150,000 - - Total governmental activities program revenues2,864,023 5,177,808 3,340,598 4,287,407 4,426,158 6,785,935 3,854,538 3,520,684 3,969,251 3,913,302 Business-type activitiesCharges for services Storm Drainage550,617 484,874 466,934 596,520 592,322 539,295 430,303 435,798 435,559 437,219 Trophy Club Park- - - - - - 188,708 185,981 289,336 268,703 Operating grants and contributions- - 61,106 - 94,521 - - 4,170 125,468 31,750 Capital grants and contributions- - - - - 3,360 68,146 - - - Total business-type activities program revenues550,617 484,874 528,040 596,520 686,843 542,655 687,157 625,949 850,363 737,672 Total primary government program revenues3,414,640$ 5,662,682$ 3,868,638$ 4,883,927$ 5,113,001$ 7,328,590$ 4,541,695$ 4,146,633$ 4,819,614$ 4,650,974$ DRAFT - 3.20.2024Page 178 of 233 Town of Trophy Club, Texas Changes in Net Position (Continued) Last Ten Fiscal Years (Unaudited) (accrual basis of accounting) Table 2 89 Fiscal Year20142015*201620172018**20192020202120212022Net (Expense) RevenueGovernmental activities (8,271,275)$ (7,250,669)$ (11,271,915)$ (10,495,371)$ (11,188,356)$ (10,624,368)$ (11,744,875)$ (15,003,860)$ (13,797,812)$ (16,022,521)$ Business-type activities 312,991 156,098 244,216 359,748 463,444 289,099 363,575 374,094 536,776 434,057 Total primary government net (expense) revenue (7,958,284)$ (7,094,571)$ (11,027,699)$ (10,135,623)$ (10,724,912)$ (10,335,269)$ (11,381,300)$ (14,629,766)$ (13,261,036)$ (15,588,464)$ General Revenues And Other Changes In Net PositionGovernmental activitiesTaxes Property taxes5,955,398$ 7,447,069$ 7,714,564$ 8,269,141$ 8,412,231$ 8,974,426$ $9,347,776 $9,940,633 $10,255,223 11,180,838$ Sales and mixed beverage taxes965,969 1,104,298 1,217,693 1,306,243 1,150,073 1,271,864 1,445,994 2,035,404 2,290,748 2,358,255 Other taxes1,020,554 1,027,407 1,255,995 1,376,352 1,486,952 1,581,721 1,238,302 1,261,872 1,689,864 1,838,706 Investment income4,973 11,331 65,709 146,015 259,220 512,922 183,858 72,940 244,451 1,289,627 Miscellaneous revenues185,922 100,202 382,521 908,540 197,567 235,107 414,384 62,904 197,903 313,150 Special items- - - - - - 882,082 - - - Transfers28,607 35,350 70,206 86,887 87,209 86,937 262,933 (116,463) (142,194) (156,342) Total governmental activities 8,161,423 9,725,657 10,706,688 12,093,178 11,593,252 12,662,977 13,775,329 13,257,290 14,535,995 16,824,234 Business-type activitiesInvestment income25 143 914 2,087 7,258 11,818 2,711 325 8,264 64,244 Special items26,001 - - - - - - - - - Transfers28,607 35,350 70,206 86,887 87,209 86,937 262,933 116,463 142,194 156,342 Total business-type activities 54,633 35,493 71,120 88,974 94,467 98,755 265,644 116,788 150,458 220,586 Total primary government8,216,056$ 9,761,150$ 10,777,808$ 12,182,152$ 11,687,719$ 12,761,732$ 14,040,973$ 13,374,078$ 14,686,453$ 17,044,820$ Change In Net PositionGovernmental activities(109,852)$ 2,474,988$ (565,227)$ 1,597,807$ 404,896$ 2,038,609$ 2,030,454$ (1,746,570)$ 738,183$ 801,713$ Business-type activities367,624 191,591 315,336 448,722 557,911 387,854 629,219 490,882 687,234 654,643 Total primary government change in net position257,772$ 2,666,579$ (249,891)$ 2,046,529$ 962,807$ 2,426,463$ 2,659,673$ (1,255,688)$ 1,425,417$ 1,456,356$ *The Town implemented GASB Statement No. 68 for the year ended September 30, 2015.**The Town implemented GASB Statement No. 75 for the year ended September 30, 2018.DRAFT - 3.20.2024Page 179 of 233 Town of Trophy Club, Texas Fund Balances of Governmental Funds Last Ten Fiscal Years (Unaudited) (modified accrual basis of accounting) Table 3 90 Fiscal Year2014201520162017201820192020202120222023General FundNonspendable796$ 1,816$ 54,397$ 91,278$ 430,977$ 389,687$ 389,112$ 727,449$ 427,772$ 435,113$ Committed228,138 228,138 - - - - - - - - Assigned- 200,000 189,475 183,858 182,718 177,130 169,592 - - - Unassigned2,816,087 3,261,235 3,950,290 4,335,983 4,826,823 5,256,436 6,988,719 6,876,307 7,916,625 9,981,221 Total general fund3,045,021$ 3,691,189$ 4,194,162$ 4,611,119$ 5,440,518$ 5,823,253$ 7,547,423$ 7,603,756$ 8,344,397$ 10,416,334$ All Other Governmental FundsRestricted:Debt Service118,092$ 118,542$ 143,174$ 309,043$ 262,277$ 473,670$ 706,640$ 4,357,220$ 4,078,885$ 4,289,334$ Capital Projects4,505,273 1,694,546 8,764,936 6,285,515 5,764,419 3,568,072 1,984,646 6,199,646 4,952,458 10,606,605 Municipal court46,253 43,422 39,668 37,819 37,155 30,036 32,838 36,824 44,638 61,194 Public Safety93,746 134,265 210,189 71,259 9,886 9,886 9,886 284,013 290,366 267,457 Street Maintenance39,915 65,306 -92,856 29,337 92,457 184,556 302,901 436,702 426,989 Tourism283,481 475,748 564,363 399,883 790,686 1,313,981 1,530,643 1,726,744 2,275,553 2,722,338 Parks - - - - 467,425 220,464 385,727 536,001 350,554 407,935 PID No. 1- 4,229,068 3,869,425 3,832,851 3,882,225 3,972,188 3,971,196 - - - Town Anniversary2,114 3,497 - - - - -- - - Committed:Recreation programs2,812 3,395 2,269 7,307 3,655 3,028 5,062 7,710 21,550 21,175 Unassigned6,333 6,327 5,017 - - - - (327,716) (226,168) (192,359) Total all other governmental funds 5,098,019$ 6,774,116$ 13,599,041$ 11,036,533$ 11,247,065$ 9,683,782$ 8,811,194$ 13,123,343$ 12,224,538$ 18,610,668$ DRAFT - 3.20.2024Page 180 of 233 Town of Trophy Club, Texas Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Unaudited) (modified accrual basis of accounting) Table 4 91 Fiscal Year2014201520162017201820192020202120222023RevenuesTaxes Ad valorem taxes 5,908,764$ 7,469,912$ 7,724,244$ 8,132,670$ 8,600,999$ 8,967,795$ 9,359,847$ 9,941,321$ 10,262,914$ 11,207,851$ Sales and mixed beverage taxes 965,969 1,104,298 1,217,694 1,306,243 1,150,073 1,271,864 1,445,994 2,035,404 2,290,748 2,358,255 Franchise taxes 772,621 811,052 953,622 888,863 867,446 911,738 850,543 869,212 908,033 1,016,222 Occupancy 235,796 264,708 302,374 487,489 619,506 669,983 387,759 392,660 781,831 822,484 Special assessments - 1,917,636 1,986,516 2,129,321 2,166,167 2,176,400 2,187,165 2,195,144 2,263,090 2,267,110 Licenses, permits & fees 904,251 697,378 598,586 333,780 614,931 499,302 479,513 284,500 280,222 253,027 Intergovernmental 133,004 326,195 26,237 581,633 608,910 724,333 2,056,622 1,365,324 1,601,656 1,567,063 Charges for services 611,781 293,011 310,735 820,530 767,237 769,962 296,947 1,431,343 1,484,550 1,524,037 Fines & Fees 126,111 580,648 362,409 355,504 497,078 312,267 132,877 337,123 618,956 432,505 Lease revenue- - - - - - - - 83,834 107,834 Interest revenue - leases- - - - - - - - 24,288 20,188 Investment Income4,974 11,330 65,708 146,015 259,213 512,922 183,858 72,940 244,451 1,289,627 Grant revenue61,383 147,691 7,942 - - - - - - - Miscellaneous485,380 100,202 407,418 158,540 715,535 402,894 386,615 212,904 66,440 216,732 Total revenues10,210,034 13,724,061 13,963,485 15,340,588 16,867,095 17,219,460 17,767,740 19,137,875 20,911,013 23,082,935 ExpendituresCurrentGeneral government1,947,650 2,273,447 2,349,120 2,191,140 2,404,704 3,164,364 2,584,454 973,869 270,272 383,218 Manager's office- - - - - - - 973,427 620,172 758,661 Human resources- - - - - - - 287,521 216,058 268,107 Finance- - - - - - - 528,002 583,304 504,727 Information services- - - - - - - 595,432 492,761 641,317 Legal- - - - - - - 118,756 189,141 159,807 Court- - - - - - - 51,347 258,489 92,313 PID activities- 314,344 81,793 44,984 2,850 26,875 50,152 - - - Public safety2,918,484 2,896,632 3,187,064 4,117,992 4,441,873 4,872,242 4,977,216 5,616,394 6,162,615 6,547,801 Facilities management- - - - - - - 450,853 1,460,399 1,425,314 Tourism- - - - - - - 319,943 402,212 644,687 Sanitation- - - - - - - 1,057,653 - - Public works517,964 516,035 566,927 179,448 340,910 414,938 388,419 204,633 207,684 231,437 Community development587,760 479,477 576,508 582,259 449,178 568,239 491,941 654,107 490,655 524,674 Culture & recreation1,853,811 1,799,204 1,892,065 1,991,571 2,708,827 2,250,599 2,380,448 1,922,721 2,138,251 2,308,047 Debt service Principal998,000 1,438,000 2,153,974 1,567,004 1,675,350 1,723,652 3,081,206 3,408,000 3,582,199 3,397,255 Interest and fiscal changes473,972 2,546,971 3,396,480 2,630,171 2,796,835 2,811,664 1,614,385 1,452,214 1,396,045 1,479,107 Capital outlay885,436 3,466,307 3,395,509 9,146,919 1,239,065 2,860,040 1,735,016 508,748 2,647,445 2,325,253 Total expenditures10,183,077 15,730,417 17,599,440 22,451,488 16,059,592 18,692,613 17,303,237 19,123,620 21,117,702 21,691,725 Excess (Deficiency) of Revenues Over Expenditures26,957 (2,006,356) (3,635,955) (7,110,900) 807,503 (1,473,153) 464,503 14,255 (206,689) 1,391,210 Other Financing Sources (Uses)Proceeds from lease obligation- - - - 264,732 - - - - - Proceeds from contractual obligations2,500,000 - 4,210,000 - - - - - - - Sale of general capital assets- - - - - - 32,213 - 60,142 54,208 Insurance recoveries- - - - - - 27,769 - - - Proceeds from bonds600,000 2,030,000 31,399,979 4,445,000 - - 3,550,000 4,305,000 - 6,925,000 Premium on bonds50,329 - 5,020,788 128,317 - - - 297,691 - 257,608 Payment to refunded bond escrow agent- 2,026,710 29,734,500 - - - 3,485,838 - - - Lease financing- - - - - - - - 90,577 26,383 Transfers in55,741 63,350 493,947 993,250 298,457 89,937 264,433 686,235 266,609 246,754 Transfers out27,134 28,000 423,741 906,363 63,817 3,000 1,500 (802,698) (408,803) (403,096) Total other financing sources (uses) 3,233,204 4,148,060 71,282,955 6,472,930 627,006 92,937 7,361,753 4,486,228 8,525 7,106,857 Net Change in Fund Balances3,260,161$ 2,141,704$ 67,647,000$ (637,970)$ 1,434,509$ (1,380,216)$ 7,826,256$ 4,500,483$ (198,164)$ 8,498,067$ Debt Service as a Percentage of Noncapital Expenditures15.83% 32.49% 39.08% 31.55% 30.18% 28.65% 30.16% 26.11% 26.95% 25.18% DRAFT - 3.20.2024Page 181 of 233 Town of Trophy Club, Texas Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (Unaudited) Table 5 92 Less: Total Taxable Total DirectFiscal Real Non Real Tax Exempt Assessed TaxYear Property Property Property Value Rate20141,248,215,265$ 25,845,178$ 60,160,746$ 1,213,899,697$ 0.49930$ 20151,426,754,517 20,304,259 64,382,412 1,382,676,364 0.49000 20161,618,577,881 28,301,916 68,622,814 1,578,256,983 0.48400 20171,816,191,857 29,805,970 73,301,474 1,772,696,353 0.47300 20181,986,456,291 32,335,529 83,492,349 1,935,299,471 0.45144 20192,146,374,412 34,488,137 79,947,523 2,100,915,026 0.44644 20202,245,060,094 34,337,805 173,637,626 2,105,760,273 0.44644 20212,571,479,079 41,659,656 210,421,213 2,402,717,522 0.44644 20222,732,597,188 30,337,600 213,411,764 2,549,523,024 0.44500 20233,069,209,272 29,159,280 220,375,646 2,877,992,906 0.41547 Source: Denton & Tarrant County Central Appraisal District Certified Roll Note: Total Taxable Assessed Value is not adjusted for tax ceilings. Estimated Market Value DRAFT - 3.20.2024Page 182 of 233 Town of Trophy Club, Texas Direct and Overlapping Property Tax Rates (Per $100 of Assessed Value) Last Ten Fiscal Years (Unaudited) Table 6 93 TotalTarrant Tarrant Total Total Total Direct &Fiscal Operating Debt Service Total Town Northwest Trophy Club Trophy Club Denton Trophy Club Tarrant County County MUD #1 MUD #2 PID #1 ESD OverlappingYear Mileage Mileage Mileage ISD MUD #1 MUD #2 County PID #1 ESD County College Hospital Mileage Mileage Mileage Rates2014 0.384300$ 0.115000$ 0.499300$ 1.452500$ 0.133390$ -$ 0.284914$ 0.087380$ 0.264000$ 0.149500$ 0.227897$ 2.985984$ N/A 2.439094$ 3.098881$ 2015 0.380000 0.110000 0.490000 1.452500 0.133390 - 0.272200 0.077270 0.264000 0.149500 0.227897 2.948860 N/A 2.401970 3.066757 2016 0.374000 0.110000 0.484000 1.452500 0.131140 - 0.262000 0.072220 0.264000 0.149500 0.227897 2.925360 N/A 2.380720 3.043257 2017 0.363000 0.110000 0.473000 1.452500 0.127220 - 0.248409 0.074450 0.254000 0.144730 0.227897 2.884309 N/A 2.358359 3.002206 2018 0.341442 0.110000 0.451442 1.490000 0.120210 - 0.237181 0.068700 0.244000 0.140060 0.224429 2.861593 N/A 2.357323 2.976022 2019 0.336442 0.110000 0.446442 1.490000 0.116180 - 0.225574 0.067190 0.234000 0.136070 0.224429 