North Park Public Utility District

North Park Public Utility District

Information Required by Section 26.18, Texas Tax Code

Date: January 1,2020

(1) Name of each member of the governing body:

Robinson K. Neblett Barry W. Smith

James Thomas Bagby, Jr. Victor E. Harris

Charles L. Henke, Jr.

(2) Mailing address, e-mail address, and telephone number:

2727 Alien Parkway, Suite 1100

Houston, Texas 77019

713-652-6500

9403 0(%smithmur.com

(3) Official contact information for each member of the governing body:

Same as Item (2) above.

(4) District's budget for the preceding two years:

See Attached.

(5) Proposed or adopted budget for the current year: See Attached.

(6) Change in amount of District budget from the preceding year to current year, by dollar amount and percentage;

2019 Budget 2020 Budget Change in Budget Percentage of Change

$2,131,000 $2,245,000 $114,000 5.35%

(7) Amount of property tax revenue budgeted for maintenance and operations for the preceding two years and the current year:

See attached budgets.

(8) Amount of property tax revenue budgeted for debt service for the preceding two years and

the current year:

The District does not budget for debt service.

(9) Tax rate for maintenance and operations adopted by the taxing unit for the preceding two

fears:

2019: $0.15

2018: $0.15

(10) The tax rate for debt service adopted by the taxing unit for the preceding two years:

2019: $0.125

2018: $0.165

(11) This information required by Section 26.18 is applicable only to school districts.

(12) Tax rate for maintenance and operations proposed by the taxing unit for the current year: As of the date of the report, no proposed tax rate has been established for the current year. (13) Tax rate for debt service proposed by the taxing unit for the current year:

As of the date of the report, no proposed tax rate has been established for the current year.

(14) This information required by Section 26.18 is applicable only to school districts.

(15) The most recent financial audit of the District.

See attached.

North Park Public UtiUty District

Operating Fund Adopted Budget

Octnber 1,2817 through September 30, 2018

O^^astajry Ssacamq^lxp&iuse Sstcai-me tMW •WaSw&uhnnmSemriceR'a l.SSSO •SewefrOutomes'SmvlceFaea 1A330 •PeuiIiy/hteKiatOnSwAsds 1AWS -TapFeeg 1A8BO •NHCKWAB8C 15380 • MteceUaneow Income 1.S3BS •CiiyafHoustan SPA income 1.SSS1 •Ihfei'estonTeaplBBealment 1S3U 'Gteaseltaip 1S39S •MaiaienanceTajiOaIIecUBas Tntal Incsme Expense 1,6142 •Chemicab .1.6170 •TapCiMm.Expnae 162B2 -Sludge 1.623S • Repair feMamhaunca 6233,11 -R&M-Water 623SJ2-R&M-Sewer Total 1^238 • Repair &Mainienance 1.SZ7S •Swt,CSI,GT laapeeHnnBip 1.6SU •Dliettdtpeea-P/R' U3W . legal BKS General DotmnenE: Convemtsa Section

lepl Fees - CondcannaUon Total 1.63ZB- Legal Sees 1.63a •AMdltingFus 1.6322 • EriginissrUigFces 1.6324 •l«botatB«y Expense 1.632S • HecUnn Expeme 1.632<-PeamitFeea 1.&332 •Opt.raKtms&BilIjsig 1.6SS3 -BccAkieeptag 1.6338 •I^gdNutice^OthlPubUcaHoiu 1.6340 •Brtnling& Office Supplies 1.63SI -Teltphaae

1.6352 •UHliUeB

1.6353 •IneiuancqfSurelyBondPnmlums 1.6354 -naval & Pa Dle»n

1.6359 •OBierEspenseB 1.6370 'TCEQRegfeeB 1.6375 •NBOlWABxpeme l.®(0 •PayioUBtpenaea 1.7306-CaplialOuUay WPZRehabUMaUon Total 1,?3BS • Capital OuUay 1.7310 • Utility Easement 1.739S •MiaedlaneuuaBxpenBea Total Btpeme

Net Ordinary Income

Net S?E£iMne Adopted C9/2B/2M7 octW-Stpia iBO/ssm.m 390,000.00 11,000.00 O.BO 621,000.00 l.ODB.DO 280,ODD.OO 20,000.00 zs.flOB.ao sia^ioo.oo 2,100^)00.00 60,000.00 0.00 65,BOO.(10 iss/sm.m mooB.flo 255/100.00 0.00 MD,UKMH) 13,500.00 113^00.00 14000.00 7BWIO.W 35^)00.00 16,OOB.OO SO.BOO.OO 28,OBB.OD i.oao.oo s.ooa.oo sjawaa 120,000.00 45.COO.OB zaouuio lO.OBO.OO •t.SW.OO 621,000.00 3,OOO.OB 0109 SftOO.OO 13<6,OOD.OO 554,000.09 "sSpw.oo sn»^——uaaia Amended 12/06/2017 Oct 17-Sep 18 430,000.00 390,000,00 11.000.00 0,00 621.BOD.OO 1,000.00 280.000.00 20,008.00 • 29,000.00 318,01)0.00 2,100,000,00 60,000.00 0,00 6S,ODO.OO 15S,OBO.OO ion,ooB.oo 255,000.00 I 43,200.00 100,000.00 13^00.00 113,300.00 HOOO.OO 70,000.01) 35,MO.OO 16,000.00 50,0(».00 28,000,00 1,000.00 5,000.00 5,000.00 120,000.00 45,OOO.OB 20,000.00 u,ODO.an 4,500,00 Wca.oa 3,000.00 0.00 s.ooo.oo l,589,2UMl[> 510,800.00 SWiStBaa PflgelofZ