2.825456 N/A 2.339206 2.939885 2020 0.336442 0.110000 0.446442 1.420000 0.112730 - 0.225278 0.067380 0.234000 0.130170 0.224429 2.204450 N/A2.269100 2.860429 2021 0.336442 0.110000 0.446442 1.420000 0.105880 - 0.224985 0.064760 0.229000 0.130170 0.224429 2.197307 N/A 2.266187 2.845666 2022 0.335000 0.099799 0.434799 1.292000 0.091340 - 0.233086 0.064180 0.224000 0.130170 0.229000 2.051225 N/A 2.123864 2.698575 2023 0.315670 0.099799 0.415469 1.274600 0.063810 - 0.189485 0.056250 0.194500 0.112170 0.194500 1.943364 N/A 2.035603 2.500784 Source: Denton & Tarrant County Appraisal Districts Overlapping RatesTown of Trophy Club Overlapping Rates DRAFT - 3.20.2024Page 183 of 233 Town of Trophy Club, Texas Principal Property Taxpayers Current Year and Ten Years Ago (Unaudited) Table 7 94 Percentage ofPercentage ofTaxableTotal TaxableTaxableTotal TaxableAssessedAssessedAssessedAssessedTaxpayerValue RankValueValue Rank ValueNAP Trophy Club LP67,500,000$ 12.35%- n/a- Armore Trophy Club LLC19,400,000 20.67%7,700,000 30.63%Trophy Club 18 LLC19,054,000 30.66%- n/a- TC Town Center 1 LP18,800,000 40.65%- n/a- KAGR Trophy Club 2800 LLC17,400,000 50.60%- n/a- 4663 Okeechobee Blvd. & Palm Beach Holdings9,524,969 60.33%5,700,000 50.47%Trophy Lodging LTD9,500,000 70.33%- n/a- Quasar Hotels LLC9,060,000 80.31%- n/a 0.00%Hydra Hotels LLC8,519,000 90.30%3,862,253 90.32%Oncor Electric Delivery Company8,360,360 100.29%- n/a- Clubcorp Golf Tex LP P/S- n/a- 4,362,406 60.36%Cnl Retmt CRSI Trophy Cl Tx LP- n/a- 18,000,000 11.48%Trophy Club 12 LLC- n/a- 13,100,000 21.08%Trophy Club Medical Center LP- n/a- 5,808,648 40.48%First Texas Homes INC- n/a- 3,897,287 70.32%BDMR Development- n/a- 3,895,520 80.32%Trophy Club Equities- n/a- 3,575,000 10 0.29% Totals187,118,329$ 6.49%69,901,114$ 5.76% Source: Denton and Tarrant County Central Appraisal District20232014 DRAFT - 3.20.2024Page 184 of 233 Town of Trophy Club, Texas Property Tax Levies and Collections Last Ten Fiscal Years (Unaudited) Table 8 95 Total TaxCollections inFiscal Levy forSubsequentYear Fiscal Year Amount Percentage of Levy YearsAmount Percentage of Levy2014 5,904,591$ 5,869,976$ 99.41% 26,189$ 5,896,165$ 99.86%2015 6,665,433 6,642,558 99.66% 14,249 6,656,806 99.87%2016 7,477,394 7,456,542 99.72% 13,166 7,469,708 99.90%2017 8,188,616 8,153,915 99.58% 10,781 8,164,696 99.71%2018 8,627,946 8,614,737 99.85% 2,176 8,616,913 99.87%2019 9,027,118 8,992,174 99.61% 34,943 9,027,117 100.00%2020 9,504,473 9,400,652 98.91% 21,969 9,422,621 99.14%2021 9,835,286 9,785,993 99.50% 24,299 9,810,292 99.75%2022 10,263,591 10,247,041 99.84% (11,060) 10,235,981 99.73%2023 11,139,198 11,121,834 99.84% - 11,121,834 99.84%Source: Denton County Tax Assessor CollectorTotal Collections to DateFiscal Year of the LevyCollected within the DRAFT - 3.20.2024Page 185 of 233 Town of Trophy Club, Texas Ratios of Outstanding Debt by Type Last Ten Fiscal Years (Unaudited) Table 9 96 General Certificates SpecialCertificatesTotal PercentageFiscalObligationof AssessmentofPrimary of Personal PerYearBondsObligation Bonds Premium LeasesObligation Premium Government Income (1) Capita20149,085,567$ 4,212,132$ -$ -$ -$ 1,599,038$ -$ 14,896,737$ 3.07% 1,293 20158,344,695 4,029,431 26,481,000 - - 1,454,619 - 40,309,745 7.62% 3,348 201612,375,000 7,961,000 25,710,479 4,916,763 - 1,275,000 30,200 52,268,442 9.35% 4,200 201711,450,000 12,068,000 25,406,475 4,754,458 - 1,130,000 25,779 54,834,712 9.26% 4,234 201810,640,000 11,415,000 25,285,577 4,457,420 173,280 980,000 21,358 52,972,635 8.06% 3,828 20199,805,000 10,637,000 25,260,000 4,160,382 88,205 825,000 16,939 50,792,526 7.94% 4,106 20209,005,000 9,789,000 23,985,000 3,872,927 - 670,000 12,522 47,334,449 6.98% 3,802 20217,500,000 13,206,000 22,800,000 3,798,808 - - 8,504 47,313,312 7.04% 3,557 20226,595,000 12,298,000 21,245,000 3,482,143 99,617 345,000 4,486 44,069,246 6.10% 3,206 20235,890,000 18,040,000 19,776,000 3,423,086 85,745 175,000 468 47,390,299 5.60% 3,423 (1) Personal Income and population found on Table 15 of the Statistical SectionBusiness-Type ActivitiesGovernmental Activities DRAFT - 3.20.2024Page 186 of 233 Town of Trophy Club, Texas Ratios of Net General Bonded Debt Outstanding Last Ten Fiscal Years (Unaudited) Table 10 97 Fiscal YearGeneral Obligation BondsCertificates of ObligationSpecial Assessment BondsPercentage of Actual Taxable Value of PropertyaPer Capitab20149,085,567$ 4,212,132$ -$ 1.10%1,154$ 20158,344,695 4,029,431 - 0.89%1,028 201612,375,000 7,961,000 25,710,479 1.29%1,634 201711,450,000 12,068,000 25,406,475 1.33%1,890 201810,640,000 11,415,000 25,285,577 1.14%1,594 20199,805,000 10,637,000 25,260,000 0.97%1,653 20209,005,000 9,789,000 23,985,000 0.89%1,509 20217,500,000 13,206,000 22,800,000 0.86%1,557 20226,595,000 12,298,000 21,245,000 0.74%1,375 20235,890,000 18,040,000 19,776,000 0.83%1,729 a Property values are from table 5.b Populations are from table 12. DRAFT - 3.20.2024Page 187 of 233 Town of Trophy Club, Texas Direct and Overlapping Governmental Activities Debt As of September 30, 2023 (Unaudited) Table 11 98 EstimatedEstimated Share ofDebt Principal Percentage OverlappingGovernmental Unit Outstanding Applicable DebtDebt repaid with property taxes:Denton County 624,655,000$ 1.62% 10,144,876$ Northwest Independent School District 1,807,155,334 7.70276%139,200,834 Tarrant County376,120 0.01%21 Tarrant County College District591,230,000 0.07%413,861 Tarrant County Hospital District448,410,000 0.01%25,590 Trophy Club MUD #120,725,000 0.56%115,470 Subtotal, overlapping debt3,492,551,454$ 149,900,652$ Town of Trophy Club, direct debt47,129,086 100.00%47,129,086 Total Direct and Overlapping Debt Principal3,539,680,540$ 197,029,738$ Source: Most recent Texas Municipal Reports (TMR) published by the Municipal Advisory Council of Texas.Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the Town of Trophy Club. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. DRAFT - 3.20.2024Page 188 of 233 Town of Trophy Club, Texas Pledged Revenue Coverage Last Ten Fiscal Years (Unaudited) Table 12 99 SpecialFiscal Assessment Annual TimesYear Collections Requirement (a) Coverage20202,187,165$ 2,180,573$ 1.0020212,195,1442,220,0730.9920222,263,0902,249,9221.0120232,267,1102,283,9231.01Note:(a) Includes Principal and InterestSpecial Assessment BondsSpecial assessment bonds pledged-revenue coverage presented starting with fiscal year 2020. DRAFT - 3.20.2024Page 189 of 233 Town of Trophy Club, Texas Demographic and Economic Statistics Last Ten Fiscal Years (Unaudited) Table 13 100 YearEstimated PopulationaTotal HouseholdsaMedian Household IncomebTotal Personal Income Unemployment Ratec201411,5253,891 124,593$ 484,791,363$ 4.72 201512,0404,153 127,391 529,054,823 3.88 201612,4464,342 128,750 559,032,500 3.66 201712,9504,435 133,457 591,881,795 3.38 201813,8384,723 139,156 657,233,788 3.40 201912,3694,490 142,483 639,748,670 3.10 202012,451 4,600 147,477 678,394,200 3.10 202113,301 4,555 147,477 671,757,735 6.60 202213,745 4,234 170,679 722,654,886 3.80 202313,843 4,625 183,125 846,953,125 5.60 Sources: a Estimated population using residential water connectionsb United States Census BureaucFederal Bank of St. Louis Economic Research; Denton and Tarrant Counties' data averaged 2018. DRAFT - 3.20.2024Page 190 of 233 Town of Trophy Club, Texas Principal Employers Current Year and Ten Years Ago (Unaudited) Table 14 101 EmployerEmployeesPercentage of Total Town EmploymentEmployerEmployeesPercentage of Total Town EmploymentNorthwest Independent School District 4146.30% Northwest Independent School District 35323.53%Baylor Medical Center at Trophy Club2303.27% Trophy Club Country Club16911.27%Trophy Club Country Club2153.50% Baylor Medical Center at Trophy Club1308.67%Town of Trophy Club*1522.31% Tom Thumb976.47%Tom Thumb1271.93% Town of Trophy Club865.73%HG Sply Co.671.02% Cristina's Mexican Restaurant473.13%Fellowship United Methodist Church390.59% Respiratory Sleep Solutions422.80%Premier Academy - Trophy Club350.53% Premier Academy - Trophy Club402.67%Church at Trophy Club Lake300.46% Fellowship United Methodist Church392.60%Trophy Lake Academy300.46% Church at Trophy Lake302.00%Total1,33920.38%1,03368.87%(*) Includes Full Time, Part Time, and Seasonal20232014 DRAFT - 3.20.2024Page 191 of 233 Town of Trophy Club, Texas Full-time Equivalent Town Government Employees By Function/Program Last Ten Fiscal Years (Unaudited) Table 15 102 Function2014 2015 2016 2017 2018 2019 2020 2021 2022 2023General Government and Adminstration141314 13 14 14 13 12 12 14Public Safety313233 33 34 41 41 38 42 43Streets5 4 44233333Parks and Recreation17 17 1716171414161417Community Development7 6 66654434Total74 72 7373737775737481Source: Departmental records DRAFT - 3.20.2024Page 192 of 233 Town of Trophy Club, Texas Operating Indicators by Function/Program Last Ten Fiscal Years (Unaudited) Table 16 103 Function2014 2015 2016 2017 2018 2019 2020 2021 2022 2023Public Safety Police Number of stations 1 1 1 1 2 2 1 1 1 1 Number of police personnel23 25 25 26 26 24 25 23 26 26 Number of arrests82 125 145 148 130 275 157 158 47 141 Number of traffic stops2,004 2,912 3,635 2,922 4,262 5,397 3,106 3,206 2,987 5,312 Fire Number of stations1 1 1 1 1 1 1 1 1 1 Number of fire personnel15 15 16 17 18 17 17 18 19 19 Number of calls answered907 868 898 868 858 871 965 981 1,061 944 Developmental Miles of streets43 43 43 43 43 52 52 52 52 52 Parks/Recreational Changes Parks6 6 6 6 6 6 6 6 6 6 Park acreage1,039 1,039 1,039 1,039 1,039 1,039 1,039 1,039 1,039 1,039 Source: Departmental records DRAFT - 3.20.2024Page 193 of 233 DRAFT - 3.20.2024 Page 194 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: April Duvall, Director of Finance AGENDA ITEM: Consider a resolution adopting the Town of Trophy Club Investment Policy for Fiscal Year 2023-2024. (April Duvall, Director of Finance) BACKGROUND/SUMMARY: In accordance with the Public Funds Investment Act, the Trophy Club Town Council is required to adopt a resolution affirming that it has reviewed the Town's investment policy and investment strategies not less than annually and approving any recommended changes. Valley View Consulting serves as the Town's investment advisor and provides technical assistance in updating the Town's investment policy consistent with changes in State laws and investment best practices. Under the Town of Trophy Club Investment Policy, the Town Manager designates the Finance Director and the Chief Financial Analyst as the Town of Trophy Club’s Investment Officers. The policy maintains its four primary objectives of safety and preservation of principal, maintenance of sufficient liquidity to meet operating needs, public trust from prudent investment activities, and optimizing interest earnings on the portfolio. Minor adjustments are recommended at this time involving increasing the frequency of Investment Committee meetings from an annual occurrence to a quarterly schedule. BOARD REVIEW/CITIZEN FEEDBACK: N/A FISCAL IMPACT: Investment earnings provide revenue for the Town of Trophy Club to reduce the Town's reliance on property taxes and other revenue sources. During the last reported investment quarter ending December 31, 2023, the Town of Trophy Club received $435,125 for that quarter. LEGAL REVIEW: Town Attorney, Dean Roggia, has reviewed the draft resolution as to form and legality. ATTACHMENTS: 1. Draft Resolution Investment Policy.Clean_ 2. Investment Policy REDLINE ACTIONS/OPTIONS: Staff recommends that the Town Council move to approve the resolution adopting the Town of Trophy Club Investment Policy for Fiscal Year 2023-2024. Page 195 of 233 Page 196 of 233 TOWN OF TROPHY CLUB RESOLUTION NO. 2024-XX A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF TROPHY CLUB, TEXAS, ADOPTING AN INVESTMENT POLICY FOR FISCAL YEAR 2023-2024 FOR FUNDS FOR THE TOWN OF TROPHY CLUB, AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Town of Trophy Club (the “Town”) is a home rule city acting under its charter adopted by the electorate pursuant to Article XI, Section 5 of the Texas Constitution and Chapter 9 of the Local Government Code; and WHEREAS, the Town’s Investment Policy is reviewed annually as part of the budget preparation process; and WHEREAS, the Texas Public Funds Investment Act (“PFIA”) requires the Town Council, to annually review the Town’s Investment Policy; and WHEREAS, the Town’s staff has developed the Town’s Investment Policy to comply with all aspects of the PFIA; and WHEREAS, the Town Council hereby finds and determines it to be in the interests of the public health, safety, and welfare of the Town’s residents and the general welfare to adopt Exhibit “A,” as the Town’s Investment Policy. NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF TROPHY CLUB, TEXAS, THAT: SECTION 1. The facts and recitals set forth in the preamble of this Resolution are hereby found to be true and correct and are incorporated into this resolution as if fully set forth herein. SECTION 2. The Town of Trophy Club Investment Policy, attached hereto and incorporated herein by reference as Exhibit “A,” having been reviewed by the Town Council of the Town of Trophy Club, Texas, and found to be acceptable and in the best interest of the Town and its citizens, is hereby in all things approved. The Town Manager and staff shall implement and execute the procedures and policies adopted therein. SECTION 3. A true and correct copy of the Town of Trophy Club Investment Policy, as adopted herein, shall be maintained by the Town Secretary’s Office. Page 197 of 233 SECTION 4. This Resolution shall take effect immediately upon its passage and approval. PASSED and APPROVED by the Town Council of the Town of Trophy Club, Texas on this the 25th day of March, 2024. Jeannette Tiffany, Mayor ATTEST:[SEAL] Tammy Dixon, Town Secretary APPROVED TO AS FORM: Dean Roggia, Town Attorney Page 198 of 233 EXHIBIT “A” Page 199 of 233 TOWN OF TROPHY CLUB INVESTMENT POLICY I.POLICY It is the policy of the Town of Trophy Club that after allowing for the anticipated cash flow requirements of the Town of Trophy Club and giving due consideration to the safety and risk of investment, all available funds shall be invested in conformance with these legal and administrative guidelines, seeking to optimize interest earnings to the maximum extent possible. Effective cash management is recognized as essential to good fiscal management. Investment interest is a source of revenue to Trophy Club funds. Trophy Club’s investment portfolio shall be designed and managed in a manner to maximize this revenue source, to be responsive to public trust, and to be in compliance with legal requirements and limitations. Investments shall be made with the primary objectives of: Safety and preservation of principal Maintenance of sufficient liquidity to meet operating needs Public trust from prudent investment activities Optimization of interest earnings on the portfolio II.PURPOSE The purpose of this Investment Policy is to comply with Chapter 2256 of the Government Code (“Public Funds Investment Act” or “PFIA”), which requires the Town of Trophy Club to adopt a written investment policy regarding the investment of its funds and funds under its control. The Investment Policy addresses the methods, procedures and practices that must be exercised to ensure effective and judicious fiscal management of Trophy Club’s funds. III.SCOPE This Investment Policy shall govern the investment of all financial assets of the Town of Trophy Club. These funds are accounted for in the Town of Trophy Club’s Annual Comprehensive Financial Report (ACFR) and include: •General Fund •Special Revenue Funds •Capital Projects Funds •Proprietary Funds •Debt Service Funds, including reserves and sinking funds, to the extent not required by law or existing contract to be kept segregated and managed separately •Any new fund created by the Town of Trophy Club, unless specifically exempted from this Policy by the Town Council or by law The Town of Trophy Club consolidates fund cash balances to maximize investment earnings. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. This Investment Policy shall apply to all transactions involving the financial assets and related activity for all the foregoing funds. However, this Policy does not apply to the assets administered for the benefit of the Town of Trophy Club by outside agencies under deferred compensation programs. Page 200 of 233 5 IV.INVESTMENT OBJECTIVES The Town of Trophy Club shall manage and invest its cash with four primary objectives, listed in order of priority: safety, liquidity, public trust, and yield, expressed as optimization of interest earnings. The safety of the principal invested always remains the primary objective. All investments shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. The Town of Trophy Club shall maintain a comprehensive cash management program, which includes collection of accounts receivable, vendor payments in accordance with the Town’s purchasing policies, and prudent investment of available cash. Cash management is defined as the process of managing monies in order to ensure maximum cash availability and maximum earnings on short-term investment of idle cash. Safety [PFIA 2256.005(b)(2)] Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk. Credit Risk and Concentration of Credit Risk – The Town of Trophy Club will minimize credit risk, the risk of loss due to the failure of the issuer or backer of the investment, and concentration of credit risk, the risk of loss attributed to the magnitude of investment in a single issuer, by: •Limiting investments to the safest types of investments. •Pre-qualifying the financial institutions and broker/dealers with which the Town of Trophy Club will do business. •Diversifying the investment portfolio so that potential losses on individual issuers will be minimized. Interest Rate Risk – the Town of Trophy Club will manage the risk that the interest earnings and the market value of investments in the portfolio will fall due to changes in general interest rates by limiting the maximum weighted average maturity of the investment portfolio to 365 days. The Town of Trophy Club will, in addition: •Structure the investment portfolio so that investments mature to meet cash requirements for ongoing operations, thereby avoiding the need to liquidate investments prior to maturity. •Invest operating funds primarily in financial institution deposits, shorter-term securities, money market mutual funds, or local government investment pools functioning as money market mutual funds. •Diversify maturities and stagger purchase dates to minimize the impact of market movements over time. Liquidity [PFIA 2256.005(b)(2)] The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that investments mature concurrent with cash needs to meet anticipated demands. Because all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in shares of money market mutual funds, local government investment pools, or other cash equivalents that offer same-day liquidity. Public Trust All participants in the Town of Trophy Club’s investment process shall seek to act responsibly as custodians of the public trust. The Investment Officers shall avoid any transaction that might impair public confidence in the Town of Trophy Club’s ability to govern effectively. Page 201 of 233 6 Yield (Optimization of Interest Earnings) [PFIA 2256.005(b)(3)] The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. V.INVESTMENT STRATEGY STATEMENTS The Town of Trophy Club portfolio will be structured to benefit from anticipated market conditions and to achieve a reasonable return. Relative value among asset groups shall be analyzed and pursued as part of the investment program within the restrictions set forth by the Investment Policy. The Town of Trophy Club maintains portfolios which utilize four specific investment strategy considerations designed to address the unique characteristics of the fund groups represented in the portfolios. Operating Funds Suitability - All investments authorized in the Investment Policy are suitable for Operating Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Liquidity - Investment strategies for the Operating Funds have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The dollar-weighted average maturity of operating funds, based on the stated final maturity date of each investment, will be calculated and limited to one year or less. Constant $1.0000 net asset value investment pools and money market mutual funds, and other cash equivalents shall be integral components to maintaining daily liquidity. Investments for these funds shall not exceed a 24-month period from date of purchase. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Operating Funds shall be the rolling three-month Treasury yield. Reserve and Deposit Funds Suitability - All investments authorized in the Investment Policy are suitable for Reserve and Deposit Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Page 202 of 233 7 Liquidity - Investment strategies for Reserve and Deposit Funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate reserve fund from investments with a low degree of volatility. Except as may be required by the bond ordinance specific to an individual issue, investments should be of high quality, with short-to-intermediate-term maturities. The dollar-weighted average maturity of Reserve and Deposit Funds, based on the stated final maturity date of each investment, will be calculated and limited to two years or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Reserve and Deposit Funds shall be the rolling three-month Treasury yield. Bond and Certificate Capital Project Funds and Special Purpose Funds Suitability - All investments authorized in the Investment Policy are suitable for Bond and Certificate Capital Project Funds and Special Purpose Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Liquidity - Investment strategies for Bond and Certificate Capital Project Funds and Special Purpose Funds portfolios will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of investments held should not exceed the estimated project completion date or a maturity of no greater than three years. The dollar-weighted average maturity of Bond and Certificate Capital Project Funds and Special Purpose Funds, based on the stated final maturity date of each investment, will be calculated and limited to two years or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Bond and Certificate Capital Project Funds and Special Purpose Funds shall be the rolling three-month Treasury yield. A secondary objective of these funds is to achieve a yield equal to or greater than the arbitrage yield of the applicable bond or certificate, when reasonable considering safety and liquidity objectives. Debt Service Funds Suitability - All investments authorized in the Investment Policy are suitable for Debt Service Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Liquidity - Investment strategies for Debt Service Funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. Investments shall not have a stated final maturity date which exceeds the next unfunded debt service payment date. The dollar-weighted average maturity of Debt Service Funds, based on the stated final maturity date of each investment, will be calculated and limited to one year or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Page 203 of 233 8 Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Debt Service Funds shall be the rolling three-month Treasury yield. VI.RESPONSIBILITY AND CONTROL Delegation of Authority [PFIA 2256.005(f)] In accordance with the Town of Trophy Club and the Public Funds Investment Act, the Town Council designates the Town Manager's designee and/or Finance Director and the Chief Financial Analyst as the Town of Trophy Club’s Investment Officers. The Town