North Park Public Utility District

Opeyating Fund Adopted Budget

October 1,2017 through September 30, 2018

Adopted 09/2D/2817 Amendedl2/06/20l7

Ocfiy-SepM Oct17-Sepl8

11.6311 - Amend lo accmmfc fay axuiual Dii-sch)r Fees

North Park Public Utility District

Operating Fund Adopted Budget

October 1,2018 through September 30,2019

09A9/2018 Adopted 9/19A8 Oct •18. Sep 19 Ordinary Incomi^Bxpense

Income

l.UOO -Waicr-Customer Service Fee 430,000.00 1.4101 -Water-BuIk Sales

1,4200 -Sewcr*<^ustomer Service Fees 1.4202 •SI,CSt,FB Inspection Fees

1.4:339 •Penalty/Inlerest On Serv Accts 1.460B -Tap Fees

1.4800 -NHCRWA Fee 1.5380 • Miscellaneous Income 1.5385 -City of Houston SPA Income

1*5391 -Interest on Temp Inveshnenfr

1.5394 -Grease Trap

1.5398 -Maintenance Tax Collections

Total Income Expense

1.6142 -Chemicals

1.6170 -Tap Conn. Expense

1.6202 -Sludge

1.6235 • Repair & Maintenance 6235.11 -R&M-Water 6235.12 -R&M-Sewer Total 1.6235 -Repair & Maintenance 1,6275 -Swr,CSI,GT Inspection Exp

1.63U -Director Fees - F/R

1,6320 -Legal Fees General Election

Document Conversion

Total 1.6320 'Legal Fees 1.6321 -Auditing Fees 1.6322 • Engineering Fees 1>6324 -Laboratory Expense 1.6325 -Election Expense 1.6326 • Permit Fees 1.6332 • Operations & Billing 1.6333 -Bookkeeping

1.6338 'Legal Noiices/Oth Publications 1.6340 • Printing & Office Supplies 1.6351 -Telephone

1.6352 -Utilities

1.6353 ' Insurance/Surety Bond Premiums

1.6354 -Travel & Per Diem 1.6359 -Other Expenses 1.6370 -TCEQ Reg Fees 1.6375 -NHCRWA Expense I.656B •1'ayroll Expenses 1.7395 -Miscellaneous Expenses 1,7396 -Capital Improvements Total Expense

Net Ordinary Income

[rtcome 0.00 390,000.00 5,000.00 20,000.00 0.00 620,000.00 1,000.00 260,000.00 40,000.00 25,000.00 340,000.00 2,131,000.00 60,000.00 0.00 65,000.00 155,000.00 100,000.00 255,000.00 15,000.00 36,000.00 100,000.00 0.00 13,500.00 113,500.00 14,000.00 80,000.00 36,000.00 0.00 16,000.00 50,000.00 28,000.00 1,000.00 5,000.00 7,000.00 122,000.00 35,000.00 20,000.00. 10,000.00 4,500.00 620,000.00 3,000.00 5,000.00 205,000.00 1,806,000.00 325,000.00 ' 325,666:00' Paee 1 of 1

North Park Public Utility District

Operating Fund Adopted Budget

October 1,2019 through September 30,2020

Ordinary Incomq/Btpense

Income

l.MOO -Watet-Customet Service Fee

Adopted 09/18/2019 Oct'19-Sep 20

440,000.00

1.4200 -Sewer-Customer Service Fees

1.4202 -SI,CSI,FB Inspection Fees 1.4330 -Penalty/InterestOnServAccts 1.4600 -Tap Fees

1,4800 -NHCRWAFee

1.5380 • Miscellaneous Income

1.538S -City of Houston SPA Income

1.5391 -Interest on Temp Inveshnent

15394 -Grease Trap

1.5398 -Maintenance Tax Collections Total Income

Expense

1.6142 -Chenucals 1.6170 -Tap Conn. Expense

1.6202 -Sludge

1.6235 -Repair & Maintenance

6235.11 -R&M-Water 6235.12 -R&M-Sewer Total 1.6235 • Repair & Maintenance 1.6275 -Swi,CSI,GT Impection Exp

1.6311 -Director Fees-P/R 1.6320 -Legal Fees General Hection Litigation/ Condemnation Document Conversion

Total 1.6320 -Legal Fees 1.6321 -Auditing Fees 1.6322 • Engineering Fees

1.6324 'Laboratory Expense

1.6325 -Election Expense

1.6326 -FennitFees

1.6332 • Operations & BUling 1.6333 -Bookkeeping

1.6339 • Legal Notkes/OthFuUicaltons 1.6340 • Printing & Office Supplies 1.6351 -Telephone

1.6352 -UUllHes

1,6353 -Insutanc^/Surety Bend Premiums 1.6354 -Travel & Per Diem

1.6359 -Other Expenses 1.6370 -TCEQRegFees 1.6375 -NHCRWA Expense 1.6560 • Payroll Expenses 1.7306 -Capital Outlay 1.7395 *MisceUanet»us Expenses Total Expense Net Otdinaiy Income