Manager's designee and/or Finance Director is responsible for the overall management of the Town’s investment program and may direct the other Investment Officer in his/her duties. The Investment Officers are authorized to deposit, withdraw, invest, transfer, execute documentation, and otherwise manage funds on behalf of the Town of Trophy Club according to this Policy. Unless authorized by law, no other person may deposit, withdraw, transfer or manage in any other manner the Town of Trophy Club funds. The investment authority granted to the Investment Officers is effective until rescinded. Quality and Capability of Investment Management [PFIA 2256.005(b)(3)] The Town of Trophy Club shall provide periodic training in investments for the designated Investment Officers and other investment personnel through courses and seminars offered by professional organizations, associations, and other independent sources in order to ensure the quality and capability of investment management in compliance with the Public Funds Investment Act. Training Requirement [PFIA 2256.008 – Local Governments] In accordance with the Town of Trophy Club and the Public Funds Investment Act, designated Investment Officers shall attend investment training no less often than once every two years and shall accumulate not less than 8 hours of instruction relating to investment responsibilities. A newly appointed Investment Officer must attend training accumulating at least 10 hours of instruction within twelve months of the date the Officer took office or assumed the Officer’s duties. The investment training sessions shall be provided by independent sources approved by the Investment Committee, and must include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with the PFIA. Internal Controls (Best Practice) The Investment Officers are responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Town of Trophy Club are protected from loss, theft, or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Investment Officers shall establish a process for annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points. •Avoidance of collusion. •Separation of transactions authority from accounting and recordkeeping. •Custodial safekeeping. •Avoidance of physical delivery securities. •Clear delegation of authority to subordinate staff members. •Written confirmation for telephone (voice) transactions for investments and wire transfers. Page 204 of 233 9 •Development of a wire transfer agreement with the depository bank or third-party custodian. Investment Policy Certification [PFIA 2256.005(k-l)] A qualified representative, as defined by PFIA section 2256.002(10), of all business organizations, as defined by PFIA section 2256.005(k) as local government investment pools and discretionary investment management firms, must sign a certification acknowledging that the organization has received and reviewed the Town of Trophy Club’s Investment Policy and that reasonable procedures and controls have been implemented to preclude investment transactions that are not authorized by the Town of Trophy Club’s Policy except to the extent that the authorization is dependent on an analysis of the makeup of the Town's entire portfolio, requires an interpretation of subjective investment standards, or relates to investment transactions of the Town that are not made through accounts or other contractual arrangements over which the business organization has accepted discretionary investment authority. The Town shall not enter into an investment transaction with a business organization prior to receiving the signed certification. Prudence [PFIA 2256.006] The standard of care to be applied by the Investment Officers shall be the “prudent person” rule. This rule states that “Investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived.” In determining whether an Investment Officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: •The investment of all funds, or funds under the Town of Trophy Club’s control, over which the Officer had responsibility rather than a consideration as to the prudence of a single investment. •Whether the investment decision was consistent with the written, approved Investment Policy of the Town of Trophy Club. Indemnification The Investment Officers, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific investment’s credit risk or market price changes, provided that these deviations are reported immediately and the appropriate action is taken to control adverse developments. Ethics and Conflicts of Interest [PFIA 2256.005(i)] Officers and employees involved in the investment process shall refrain from personal business activity that would conflict with the proper execution and management of the investment program, or that would impair their ability to make impartial decisions. Investment Committee members shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of the Town of Trophy Club. An Investment Officer of the Town of Trophy Club who has a personal business relationship with an organization seeking to sell an investment to the Town of Trophy Club shall file a statement disclosing that personal business interest. An Investment Officer who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the Town of Trophy Club shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the Town Council. VII.SUITABLE AND AUTHORIZED INVESTMENTS Portfolio Management The Town of Trophy Club currently has a “buy and hold” portfolio strategy. Maturity dates are matched Page 205 of 233 10 with cash flow requirements and investments are purchased with the intent to be held until maturity. However, investments may be liquidated prior to maturity for the following reasons: •An investment with declining credit maybe liquidated early to minimize loss of principal. •Cash flow needs of the Town of Trophy Club require that the investment be liquidated. Investments [PFIA 2256.005(b)(4)(A)] Trophy Club funds governed by this Policy may be invested in the instruments described below, all of which are authorized by the Public Funds Investment Act. Investment of Town of Trophy Club funds in any instrument or security not authorized for investment under the Act is prohibited. The Town of Trophy Club will not be required to liquidate an investment that becomes unauthorized subsequent to its purchase. I.Authorized 1.Obligations, including letters of credit, of the United States, its agencies and instrumentalities, including the Federal Home Loan Banks. 2.Direct obligations of the State of Texas, its agencies and instrumentalities or obligations of agencies, counties, cities, and other political subdivisions of this State rated as to investment quality by a nationally recognized investment rating firm of not less than “A” or its equivalent. 3.Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States. 4.Certificates of Deposit and other forms of deposit issued by a depository institution that has its main office or a branch office in Texas. The deposit must be guaranteed or insured by the Federal Deposit Insurance Corporation (“FDIC”) or its successor, or the National Credit Union Share Insurance Fund (“NCUSIF”) or its successor, or secured by obligations in a manner and amount as provided by law. In addition, deposits obtained through a depository institution that has its main office or a branch office in Texas and that contractually agrees to place the funds in federally insured depository institutions in accordance with the conditions prescribed in Section 2256.010(b) of the Public Funds Investment Act are authorized investments. Funds may also be invested by the Town through a broker that has a main office or branch office in Texas and is selected from a list approved by the Town as required by section 2656.025 of the Public Funds Investment Act or a depository institution that has a main office or branch office in Texas and is selected by the Town are authorized investments if the following conditions are met: a.the broker or depository institution selected by the Town as specified above arranges for the deposit of the funds in one or more federally insured depository institutions, wherever located, for the account of the Town; b.the full amount of the principal and accrued interest of each deposit is insured by the United States or an instrumentality of the United States; and c.the Town appoints a depository bank or a clearing broker registered with the Securities and Exchange Commission Rule 15c-3 (17CFR, Section 240 15c3-3) as custodian for the Town with respect to the deposit issued for account to the Town. 5.Fully collateralized direct repurchase agreements with a defined termination date secured by obligations of the United States or its agencies and instrumentalities. These shall be pledged to the Town of Trophy Club, held in an account in the Town of Trophy Club’s name, and deposited at the time the investment is made with the Town of Trophy Club or with a third-party selected and approved by the Town of Trophy Club. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas. A Master Repurchase Agreement, or similar agreement, must be signed prior to investment in a repurchase agreement. Securities received for repurchase agreements must have a Page 206 of 233 11 market value greater than or equal to 102 percent at the time funds are disbursed. (This section pertains to Sweep Accounts and/or Bond Proceeds) 6.No-Load Money Market Mutual funds that: 1) are registered and regulated by the Securities and Exchange Commission and provide a prospectus and other information required by the Securities and Exchange Act of 1934 (15 U.S.C. Section 78a) or the Investment Company Act of 1940 (15 U.S.C. Section 80a-1), and 2) seek to maintain a stable net asset value of $1.0000 per share. 7.Local government investment pools, which 1) meet the requirements of Chapter 2256.016 of the Public Funds Investment Act, 2) are rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service, and 3) are authorized by resolution or ordinance by the Town Council. In addition, a local government investment pool created to function as a money market mutual fund must mark its portfolio to the market daily and, to the extent reasonably possible, stabilize at a $1.0000 net asset value. If an investment in the Town’s portfolio becomes an unauthorized investment due to changes in the Investment Policy or the Public Funds Investment Act, or an authorized investment is rated in a way that causes it to become an unauthorized investment, the Investment Committee of the Town shall review the investment and determine whether it would be more prudent to hold the investment until its maturity, or to redeem the investment. The Investment Committee shall consider the time remaining until maturity of the investment, the quality of the investment, and the quality and amounts of any collateral which may be securing the investment in determining the appropriate steps to take. [PFIA 2256.021]. II.Not Authorized [PFIA 2256.009(b)(1-4)] Investments including interest-only or principal-only strips of obligations with underlying mortgage-backed security collateral, collateralized mortgage obligations with an inverse floating interest rate or a maturity date of over 10 years are strictly prohibited. VIII.INVESTMENT PARAMETERS Maximum Maturities [PFIA 2256.005(b)(4)(B)] The longer the maturity of investments, the greater their potential price volatility. Therefore, it is the Town of Trophy Club’s policy to concentrate its investment portfolio in shorter-term investments in order to limit principal risk caused by changes in interest rates. The Town of Trophy Club attempts to match its investments with anticipated cash flow requirements. The Town of Trophy Club will not directly invest for more than three years from the date of purchase; however, the above described obligations, certificates, or agreements may be collateralized using longer dated investments. Because no secondary market exists for repurchase agreements, the maximum maturity shall be 120 days except in the case of a flexible repurchase agreement for bond proceeds. The maximum maturity for such an investment shall be determined in accordance with project cash flow projections and the requirements of the governing bond ordinance. The composite portfolio will have a weighted average maturity of 365 days or less. The dollar-weighted average maturity will be calculated using the stated final maturity dates of each security. [PFIA 2256.005(b)(4)(C)]. Diversification [PFIA 2256.005(b)(3)] The Town of Trophy Club recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Risk is managed through portfolio diversification that shall be achieved by the following general guidelines: Page 207 of 233 12 •Limiting investments to avoid overconcentration in investments from a specific issuer or business sector (excluding U.S. Treasury securities and financial institution deposits that are fully insured and collateralized in accordance with state and federal law), •Limiting investments that have higher credit risk, •Utilizing investments with varying maturities, and •Continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LGIPs), money market accounts, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. IX.SELECTION OF BANKS AND DEALERS Depository At least every five years a Depository shall be selected through the Town of Trophy Club’s banking services procurement process, which shall include a formal request for application (RFA). The selection of a depository will be determined by competitive application and evaluation of applications will be based on the most advantageous terms and conditions for the handling of Town funds. Authorized Brokers/Dealers [PFIA 2256.025] The Town of Trophy Club Investment Committee (see Section XIII) shall, at least annually, review, revise, and approve a list of qualified broker/dealers authorized to engage in securities transactions with the Town of Trophy Club. Authorized firms may include primary dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). Competitive Environment It is the policy of the Town of Trophy Club to provide a competitive environment for all investment activities. The Investment Officers shall develop and maintain procedures for ensuring competition in the investment of the Town of Trophy Club’s funds and are authorized to solicit bids for investments orally, in writing, electronically, or in any combination of these methods. Delivery vs. Payment [PFIA 2256.005(b)(4)(E)] Securities shall be purchased using the delivery vs. payment method. Funds will be released after notification that the purchased security has been received. X.SAFEKEEPING AND CUSTODY Safekeeping and Custodial Agreements The Town of Trophy Club shall contract with a bank or banks for the safekeeping of securities either owned by the Town of Trophy Club as part of its investment portfolio or held as collateral to secure demand or time deposits. Securities owned by the Town of Trophy Club shall be held in an account in the Town of Trophy Club’s name as evidenced by safekeeping receipts of the institution holding the securities. Original safekeeping receipts shall be obtained and held by the Town. Collateral for deposits will be held by a third-party custodian designated by the Town of Trophy Club and pledged to the Town of Trophy Club as evidenced by pledge receipts of the institution with which the collateral is deposited. Collateral may be held by the depository bank’s trust department, a Federal Reserve Bank or branch of a Federal Reserve Bank, a Federal Home Loan Bank, or a third-party bank approved by the Town of Trophy Club. Collateral Policy [PFCA 2257.023] Consistent with the requirements of the Public Funds Collateral Act, it is the policy of the Town of Trophy Page 208 of 233 13 Club to require full collateralization of all non-insured Town of Trophy Club funds on deposit with a financial institution and a written depository agreement acceptable to the Town. The market value of the securities collateralizing the deposit of funds shall be at least equal to 102% of the principal and accrued interest on the deposits less an amount insured by the FDIC or NCUSIF. Collateral in the form of letters of credit issued by the Federal Home Loan Bank must be equal to 100% of the principal and anticipated interest of deposits less the applicable level of FDIC insurance. At its discretion, the Town of Trophy Club may require a higher level of collateralization for certain investment securities held as collateral. Securities pledged as collateral shall be held by an independent third-party with whom the Town of Trophy Club has a current custodial agreement. The Investment Officers are responsible for entering into collateralization agreements with third-party custodians in compliance with this Policy. The agreements are to specify the acceptable investment securities for collateral, including provisions relating to possession of the collateral, the substitution or release of investment securities, ownership of securities, and the method of valuation of securities. A clearly marked evidence of pledge must be supplied to the Town of Trophy Club and retained. Collateral shall be reviewed at least monthly to assure that the market value of the pledged securities are adequate. The custodial portion of the depository agreement shall define the Town’s rights to the collateral in case of default, bankruptcy or closing and shall establish a perfected security interest in compliance with Federal and State regulations, including: •The Agreement must be in writing; •The Agreement must be executed by the depository and the Town contemporaneously with the acquisition of the asset; •The Agreement must be approved by the board of directors or the loan committee of the depository and a copy of the meeting minutes must be delivered to the Town; and •The Agreement must be part of the depository’s “official record” continuously since its execution. Collateral Defined The Town of Trophy Club shall accept only the following types of collateral: •Obligations of the United States or its agencies and instrumentalities •Direct obligations of the State of Texas or its agencies and instrumentalities •Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States •Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized rating firm not less than A or its equivalent with a remaining maturity of ten (10) years or less •A surety bond issued by an insurance company rated as to investment quality by a nationally recognized rating firm not less than A •A letter of credit issued by the Federal Home Loan Bank Subject to Audit All collateral shall be subject to inspection and audit by the Investment Officers or their designee, Including the Town of Trophy Club’s independent auditors. XI.PERFORMANCE Performance Standards The Town of Trophy Club’s investment portfolio will be managed in accordance with the parameters specified within this Policy. The portfolio shall be designed with the objective of obtaining a market rate of return through budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow requirements of the Town of Trophy Club. Page 209 of 233 14 Performance Benchmark It is the policy of the Town of Trophy Club to purchase investments with maturity dates coinciding with cash flow needs. Through this strategy, the Town of Trophy Club shall seek to optimize interest earnings utilizing allowable investments available in the market at that time. The Town of Trophy Club’s portfolio shall be designed with the objective of regularly meeting or exceeding the benchmark(s) as appropriate per the investment strategy statements. Weighted Average Yield to Maturity shall be the standard for calculating portfolio rate of return. XII.REPORTING [PFIA 2256.023] Methods The Investment Officers shall prepare a written investment report on a quarterly basis that summarizes investment strategies employed in the most recent quarter and describes the portfolio in terms of investment securities, maturities, and shall explain the total investment return for the quarter. The quarterly investment report shall include a summary statement of investment activity prepared in compliance with the PFIA. This summary will be prepared in a manner that will allow the Town of Trophy Club to ascertain whether investment activities during the reporting period have conformed to the Investment Policy. The report will be provided to the Town Council and signed by the Investment Officers. The report will include the following: •A listing of individual investments held at the end of the reporting period. •Unrealized gains or losses resulting from appreciation or depreciation by listing the beginning and ending book and market value of investments for the period. •Additions and changes to the market value during the period. •Average weighted yield to maturity of portfolio as compared to applicable benchmarks. •Listing of investments by maturity date. •Fully accrued interest for the reporting period. •The percentage of the total portfolio that each type of investment represents. •Statement of compliance of the Town of Trophy Club’s investment portfolio with state law and the investment strategy and policy approved by the Town Council. An independent auditor will perform a formal annual review of the quarterly reports with the results reported to the Town Council [PFIA 2256.023(d)]. Monitoring Market Value [PFIA 2256.005(b)(4)(D)] Market value of all securities in the portfolio will be determined at least on a quarterly basis. These values will be obtained from a reputable and independent source and disclosed to the Town Council quarterly in a written report. XIII.INVESTMENT COMMITTEE Members An Investment Committee, consisting of the Town Manager and the Investment Officers, shall review the Town’s investment strategies and monitor the results of the investment program periodically. This review can be done by reviewing the quarterly written reports and by holding committee meetings as necessary. The committee will be authorized to invite other advisors to attend meetings as needed. Scope The Investment Committee shall include in its deliberations such topics as economic outlook, investment strategies, portfolio diversification, maturity structure, potential risk to the Town’s funds, evaluation and Page 210 of 233 15 authorization of broker/dealers, acceptable training sources, rate of return on the investment portfolio, and review of compliance with the Investment Policy. The Investment Committee will also advise the Town Council of any future amendments to the Investment Policy that are deemed necessary or recommended. Procedures The Investment Policy shall require the Investment Committee to provide minutes of investment information discussed at any meetings held. The committee shall meet at least annually to discuss the investment program and policy. XIV.INVESTMENT POLICY ADOPTION [PFIA 2256.005(e)] The Town of Trophy Club’s Investment Policy shall be adopted by resolution of the Town Council. It is the Town of Trophy Club’s intent to comply with state laws and regulations. The Town of Trophy Club’s Investment Policy shall be subject to revisions consistent with changing laws, regulations, and needs of the Town of Trophy Club. The Town Council shall adopt a resolution stating that it has reviewed the policy and investment strategies not less than annually, approving any changes or modifications. Page 211 of 233 TOWN OF TROPHY CLUB INVESTMENT POLICY I. POLICY It is the policy of the Town of Trophy Club that after allowing for the anticipated cash flow requirements of the Town of Trophy Club and giving due consideration to the safety and risk of investment, all available funds shall be invested in conformance with these legal and administrative guidelines, seeking to optimize interest earnings to the maximum extent possible. Effective cash management is recognized as essential to good fiscal management. Investment interest is a source of revenue to Trophy Club funds. Trophy Club’s investment portfolio shall be designed and managed in a manner to maximize this revenue source, to be responsive to public trust, and to be in compliance with legal requirements and limitations. Investments shall be made with the primary objectives of:  Safety and preservation of principal  Maintenance of sufficient liquidity to meet operating needs  Public trust from prudent investment activities  Optimization of interest earnings on the portfolio II. PURPOSE The purpose of this Investment Policy is to comply with Chapter 2256 of the Government Code (“Public Funds Investment Act” or “PFIA”), which requires the Town of Trophy Club to adopt a written investment policy regarding the investment of its funds and funds under its control. The Investment Policy addresses the methods, procedures and practices that must be exercised to ensure effective and judicious fiscal management of Trophy Club’s funds. III. SCOPE This Investment Policy shall govern the investment of all financial assets of the Town of Trophy Club. These funds are accounted for in the Town of Trophy Club’s Annual Comprehensive Financial Report (ACFR) and include:  General Fund  Special Revenue Funds  Capital Projects Funds  Proprietary Funds  Debt Service Funds, including reserves and sinking funds, to the extent not required by law or existing contract to be kept segregated and managed separately  Any new fund created by the Town of Trophy Club, unless specifically exempted from this Policy by the Town Council or by law The Town of Trophy Club consolidates fund cash balances to maximize investment earnings. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. This Investment Policy shall apply to all transactions involving the financial assets and related activity for all the foregoing funds. However, this Policy does not apply to the assets administered for the benefit of the Town of Trophy Club by outside agencies under deferred compensation programs. Page 212 of 233 3 IV. INVESTMENT OBJECTIVES The Town of Trophy Club shall manage and invest its cash with four primary objectives, listed in order of priority: safety, liquidity, public trust, and yield, expressed as optimization of interest earnings. The safety of the principal invested always remains the primary objective. All investments shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. The Town of Trophy Club shall maintain a comprehensive cash management program, which includes collection of accounts receivable, vendor payments in accordance with the Town’s purchasing policies, and prudent investment of available cash. Cash management is defined as the process of managing monies in order to ensure maximum cash availability and maximum earnings on short-term investment of idle cash. Safety [PFIA 2256.005(b)(2)] Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk.  Credit Risk and Concentration of Credit Risk – The Town of Trophy Club will minimize credit risk, the risk of loss due to the failure of the issuer or backer of the investment, and concentration of credit risk, the risk of loss attributed to the magnitude of investment in a single issuer, by:  Limiting investments to the safest types of investments.  Pre-qualifying the financial institutions and broker/dealers with which the Town of Trophy Club will do business.  Diversifying the investment portfolio so that potential losses on individual issuers will be minimized.  Interest Rate Risk – the Town of Trophy Club will manage the risk that the interest earnings and the market value of investments in the portfolio will fall due to changes in general interest rates by limiting the maximum weighted average maturity of the investment portfolio to 365 days. The Town of Trophy Club will, in addition:  Structure the investment portfolio so that investments mature to meet cash requirements for ongoing operations, thereby avoiding the need to liquidate investments prior to maturity.  Invest operating funds primarily in financial institution deposits, shorter-term securities, money market mutual funds, or local government investment pools functioning as money market mutual funds.  Diversify maturities and stagger purchase dates to minimize the impact of market movements over time. Liquidity [PFIA 2256.005(b)(2)] The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that investments mature concurrent with cash needs to meet anticipated demands. Because all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in shares of money market mutual funds, local government investment pools, or other cash equivalents that offer same-day liquidity. Public Trust All participants in the Town of Trophy Club’s investment process shall seek to act responsibly as custodians of the public trust. The Investment Officers shall avoid any transaction that might impair public confidence in the Town of Trophy Club’s ability to govern effectively. Page 213 of 233 4 Yield (Optimization of Interest Earnings) [PFIA 2256.005(b)(3)] The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. V. INVESTMENT STRATEGY STATEMENTS The Town of Trophy Club portfolio will be structured to benefit from anticipated market conditions and to achieve a reasonable return. Relative value among asset groups shall be analyzed and pursued as part of the investment program within the restrictions set forth by the Investment Policy. The Town of Trophy Club maintains portfolios which utilize four specific investment strategy considerations designed to address the unique characteristics of the fund groups represented in the portfolios. Operating Funds Suitability - All investments authorized in the Investment Policy are suitable for Operating Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Liquidity - Investment strategies for the Operating Funds have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The dollar-weighted average maturity of operating funds, based on the stated final maturity date of each investment, will be calculated and limited to one year or less. Constant $1.0000 net asset value investment pools and money market mutual funds, and other cash equivalents shall be integral components to maintaining daily liquidity. Investments for these funds shall not exceed a 24-month period from date of purchase. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Operating Funds shall be the rolling three-month Treasury yield. Reserve and Deposit Funds Suitability - All investments authorized in the Investment Policy are suitable for Reserve and Deposit Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Page 214 of 233 5 Liquidity - Investment strategies for Reserve and Deposit Funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate reserve fund from investments with a low degree of volatility. Except as may be required by the bond ordinance specific to an individual issue, investments should be of high quality, with short-to-intermediate-term maturities. The dollar-weighted average maturity of Reserve and Deposit Funds, based on the stated final maturity date of each investment, will be calculated and limited to two years or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Reserve and Deposit Funds shall be the rolling three-month Treasury yield. Bond and Certificate Capital Project Funds and Special Purpose Funds Suitability - All investments authorized in the Investment Policy are suitable for Bond and Certificate Capital Project Funds and Special Purpose Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Liquidity - Investment strategies for Bond and Certificate Capital Project Funds and Special Purpose Funds portfolios will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of investments held should not exceed the estimated project completion date or a maturity of no greater than three years. The dollar-weighted average maturity of Bond and Certificate Capital Project Funds and Special Purpose Funds, based on the stated final maturity date of each investment, will be calculated and limited to two years or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Bond and Certificate Capital Project Funds and Special Purpose Funds shall be the rolling three-month Treasury yield. A secondary objective of these funds is to achieve a yield equal to or greater than the arbitrage yield of the applicable bond or certificate, when reasonable considering safety and liquidity objectives. Debt Service Funds Suitability - All investments authorized in the Investment Policy are suitable for Debt Service Funds. Preservation and Safety of Principal - All investments shall be of high quality with no perceived default risk. Liquidity - Investment strategies for Debt Service Funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. Investments shall not have a stated final maturity date which exceeds the next unfunded debt service payment date. The dollar-weighted average maturity of Debt Service Funds, based on the stated final maturity date of each investment, will be calculated and limited to one year or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Page 215 of 233 6 Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town’s objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Debt Service Funds shall be the rolling three-month Treasury yield. VI. RESPONSIBILITY AND CONTROL Delegation of Authority [PFIA 2256.005(f)] In accordance with the Town of Trophy Club and the Public Funds Investment Act, the Town Council designates the Town Manager's designee and/or Finance Director and the Chief Financial Analyst as the Town of Trophy Club’s Investment Officers. The Town Manager's designee and/or Finance Director is responsible for the overall management of the Town’s investment program and may direct the other Investment Officer in his/her duties. The Investment Officers are authorized to deposit, withdraw, invest, transfer, execute documentation, and otherwise manage funds on behalf of the Town of Trophy Club according to this Policy. Unless authorized by law, no other person may deposit, withdraw, transfer or manage in any other manner the Town of Trophy Club funds. The investment authority granted to the Investment Officers is effective until rescinded. Quality and Capability of Investment Management [PFIA 2256.005(b)(3)] The Town of Trophy Club shall provide periodic training in investments for the designated Investment Officers and other investment personnel through courses and seminars offered by professional organizations, associations, and other independent sources in order to ensure the quality and capability of investment management in compliance with the Public Funds Investment Act. Training Requirement [PFIA 2256.008 – Local Governments] In accordance with the Town of Trophy Club and the Public Funds Investment Act, designated Investment Officers shall attend investment training no less often than once every two years and shall accumulate not less than 8 hours of instruction relating to investment responsibilities. A newly appointed Investment Officer must attend training accumulating at least 10 hours of instruction within twelve months of the date the Officer took office or assumed the Officer’s duties. The investment training sessions shall be provided by independent sources approved by the Investment Committee, and must include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with the PFIA. Internal Controls (Best Practice) The Investment Officers are responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Town of Trophy Club are protected from loss, theft, or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Investment Officers shall establish a process for annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points.  Avoidance of collusion.  Separation of transactions authority from accounting and recordkeeping.  Custodial safekeeping.  