Net Income 410,000.00 5,000.00 10,000.00 690,000.00 1,000.00 240,000.00 80,000.00 40,000.00 329,000.00 2,245,000.00 70,000.00 65,000.00 155,000.00 100.000.00 255,000.00 20,000.00 36,000.00 120,000.00 15,000.00 8,000.00 3,000.00 146,000.00 14,000.00 80,000.00 40,000.00 15,000.00 16,000.00 50,000.00 28,000.00 1,000.00 5,000.00 7,000.00 125,000.00 30,000.00 28,000.00 10,000.00 4,500.00 690,000.00 3;200.00 375,000.00 5,000.00 2,118,700.00 126,300.00 126,300.00 Page 1 of:

NORTH PARK PUBLIC UTILITY DISTRICT

HARRIS COUNTY, TEXAS

ANNUAL FINANCIAL REPORT

SEPTEMBER 30, 2018

McCALL GIBSON SWEDLUND BARFOOT PLLC Certified Public Accountants

TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITOR'S REPORT 1 -2 MANAGEMENT'S DISCUSSION AND ANALYSIS 3-8

BASIC FINANCIAL STATEMENTS

STATEMENT OF NET POSITION AND GOVERNMENTAL FUNDS BALANCE

SHEET 9-12

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO

THE STATEMENT OF NET POSITION 13

STATEMENT OF ACTIVITIES AND GOVERNMENTAL FUND STATEMENT OF

REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 14-15

RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF

REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO

THE STATEMENT OF ACTIVITIES 1 6

NOTES TO THE FINANCIAL STATEMENTS . 17-30

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCE-BUDGET AND ACTUAL-GENERAL FUND 32

SUPPLEMENTARY LNFORMATION REQUIRED BY THE WATER DISTRICT

FINANCIAL MANAGEMENT GUIDE

NOTES REQUIRED BY THE WATER DISTRICT FINANCIAL

MANAGEMENT GUIDE (Included in the notes to the financial statements)

SERVICES AND RATES 34-36 GENERAL FUND EXPENDITURES 3 7-3 8

INVESTMENTS 39

TAXES LEVIED AND RECEIVABLE 40-4 1 LONG-TERM DEBT SERVICE REQUIREMENTS 42-44 CHANGE IN LONG-TERM BOND DEBT 45-46

COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES

GENERAL FUND AND DEBT SERVICE FUND - FIVE YEARS 47-5 0 BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS 51-52

McCALL GIBSON SWEDLUND BARFOOTPLLC

Certified Public Accountants

73100 Wortham Center Drive

Suite 235 9600 Great Hills Trail

Houston, Texas 77065-5610 Suite 150W

(713) 462-0341 Austin, Texas 78759 Fax (713) 462-2708 (512) 610-2209

E-Mail: [email protected] www.mssbpllc.com

INDEPENDENT AUDITOR'S REPORT

Board of Directors

North Park Public Utility District

Harris County, Texas

We have audited the accompanying financial statements of the governmental activities and each major

fund of North Park Public Utility District (the "District"), as of and for the year ended September 30,

2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or

error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Member of

American Institute of Certified Public Accountants Texas Society of Certified Public Accountants

Board of Directors

North Park Public Utility District

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of September 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual - General Fund be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic fmancial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of fanning opinions on the financial statements that collectively comprise the District's basic financial statements. The supplementary information required by the Texas Commission on Environmental Quality as published in the Water District Financial Management Guide is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The supplementary information, excluding that portion marked "Unaudited" on which we express no opinion or provide any assurance, has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, includmg comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

TAtUlM^ LJL^I fti^^l^

McCall Gibson Swedlund BarfootPLLC

Certified Public Accountants

Houston, Texas

December 5, 2018

-2-NORTH PARK PUBLIC UTILITY DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30,2018

Management's discussion and analysis of North Park Public Utility District's (the "District") financial perfonnance provides an overview of the District's financial activities for the fiscal year ended September 30, 2018. Please read it in conjunction with the District's fmancial

statements.

USING THIS ANNUAL REPORT

This annual report consists of a series of financial statements. The basic financial statements include: (1) combined fund financial statements and government-wide financial statements and (2) notes to the financial statements. The combined fund financial statements and government-wide financial statements combine both: (1) the Statement of Net Position and Governmental Funds Balance Sheet and (2) the Statement of Activities and Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances. This report also includes required and other supplementary information in addition to the basic financial statements.

GOVERNMENT-WIDE FmANCIAL STATEMENTS

The District's annual report includes two financial statements combining the govemment-wide financial statements and the fund financial statements. The govemment-wide financial statements provide both long-term and short-term information about the District's overall status. Financial reporting at this level uses a perspective like that found in the private sector with its basis in full accrual accounting and elimination or reclassification of internal activities.

The Statement of Net Position includes all of the District's assets, liabilities and, if applicable, deferred inflows and outflows of resources with the difference 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 District as a whole is improving or deteriorating. Evaluation of the overall health of the District would extend to other non-financial factors.

The Statement of Activities reports how the District's net position changed during the current

fiscal year. All current year revenues and expenses are included regardless of when cash is received or paid.

-3-NORTH PARK PUBLIC UTILITY DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30,2018

FUND FINANCIAL STATEMENTS

The combined statements also include 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 District has three governmental fund types. The General Fund

accounts for resources not accounted for in another fund, customer service revenues, costs and

general expenditures. The Debt Service Fund accounts for ad valorem taxes and financial resources restricted, committed or assigned for servicing bond debt and the cost of assessing and collecting taxes. The Capital Projects Fund accounts for financial resources restricted, committed or assigned for acquisition or construction of facilities and related costs.

Governmental funds are reported in each of the financial statements. The focus in the fund financial statements provides a distinctive view of the District's governmental funds. These statements report short-term fiscal accountability focusing on the use of spendable resources and balances of spendable resources available at the end of the year. They are useful in evaluating annual financing requirements of the District and the commitment ofspendable resources for the near-tenn.

Since the government-wide focus includes the long-term view, comparisons between these two

perspectives may provide insight into the long-term impact of short-term financing decisions. The adjustments columns, the Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position and the Reconciliation of the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities explain the differences between the two presentations and assist in understanding the differences between

these two perspectives.

NOTES TO THE FmANCIAL STATEMENTS

The accompanying notes to the financial statements provide information essential to a full understanding of the govemment-wide and fund financial statements.

OTHER INFORMATION

In addition to the financial statements and accompanying notes, this report also presents certain required supplementary information ("RSI"). The budgetary comparison schedule is included as RSI for the General Fund.

-4-NORTH PARK PUBLIC UTILITY DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30,2018

GOVERNMENT-WIDE FINANCIAL ANALYSIS

Net position may serve over time as a useful indicator of the District's financial position. In the case of the District, assets and deferred outflows of resources exceeded liabilities by $7,065,815 as of September 3 0,2018.

A portion of the District's net position reflects its net investment in capital assets (e.g. land, buildings and equipment as well as water and wastewater facilities, less any debt used to acquire those assets that is still outstanding).

The following is a comparative analysis ofgovernment-wide changes in net position:

Summary of Changes in the Statement of Net Position

Current and Other Assets

Capital Assets (Net of Accumulated

Depreciation) Total Assets

Deferred Outflows of Resources

Long -Term Liabilities Other Liabilities

Total Liabilities

Net Position:

Net Investment in Capital Assets Restricted

Unrestricted

Total Net Position

$

$_

$

$

2018

5,959,733 6,154,914 12,114,647 35,434 3,625,266 1,459,000 5,084,266 1,515,082 837,207 4,713,526 7,065,815

$

$

$

$

$

$

$

2017

5,415,486 6,596,138 12,011,624 40,104 4,670,648 624,804 5,295,452 1,725,594 859,498 4,171,184 6,756,276 Change Positive (Negative)

$ 544,247

(441,224)

$ 103,023

$ (4,670)

$ 1,045,382

(834,196)

$ 211,186

$ (210,512)

(22,291)

542,342

$ 309,539

-5-NORTH PARK PUBLIC UTILITY DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30,2018

GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued)

The following table provides a summary of the District's operations for the years ended September 30, 2018, and September 30,2017.

Summary of Changes in the Statement of Activities

Revenues:

Property Taxes Sales Tax Receipts Charges for Services Other Revenues Total Revenues Expenses for Services Change in Net Position

Net Position, Beginning of Year Net Position, End of Year

$

$

$

$

2018

749,188 ' 257,076 1,504,920 89,106 2,600,290 (

(2,290,751)

309,539 ( 6,756,276 7,065,815 (

2017

? 786,403

272,682 1,391,760 56,849 ? 2,507,694 (2,150,651) ? 357,043 6,399,233 ? 6,756,276 Change Positive (Negative)

$ (37,215)

(15,606)

113,160 32,257 $ 92,596

(140,100)

$ (47,504)

357,043 $ 309,539

FmANCIAL ANALYSIS OF THE DISTRICT'S GOVERNMENTAL FUNDS

The District's combined fund balances as of September 30, 2018, were $5,630,815, an increase of $566,010 from the prior year.

The General Fund fund balance increased by $561,647, primarily due to service revenues and

sales tax receipts exceeding operating expenditures.

The Debt Service Fund fund balance increased by $2,764, primarily due to the sti'ucture of the

District's debt service requirements.

The Capital Projects Fund fund balance increased by $1,599.

-6-NORTH PARK PUBLIC UTILITY DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30,2018

GENERAL FUND BUDGETARY HIGHLIGHTS

The Board of Directors did not amend the budget during the current fiscal year. Actual revenues were $63,224 more than budgeted revenues. Actual expenditures were $55,577 more than budgeted expenditures.

CAPITAL ASSETS

Capital assets as of September 30, 2018, total $6,154,914 (net of accumulated depreciation) and include land, buildings and equipment as well as the water and wastewater systems.

Capital Assets At Year-End, Net of Accumulated Depreciation

Capital Assets Not Being Depreciated:

Land and Land Improvements Capital Assets, Net of Accumulated

Depreciation: Water System Wastewater System Total Net Capital Assets

$

$

2018

186,262 2,851,024 3,117,628 6,154,914

$

$

2017

186,262 3,036,961 3,372,915 6,596,138 Change Positive (Negative)

$

(185,937)

(255,287)

$ (441,224)

Additional information on the District's capital assets can be found in Note 6.

LONG-TERM DEBT ACTIVITY

At the end of the current fiscal year, the District had total long-term debt payable of $4,745,000. The changes in the debt position of the District during the fiscal year ended September 30, 2018,

are summarized as follows:

Bond Debt Payable, October 1, 2017 $ 4,985,000 Less: Bond Principal Paid 240,000 Bond Debt Payable, September 30, 2018 $ 4;J45flOO

The Series 2009 Bonds carry an underlying rating of "A" from Standard & Poor's Ratings Services and an insured rating of "AA" based on a policy issued by Assured Guaranty

Corporation.

Subsequent to year-end, on November 1, 2018, the District redeemed Series 2009 Bonds in the amount of $800,000 with maturity dates in 2032 and 2033.