Avoidance of physical delivery securities.  Clear delegation of authority to subordinate staff members.  Written confirmation for telephone (voice) transactions for investments and wire transfers. Page 216 of 233 7  Development of a wire transfer agreement with the depository bank or third-party custodian. Investment Policy Certification [PFIA 2256.005(k-l)] A qualified representative, as defined by PFIA section 2256.002(10), of all business organizations, as defined by PFIA section 2256.005(k) as local government investment pools and discretionary investment management firms, must sign a certification acknowledging that the organization has received and reviewed the Town of Trophy Club’s Investment Policy and that reasonable procedures and controls have been implemented to preclude investment transactions that are not authorized by the Town of Trophy Club’s Policy except to the extent that the authorization is dependent on an analysis of the makeup of the Town's entire portfolio, requires an interpretation of subjective investment standards, or relates to investment transactions of the Town that are not made through accounts or other contractual arrangements over which the business organization has accepted discretionary investment authority. The Town shall not enter into an investment transaction with a business organization prior to receiving the signed certification. Prudence [PFIA 2256.006] The standard of care to be applied by the Investment Officers shall be the “prudent person” rule. This rule states that “Investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived.” In determining whether an Investment Officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration:  The investment of all funds, or funds under the Town of Trophy Club’s control, over which the Officer had responsibility rather than a consideration as to the prudence of a single investment.  Whether the investment decision was consistent with the written, approved Investment Policy of the Town of Trophy Club. Indemnification The Investment Officers, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific investment’s credit risk or market price changes, provided that these deviations are reported immediately and the appropriate action is taken to control adverse developments. Ethics and Conflicts of Interest [PFIA 2256.005(i)] Officers and employees involved in the investment process shall refrain from personal business activity that would conflict with the proper execution and management of the investment program, or that would impair their ability to make impartial decisions. Investment Committee members shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of the Town of Trophy Club. An Investment Officer of the Town of Trophy Club who has a personal business relationship with an organization seeking to sell an investment to the Town of Trophy Club shall file a statement disclosing that personal business interest. An Investment Officer who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the Town of Trophy Club shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the Town Council. VII. SUITABLE AND AUTHORIZED INVESTMENTS Portfolio Management The Town of Trophy Club currently has a “buy and hold” portfolio strategy. Maturity dates are matched Page 217 of 233 8 with cash flow requirements and investments are purchased with the intent to be held until maturity. However, investments may be liquidated prior to maturity for the following reasons:  An investment with declining credit maybe liquidated early to minimize loss of principal.  Cash flow needs of the Town of Trophy Club require that the investment be liquidated. Investments [PFIA 2256.005(b)(4)(A)] Trophy Club funds governed by this Policy may be invested in the instruments described below, all of which are authorized by the Public Funds Investment Act. Investment of Town of Trophy Club funds in any instrument or security not authorized for investment under the Act is prohibited. The Town of Trophy Club will not be required to liquidate an investment that becomes unauthorized subsequent to its purchase. I. Authorized 1. Obligations, including letters of credit, of the United States, its agencies and instrumentalities, including the Federal Home Loan Banks. 2. Direct obligations of the State of Texas, its agencies and instrumentalities or obligations of agencies, counties, cities, and other political subdivisions of this State rated as to investment quality by a nationally recognized investment rating firm of not less than “A” or its equivalent. 3. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States. 4. Certificates of Deposit and other forms of deposit issued by a depository institution that has its main office or a branch office in Texas. The deposit must be guaranteed or insured by the Federal Deposit Insurance Corporation (“FDIC”) or its successor, or the National Credit Union Share Insurance Fund (“NCUSIF”) or its successor, or secured by obligations in a manner and amount as provided by law. In addition, deposits obtained through a depository institution that has its main office or a branch office in Texas and that contractually agrees to place the funds in federally insured depository institutions in accordance with the conditions prescribed in Section 2256.010(b) of the Public Funds Investment Act are authorized investments. Funds may also be invested by the Town through a broker that has a main office or branch office in Texas and is selected from a list approved by the Town as required by section 2656.025 of the Public Funds Investment Act or a depository institution that has a main office or branch office in Texas and is selected by the Town are authorized investments if the following conditions are met: a. the broker or depository institution selected by the Town as specified above arranges for the deposit of the funds in one or more federally insured depository institutions, wherever located, for the account of the Town; b. the full amount of the principal and accrued interest of each deposit is insured by the United States or an instrumentality of the United States; and c. the Town appoints a depository bank or a clearing broker registered with the Securities and Exchange Commission Rule 15c-3 (17CFR, Section 240 15c3-3) as custodian for the Town with respect to the deposit issued for account to the Town. 5. Fully collateralized direct repurchase agreements with a defined termination date secured by obligations of the United States or its agencies and instrumentalities. These shall be pledged to the Town of Trophy Club, held in an account in the Town of Trophy Club’s name, and deposited at the time the investment is made with the Town of Trophy Club or with a third-party selected and approved by the Town of Trophy Club. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas. A Master Repurchase Agreement, or similar agreement, must be signed prior to investment in a repurchase agreement. Securities received for repurchase agreements must have a Page 218 of 233 9 market value greater than or equal to 102 percent at the time funds are disbursed. (This section pertains to Sweep Accounts and/or Bond Proceeds) 6. No-Load Money Market Mutual funds that: 1) are registered and regulated by the Securities and Exchange Commission and provide a prospectus and other information required by the Securities and Exchange Act of 1934 (15 U.S.C. Section 78a) or the Investment Company Act of 1940 (15 U.S.C. Section 80a-1), and 2) seek to maintain a stable net asset value of $1.0000 per share. 7. Local government investment pools, which 1) meet the requirements of Chapter 2256.016 of the Public Funds Investment Act, 2) are rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service, and 3) are authorized by resolution or ordinance by the Town Council. In addition, a local government investment pool created to function as a money market mutual fund must mark its portfolio to the market daily and, to the extent reasonably possible, stabilize at a $1.0000 net asset value. If an investment in the Town’s portfolio becomes an unauthorized investment due to changes in the Investment Policy or the Public Funds Investment Act, or an authorized investment is rated in a way that causes it to become an unauthorized investment, the Investment Committee of the Town shall review the investment and determine whether it would be more prudent to hold the investment until its maturity, or to redeem the investment. The Investment Committee shall consider the time remaining until maturity of the investment, the quality of the investment, and the quality and amounts of any collateral which may be securing the investment in determining the appropriate steps to take. [PFIA 2256.021]. II. Not Authorized [PFIA 2256.009(b)(1-4)] Investments including interest-only or principal-only strips of obligations with underlying mortgage-backed security collateral, collateralized mortgage obligations with an inverse floating interest rate or a maturity date of over 10 years are strictly prohibited. VIII. INVESTMENT PARAMETERS Maximum Maturities [PFIA 2256.005(b)(4)(B)] The longer the maturity of investments, the greater their potential price volatility. Therefore, it is the Town of Trophy Club’s policy to concentrate its investment portfolio in shorter-term investments in order to limit principal risk caused by changes in interest rates. The Town of Trophy Club attempts to match its investments with anticipated cash flow requirements. The Town of Trophy Club will not directly invest for more than three years from the date of purchase; however, the above described obligations, certificates, or agreements may be collateralized using longer dated investments. Because no secondary market exists for repurchase agreements, the maximum maturity shall be 120 days except in the case of a flexible repurchase agreement for bond proceeds. The maximum maturity for such an investment shall be determined in accordance with project cash flow projections and the requirements of the governing bond ordinance. The composite portfolio will have a weighted average maturity of 365 days or less. The dollar-weighted average maturity will be calculated using the stated final maturity dates of each security. [PFIA 2256.005(b)(4)(C)]. Diversification [PFIA 2256.005(b)(3)] The Town of Trophy Club recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Risk is managed through portfolio diversification that shall be achieved by the following general guidelines: Page 219 of 233 10  Limiting investments to avoid overconcentration in investments from a specific issuer or business sector (excluding U.S. Treasury securities and financial institution deposits that are fully insured and collateralized in accordance with state and federal law),  Limiting investments that have higher credit risk,  Utilizing investments with varying maturities, and  Continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LGIPs), money market accounts, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. IX. SELECTION OF BANKS AND DEALERS Depository At least every five years a Depository shall be selected through the Town of Trophy Club’s banking services procurement process, which shall include a formal request for application (RFA). The selection of a depository will be determined by competitive application and evaluation of applications will be based on the most advantageous terms and conditions for the handling of Town funds. Authorized Brokers/Dealers [PFIA 2256.025] The Town of Trophy Club Investment Committee (see Section XIII) shall, at least annually, review, revise, and approve a list of qualified broker/dealers authorized to engage in securities transactions with the Town of Trophy Club. Authorized firms may include primary dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). Competitive Environment It is the policy of the Town of Trophy Club to provide a competitive environment for all