-7-NORTH PARK PUBLIC UTILITY DISTMCT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30,2018

CONTACTING THE DISTRICT'S MANAGEMENT

This financial report is designed to provide a general overview of the Disb-ict's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to North Park Public Utility District, c/o Smith, Murdaugh, Little & Bonham, L.L.P, 2727 Alien Parkway, Suite 1100, Houston, TX 77019.

NORTH PARK PUBLIC UTILITY DISTRICT

STATEMENT OF NET POSITION AND

GOVERNMENTAL FUNDS BALANCE SHEET

SEPTEMBER 30, 2018

Debt

General Fund Service Fund

ASSETS

Cash

Investments Receivables:

Property Taxes

Penalty and Interest on Delinquent Taxes Service Accounts (Net of Allowance for

Doubtful Accounts of $1,000)

Due from Other Funds Due from the City of Houston

Prepaid Costs Land

Capital Assets (Net of Accumulated Depreciation)

TOTAL ASSETS

DEFERRED OUTFLOWS OF RESOURCES

Deferred Charges on Refunding Bonds

TOTAL ASSETS AND DEFERRED

OUTFLOWS OF RESOURCES

$

$

814,980 3,853,793 1,803 278,832 1,669 62,156 25,054 5,038,287 -0-5,038,287 52,913 761,205 2,510 4,393 $ 821,021

-0-The accompanying notes to the financial statements are an integral part of this report.

-9-Capital Projects Fund

$

105,004 Total $ 867,893 4,720,002 4,313 Adjustments 1,483 Statement of Net Position

$ 867,893

4,720,002 4,313 1,483 105,004 $

-0-$ 5

$

$ 5

278,832 6,062 62,156 25,054 ,964,312 ; -0- ; ,964,312 ;

(6,062)

186,262 5,968,652 $ 6,150,335 $ 35,434 $ 6,185,769

$

$

$

5

12

12

278,832 62,156 25,054 186,262 ,968,652 ,114,647 35,434 ,150,081

The accompanying notes to the financial statements are an integral part of this report.

10-NORTH PARK PUBLIC UTILITY DISTRICT

STATEMENT OF NET POSITION AND

GOVERNMENTAL FUNDS BALANCE SHEET

SEPTEMBER 30, 2018

LIABILITIES

Accounts Payable Accrued Interest Payable Due to Other Governments Due to Other Funds Due to Taxpayers

Security Deposits 183,148

Long-Term Liabilities:

Due Within One Year

Due After One Year

General Fund $ 75,495 61,725 4,393 Debt Service Fund

$

1,669 2,754

TOTAL LIABILITIES $ 324,761 $ 4,423

DEFERRED INFLOWS OF RESOURCES

Property Taxes $ 1,803 $ 2,510

FUND BALANCES

Nonspendable:

Prepaid Costs $ 25,054 $

Restricted for Authorized Construction: Net Investment Revenues

Restricted for Debt Service 8 14,088

Unassigned 4,686,669

TOTAL FUND BALANCES $ 4,711,723 $ 814,088

TOTAL LIABILITIES, DEFERRED INFLOWS

OF RESOURCES AND FUND BALANCES $ 5,038,287 $ 821,021

NET POSITION

Net Investment in Capital Assets Restricted for:

Debt Service

Capital Projects

Unrestricted

TOTAL NET POSITION

The accompanying notes to the financial statements are an integral part of this report.

-11-Capital Projects Fund

$

$ $

-0-$

$

$

Total 75,495 61,725 6,062 2,754 183,148 329,184 4,313 Adjustments

$

85,878

(6,062)

1,050,000 3,625,266 $ 4,755,082

$ (4,313)

Statement of Net Position $ 75,495 85,878 61,725 2,754 183,148 1,050,000 3,625,266 $ 5,084,266 $

.-0-$ 25,054 .-0-$ (25,054) .-0-$

105,004 105,004 (105,004)

814,088 (814,088)

4,686,669 (4,686,669) 105,004 $ 5,630,815 $ (5,630,815) $ -0-105,004 $ 5,964,312 $ 1,515,082 $ 1,515,082 732,203 105,004 4,713,526 732,203 105,004 4,713,526 7,065,815 $ 7,065,815

The accompanying notes to the financial statements are an integral part of this report.

12-NORTH PARK PUBLIC UTILITY DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

SEPTEMBER 30, 2018

Total Fund Balances - Governmental Funds $ 5,630,815

Amounts reported for governmental activities in the Statement of Net Position are different because:

Land, construction in progress and capital assets used in governmental activities are not current financial resources and, therefore, are not reported as assets in the

governmental funds. 6,154,914

The difference between the net carrying amount of the refunded bonds and the reacquisition price is recorded as a deferred outflow in the governmental activities and systematically charged to interest expense over the remaining life of the old

debt or the life of the new debt, whichever is shorter. 35,434

Deferred inflows of resources related to property tax revenues and penalty and interest receivable on delinquent taxes for the 2017 and prior tax levies became part

of recognized revenues in the governmental activities of the District. 5,796

Certain liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. These liabilities at year-end consist of:

Accrued Interest Payable $ (85,878) Bonds Payable Within One Year . (1,050,000)

Bonds Payable After One Year (3,625,266) (4,761,144)

Total Net Position - Governmental Activities $ 7,065,815

The accompanying notes to the financial statements are an integral part of this report.

NORTH PARK PUBLIC UTILITY DISTRICT

STATEMENT OF ACTFVITIES AND GOVERNMENTAL FUND STATEMENT OF

REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FOR THE YEAR ENDED SEPTEMBER 30,2018

General Fund

Debt

Service Fund REVENUES

Property Taxes Sales Tax Receipts Water Service Wastewater Service

Regional Water Authority Fees

Penalty and Interest

Tap Connection and Inspection Fees Investment Revenues Miscellaneous Revenues TOTAL REVENUES EXPENDITURES/EXPENSES Service Operations: Professional Fees Contracted Services Utilities

Regional Water Authority Assessments Repairs and Maintenance

Depreciation Other Debt Service: Bond Principal Bond Interest TOTAL EXPENDITURES/EXPENSES NET CHANGE IN FUND BALANCES CHANGE IN NET POSITION FUND BALANCES/NET POSITION

-OCTOBER 1,2017

FUND BALANCES/NET POSITION -SEPTEMBER 30, 2018 $ 345,514 $ 257,076 426,884 390,942 624,960 23,656 34,901 58,476 815 $ 2,163,224 $ $ 223,390 $ 73,988 125,887 640,024 262,239 276,049 $ 1,601,577 $ 449,702 7,196 11,878 16,338 485,114 3,486 23,159 2,996 240,000 212,709 482,350 561,647 $ 4,150,076 2,764 811,324 4,711,723 $ 814,088

The accompanying notes to the financial statements are an integral part of this report.

-14-Capital Projects Fund 1,599 $ 1,599 ; $ -0- ; $ 1,599 ; 103,405 $ 105,004 ; Total ? 795,216 257,076 426,884 390,942 624,960 30,852 34,901 71,953 17,153 ? 2,649,937 P 226,876 97,147 125,887 640,024 262,239 279,045 240,000 212,709 ? 2,083,927 ? 566,010 5,064,805 t 5,630,815 Adjystments $ (46,028) (3,619) $ (49,647)

$

441,224 (240,000) 5,600 $ 206,824 $ (566,010) 309,539 1,691,471 $ 1,435,000 Statement of Activities $ 749,188 257,076 426,884 390,942 624,960 27,233 34,901 71,953 17,153 $ 2,600,290 $ 226,876 97,147 125,887 640,024 262,239 441,224 279,045 218,309 $ 2,290,751

$

309,539 6,756,276 $ 7,065,815

The accompanying notes to the financial statements are an integral part of this report.

15-NORTH PARK PUBLIC UTILITY DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF

REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED SEPTEMBER 30,2018

Net Change in Fund Balances - Govemmental Funds $ 566,010 Amounts reported for governmental activities in the Statement of Activities are different

because:

Governmental funds report tax revenues when collected. However, in the govemment-wide financial statements, revenues are recorded in the accounting period for which the taxes are

levied. (46,028)

Governmental funds report penalty and interest revenues on property taxes when collected. However, in .the govemment-wide financial statements, revenues are recorded when the

penalty and interest are assessed. (3,619) Governmental funds do not account for depreciation. However, in the govemment-wide

financial statements, capital assets are depreciated and depreciation expense is recorded in

the Statement of Activities. (44 1,224)

Governmental funds report principal payments on long-term debt as expenditures. However, in the govemment-wide financial statements, principal payments decrease long-term

liabilities and the Statement of Activities is not affected. 240,000

Governmental funds report interest payments on long-term debt as expenditures in. the year paid. However, in the govemment-wide financial statements, interest is accrued on the debt through fiscal year-end and the current amortized portion of the bond discounts is added to

the interest expense. (5,600)

Change in Net Position - Governmental Activities $ 309,539

The accompanying notes to the financial

statements are an integral part of this report.

-16-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 1. CREATION OF DISTRICT

North Park Public Utility District, located in Harris County, Texas (the "District"), was created by a Special Act of the Texas State Legislatire, Regular Session, on June 4, 1971. Pursuant to the provisions of Chapters 49 and 54 of the Texas Water Code, the District is empowered to purchase, operate and maintain all facilities, plants and improvements necessaiy to provide

water, wastewater service, storm sewer drainage, irrigation, solid waste collection and disposal,

including recycling, and to construct and maintain parks and recreational facilities for the residents of the District. The District is also empowered to contract for or employ its own peace officers with powers to make arrests and to establish, operate and maintain a fire department to perform all fire-fighting activities within the District. The District does not currently provide for police protection or fire-fighting services. The first bonds were sold on June 7, 1979.

NOTE 2. SIGNIFICANT ACCOUNTmG POLICIES

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America as promulgated by the Governmental Accounting Standards Board ("GASB"), In addition, the accounting records of the District are maintained generally in accordance with the Water District Financial Management Guide published by the Commission.

The District is a political subdivision of the State of Texas governed by an elected board. GASB has established the criteria for determining whether an entity is a primary government or a component unit of a prmary government. The primary criteria are that it has a separately elected governing body, it is legally separate, and it is fiscally independent of other state and local governments. Under these criteria, the District is considered a primary government and is not a component unit of any other government. Additionally, no other entities meet the criteria for inclusion in the District's financial statement as component units.

Financial Statement Presentation

These financial statements have been prepared in accordance with GASB Codification of Governmental Accounting and Financial Reporting Standards Part II, Financial Reporting ("GASB Codification").

The GASB Codification sets forth standards for external financial reporting for all state and local government entities, which include a requirement for a Statement of Net Position and a Statement of Activities. It requires the classification of net position into three components: Net Investment in Capital Assets; Restricted; and Unrestricted. These classifications are defined as follows:

17-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FmANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial Statement Presentation (Continued)

• Net Investment in Capital Assets - This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are

attributable to the acquisition, construction, or improvements of those assets.