investment activities. The Investment Officers shall develop and maintain procedures for ensuring competition in the investment of the Town of Trophy Club’s funds and are authorized to solicit bids for investments orally, in writing, electronically, or in any combination of these methods. Delivery vs. Payment [PFIA 2256.005(b)(4)(E)] Securities shall be purchased using the delivery vs. payment method. Funds will be released after notification that the purchased security has been received. X. SAFEKEEPING AND CUSTODY Safekeeping and Custodial Agreements The Town of Trophy Club shall contract with a bank or banks for the safekeeping of securities either owned by the Town of Trophy Club as part of its investment portfolio or held as collateral to secure demand or time deposits. Securities owned by the Town of Trophy Club shall be held in an account in the Town of Trophy Club’s name as evidenced by safekeeping receipts of the institution holding the securities. Original safekeeping receipts shall be obtained and held by the Town. Collateral for deposits will be held by a third-party custodian designated by the Town of Trophy Club and pledged to the Town of Trophy Club as evidenced by pledge receipts of the institution with which the collateral is deposited. Collateral may be held by the depository bank’s trust department, a Federal Reserve Bank or branch of a Federal Reserve Bank, a Federal Home Loan Bank, or a third-party bank approved by the Town of Trophy Club. Collateral Policy [PFCA 2257.023] Consistent with the requirements of the Public Funds Collateral Act, it is the policy of the Town of Trophy Page 220 of 233 11 Club to require full collateralization of all non-insured Town of Trophy Club funds on deposit with a financial institution and a written depository agreement acceptable to the Town. The market value of the securities collateralizing the deposit of funds shall be at least equal to 102% of the principal and accrued interest on the deposits less an amount insured by the FDIC or NCUSIF. Collateral in the form of letters of credit issued by the Federal Home Loan Bank must be equal to 100% of the principal and anticipated interest of deposits less the applicable level of FDIC insurance. At its discretion, the Town of Trophy Club may require a higher level of collateralization for certain investment securities held as collateral. Securities pledged as collateral shall be held by an independent third-party with whom the Town of Trophy Club has a current custodial agreement. The Investment Officers are responsible for entering into collateralization agreements with third-party custodians in compliance with this Policy. The agreements are to specify the acceptable investment securities for collateral, including provisions relating to possession of the collateral, the substitution or release of investment securities, ownership of securities, and the method of valuation of securities. A clearly marked evidence of pledge must be supplied to the Town of Trophy Club and retained. Collateral shall be reviewed at least monthly to assure that the market value of the pledged securities are adequate. The custodial portion of the depository agreement shall define the Town’s rights to the collateral in case of default, bankruptcy or closing and shall establish a perfected security interest in compliance with Federal and State regulations, including:  The Agreement must be in writing;  The Agreement must be executed by the depository and the Town contemporaneously with the acquisition of the asset;  The Agreement must be approved by the board of directors or the loan committee of the depository and a copy of the meeting minutes must be delivered to the Town; and  The Agreement must be part of the depository’s “official record” continuously since its execution. Collateral Defined The Town of Trophy Club shall accept only the following types of collateral:  Obligations of the United States or its agencies and instrumentalities  Direct obligations of the State of Texas or its agencies and instrumentalities  Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States  Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized rating firm not less than A or its equivalent with a remaining maturity of ten (10) years or less  A surety bond issued by an insurance company rated as to investment quality by a nationally recognized rating firm not less than A  A letter of credit issued by the Federal Home Loan Bank Subject to Audit All collateral shall be subject to inspection and audit by the Investment Officers or their designee, Including the Town of Trophy Club’s independent auditors. XI. PERFORMANCE Performance Standards The Town of Trophy Club’s investment portfolio will be managed in accordance with the parameters specified within this Policy. The portfolio shall be designed with the objective of obtaining a market rate of return through budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow requirements of the Town of Trophy Club. Page 221 of 233 12 Performance Benchmark It is the policy of the Town of Trophy Club to purchase investments with maturity dates coinciding with cash flow needs. Through this strategy, the Town of Trophy Club shall seek to optimize interest earnings utilizing allowable investments available in the market at that time. The Town of Trophy Club’s portfolio shall be designed with the objective of regularly meeting or exceeding the benchmark(s) as appropriate per the investment strategy statements. Weighted Average Yield to Maturity shall be the standard for calculating portfolio rate of return. XII. REPORTING [PFIA 2256.023] Methods The Investment Officers shall prepare a written investment report on a quarterly basis that summarizes investment strategies employed in the most recent quarter and describes the portfolio in terms of investment securities, maturities, and shall explain the total investment return for the quarter. The quarterly investment report shall include a summary statement of investment activity prepared in compliance with the PFIA. This summary will be prepared in a manner that will allow the Town of Trophy Club to ascertain whether investment activities during the reporting period have conformed to the Investment Policy. The report will be provided to the Town Council and signed by the Investment Officers. The report will include the following:  A listing of individual investments held at the end of the reporting period.  Unrealized gains or losses resulting from appreciation or depreciation by listing the beginning and ending book and market value of investments for the period.  Additions and changes to the market value during the period.  Average weighted yield to maturity of portfolio as compared to applicable benchmarks.  Listing of investments by maturity date.  Fully accrued interest for the reporting period.  The percentage of the total portfolio that each type of investment represents.  Statement of compliance of the Town of Trophy Club’s investment portfolio with state law and the investment strategy and policy approved by the Town Council. An independent auditor will perform a formal annual review of the quarterly reports with the results reported to the Town Council [PFIA 2256.023(d)]. Monitoring Market Value [PFIA 2256.005(b)(4)(D)] Market value of all securities in the portfolio will be determined at least on a quarterly basis. These values will be obtained from a reputable and independent source and disclosed to the Town Council quarterly in a written report. XIII. INVESTMENT COMMITTEE Members An Investment Committee, consisting of the Town Manager and the Investment Officers, shall review the Town’s investment strategies and monitor the results of the investment program periodically. This review can be done by reviewing the quarterly written reports and by holding committee meetings as necessary. The committee will be authorized to invite other advisors to attend meetings as needed. Scope The Investment Committee shall include in its deliberations such topics as economic outlook, investment strategies, portfolio diversification, maturity structure, potential risk to the Town’s funds, evaluation and Page 222 of 233 13 authorization of broker/dealers, acceptable training sources, rate of return on the investment portfolio, and review of compliance with the Investment Policy. The Investment Committee will also advise the Town Council of any future amendments to the Investment Policy that are deemed necessary or recommended. Procedures The Investment Policy shall require the Investment Committee to provide minutes of investment information discussed at any meetings held. The committee shall meet at least annually quarterly to discuss the investment program and policy. XIV. INVESTMENT POLICY ADOPTION [PFIA 2256.005(e)] The Town of Trophy Club’s Investment Policy shall be adopted by resolution of the Town Council. It is the Town of Trophy Club’s intent to comply with state laws and regulations. The Town of Trophy Club’s Investment Policy shall be subject to revisions consistent with changing laws, regulations, and needs of the Town of Trophy Club. The Town Council shall adopt a resolution stating that it has reviewed the policy and investment strategies not less than annually, approving any changes or modifications. Page 223 of 233 TOWN COUNCIL COMMUNICATION MEETING DATE: March 25, 2024 FROM: Matt Cox, Director of Community Development AGENDA ITEM: Consider a meritorious exception application request for special purpose banners/signs for the 2024 Trophy Club Women's Club Mother's Day Art and Garden Festival, to include a request to waive the meritorious exception fee, to be located at the Trophy Club Town Center, PD-30. (Matt Cox, Commuity Development Director) BACKGROUND/SUMMARY: The 4th Annual Trophy Club Women's Club Mother's Day Art and Garden Festival is scheduled for May 10, 2024. The organization submitted a meritorious exception application requesting additional banners/signs for the event. The same meritorious exception was applied for and granted in February 2023 as part of the 2023 Trophy Club Women's Club Mother's Day Art and Garden Festival. Section 3.09.065 of the Town's Code of Ordinances allows only one (1) banner/sign, not to exceed fifty (50) square feet, on the special event site. The applicant is requesting banners/signs at multiple locations near the festival and throughout town. Section 3.09.101(b) allows an "interested party to request from the Town Council, upon recommendation by the Planning and Zoning Commission, to hear and fairly consider a meritorious exception". A site plan has been submitted with the application showing the locations of potential banners/signs (Exhibit A). Approval for banners on Northwest Independent School District property has been obtained and attached for reference (Exhibit C). The Trophy Club Women's Club is also requesting that the $300 meritorious exception fee be waived since the event is organized for the purpose of providing scholarships to Trophy Club students. Proposed Dimensions for 8 vinyl banners/signs Mother’s Day Festival HEIGHT 4’ 8 banners/signs WIDTH 7’ OVERALL SF 28 BOARD REVIEW/CITIZEN FEEDBACK: The Planning & Zoning Commission reviewed the meritorious exception application at their March 7, 2024 meeting and unanimously recommended the item for approval (5-0). FISCAL IMPACT: N/A LEGAL REVIEW: N/A Page 224 of 233 ATTACHMENTS: 1. Exhibit A - Map Locations 2. Exhibit B - ME Application 3. Exhibit C - NWISD Approval Email ACTIONS/OPTIONS: Staff recommends that the Town Council move to approve the meritorious exception application request for special purpose banners/signs for the 2024 Trophy Club Women's Club Mother's Day Art and Garden Festival, to include a request to waive the meritorious exception fee, to be located at the Trophy Club Town Center, PD-30. Page 225 of 233 Page 228 of 233 Page 229 of 233 Page 230 of 233 Page 232 of 233 Page 233 of 233