• Restricted Net Position - This component of net position consists of external constraints placed on the use of assets imposed by creditors (such as through debt covenants),

grantors, contributors, or laws or regulation of other governments or constraints imposed

by law through constihitional provisions or enabling legislation.

• Unrestricted Net Position - This component of net position consists of assets that do not meet the definition of Restricted or Net Investment in Capital Assets.

When both restricted and unrestricted resources are available for use, generally it is the District's

policy to use restricted resources first.

Govemment-Wide Financial Statements

The Statement of Net Position and the Statement of Activities display information about the District as a whole. The District's Statement of Net Position and Statement of Activities are combined with the governmental fund financial statements. The District is viewed as a special-purpose government and has the option of combining these financial statements.

The Statement of Net Position is reported by adjusting the governmental fund types to report on

the full accmal basis, economic resource basis, which recognizes all long-term assets and

receivables as well as long-term debt and obligations. Any amounts recorded due to and due from other funds are eliminated in the Statement of Net Position.

The Statement of Activities is reported by adjusting the governmental fund types to report only

items related to current year revenues and expenditures. Items such as capital outlay are

allocated over their estimated useful lives as depreciation expense. Internal activities between governmental funds, of any, are eliminated by adjustment to obtain net total revenues and expenses of the government-wide Statement of Activities.

-18-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FWANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial Statement Presentation (Continued)

Fund Financial Statements

As discussed above, the District's fund financial statements are combined with the govemment-wide financial statements. The fund financial statements include a Governmental Funds Balance Sheet and a Governmental Fund Statement of Revenues, Expenditures and Changes in Fund

Balances.

Governmental Funds

The District has three governmental funds and considers these funds to be major funds.

General Fund - To account for resources not required to be accounted for in another fund, customer service revenues, costs and general expenditures.

Debt Service Fund - To account for ad valorem taxes and financial resources restricted,

committed or assigned for servicing bond debt and the cost of assessing and collecting taxes. Capital Projects Fund - To account for financial resources restricted, committed or assigned for acquisition or construction of facilities and related costs.

Basis of Accounting

The District uses the modified accrual basis of accounting for governmental fund types. The

modified accrual basis of accounting recognizes revenues when both "measurable and available."

Measurable means the amount can be determined. Available means collectable within the current period or soon enough thereafter to pay current liabilities. The District considers revenues reported in governmental funds to be available if they are collectable within 60 days

after year-end. Also, under the modified accrual basis of accounting, expenditures are recorded

when the related fund liability is incurred, except for principal and interest on long-term debt, which are recognized as expenditures when payment is due.

Property taxes considered available by the District and included in revenues include taxes collected during the year and taxes collected after year-end, which were considered available to defray the expenditures of the current year. Deferred inflows of resources related to property tax revenues are those taxes which the District does not reasonably expect to be collected soon enough in the subsequent period to finance current expenditures.

-19-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Accounting (Continued)

Amounts transferred from one fund to another fund are reported as other financing sources or uses. Loans by one fund to another fund and amounts paid by one fund for another fund are reported as interfund receivables and payables in the Governmental Funds Balance Sheet if there is intent to repay the amount and if the debtor fund has the ability to repay the advance on a timely basis.

Capital Assets

Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the govemment-wide Statement of Net Position. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at their fair market value on the date donated. Repairs and maintenance are recorded as an expenditure in the governmental fund incurred and as an expense in the govemment-wide Statement of Activities. Capital asset additions, improvements and preservation costs that extend the life of an asset are capitalized and depreciated over the estimated useful life of the asset. Developer interest, engineering fees and certain other costs are capitalized as part of the asset. Assets are capitalized, including infrastructure assets, if they have an original cost of $20,000 or more and a useful life of at least two years. Depreciation is calculated on each class of depreciable property using no salvage value and the straight-line method of depreciation. Estimated useful lives are as follows:

Years

Buildings 40

Water System 10-45 Wastewater System 10-45 Drainage System 10-45 All Other Equipment 3-20 Budgeting

In compliance with governmental accounting principles, the Board of Directors annually adopts an unappropriated budget for the General Fund. The budget was not amended during the current

fiscal year.

-20-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 2. SIGNIFICANT ACCOUNTmG POLICIES (Continued)

Pensions

The District has not established a pension plan as the District does not have employees. The Internal Revenue Service has determined that fees of office received by Directors are wages subject to federal income tax withholding for payroll tax purposes only.

Measurement Focus

Measurement focus is a term used to describe which transactions are recognized within the various financial statements. In the govemment-wide Statement of Net Position and Statement of Activities, the governmental activities are presented using the economic resources

measurement focus. The accounting objectives of this measurement focus are the determination

of operating income, changes in net position, financial position, and cash flows. All assets, liabilities, and deferred inflows and outflows of resources associated with the activities are reported. Fund equity is classified as net position.

Governmental fund types are accounted for on a spending or financial flow measurement focus.

Accordingly, only current assets and current liabilities are included on the Governmental Funds Balance Sheet, and the reported fund balances provide an indication of available spendable or appropriable resources. Operating statements of governmental fund types report increases and decreases in available spendable resources. Fund balances in governmental funds are classified using the following hierarchy:

Nonspendable: amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted: amounts that can be spent only for specific purposes because of constitutional provisions, or enabling legislation, or because of constraints that are imposed externally.

Committed: amounts that can be spent only for purposes determined by a formal action of the Board of Directors. The Board is the highest level of decision-maldng authority for the District. This action must be made no later than the end of the fiscal year. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the

Board. The Disb-ict does not have any committed fund balances.

Assigned: amounts that do not meet the criteria to be classified as restricted or committed, but that are intended to be used for specific purposes. The District has not adopted a formal policy regarding the assignment of fund balances and does not have any assigned fund balances.

-21-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 2. SIGNIFICANT ACCOUNTmG POLICIES (Continued)

Measurement Focus (Continued)

Unassigned: all other spendable amounts in the General Fund.

When expenditures are incurred for which restricted, committed, assigned or unassigned fund balances are available, the District considers amounts to have been spent first out of restricted funds, then committed funds, then assigned funds, and finally unassigned funds.

Accpunting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expendihires during the reporting period. Actual results could differ from those estimates

NOTE 3. LONG-TERM DEBT

Series 2009

$3,175,000

5.00%-6.00% November 1,

2018,2026,

2027/2033

November I/

May I/

November 1,2018*

Refunding

Series 2014

$ 1,570,000

2.6374%

May 1,

2026

November I/

May I/

May 1,2022* Amount Outstanding - September 30, 2018

Interest Rates Maturity Dates

-B eginnmg/Ending

Interest Payment Dates Callable Dates

* Or any date thereafter, at the option of the District, in whole or in part, at par plus accrued interest to the date of redemption. Series 2009 term bond maturing on November 1, 2026 is subject to mandatory redemption beginning November 1, 2019. The bonds to be redeemed shall be selected by random selection method (or DTC while the bonds are in book-entry-only form). The Series 2014 term bond mahu-ing on May I, 2026 is subject to mandatory redemption beginning May 1, 2015.

-22-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 3. LONG-TERM DEBT (Continued)

The following is a summary of transactions regarding bonds payable for the year ended September 30, 2018:

October 1, September 30,

2017 Additions Retirements 2018 Bonds Payable $ 4,985,000

Unamortized Discounts (74,3 52)

Bonds Payable, Net $ 4,910,648

^— ~ -T

_240,

-A

235,

Amount Due Within One Year* Amount Due After One Year Bonds Payable, Net

000

618)

382

$

$

$

$

4,745,000

(69,734)

4,675,266 1,050,000 3,625,266 4,675,266 As of September 30, 2018, the debt service requirements on the bonds outstanding were as follows:

Fiscal Year Principal Interest Total

2019

2020

2021

2022

2023

2024-2028 2029-2033

2034

$

$

250,000 255,000 265,000 270,000 275,000 1,230,000 1,800,000 400,000 4,745,000

$

$

203,858 195,117 186,619 177,859 168,965 706,995 355,600 10,800 2,005,813

$

$

.453,858 450,117 451,619 447,859 443,965 1,936,995 2,155,600 410,800 6,750,813

*Subsequent to year-end, on November 1, 2018, the District redeemed Series 2009 Bonds in the amount of $800,000 with maturity dates in 2032 and 2033.

As of September 30, 2018, the District had authorized but unissued bonds in the amount of

$12,210,000 for utility facilities.

The bonds are payable from the proceeds of an ad valorem tax levied upon all property subject to taxation within the District, without limitation as to rate or amount.

During the year ended September 30, 2018, the District levied an ad valorem debt service tax at the rate of $0.195 per $100 of assessed valuation, which resulted in a tax levy of $431,254 on the adjusted taxable valuation of $220,793,266 for the 2017 tax year. The bond orders require the District to levy and collect an ad valorem debt service tax sufficient to pay interest and principal on bonds when due and the cost of assessing and collecting taxes.

-23-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FmANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTES. LONG-TERM DEBT (Continued)

The District's tax calendar is as follows:

Levy Date - October 1, or as soon thereafter as practicable.

Lien Date - January 1 .

Due Date - Not later than January 31.

Delinquent Date - Februaiy 1, at which time the taxpayer is liable for penalty and interest.

NOTE 4. SIGNIFICANT BOND ORDER AND LEGAL REQUIREMENTS

A. The bond orders state that the District is required to provide to the state information depository, and to the Purchaser of the Series 2014 bonds, continuing disclosure of annual financial information and operating data with respect to the District. The information is of the general type included in the annual audit report and must be filed within six months after the end of each fiscal year of the District.

B. The District has covenanted that it will take all necessary steps to comply with the requirement that rebatable arbitrage earnings on the investment of the gross proceeds of the bonds, within the meaning of Section 148(f) of the Internal Revenue Code, be rebated to the federal government. The minimum requirement for the determination of the

rebatable amount is on each 5th year anniversary of each issue.

NOTE 5. DEPOSITS AND INVESTMENTS

Deoosits

Custodial credit risk is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be. able to recover collateral securities that are in the possession of an outside party. The District's deposit policy for custodial credit risk requires compliance with the provisions of Texas statutes.

-24-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTES. DEPOSITS AND INVESTMENTS (Continued)

Deposits (Continued)

Texas statutes require that any cash balance in any fund shall, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, be continuously secured by a valid pledge to the District of securities eligible under the laws of Texas to secure the funds of the District, having an aggregate market value, including accrued interest, at all times equal to the uninsured cash balance in the fund to which such securities are pledged. At fiscal year-end, the carrying amount of the District's deposits was $867,893 and the bank balance was $880,725. Of the bank balance, $308,258 was covered by federal depositoiy insurance and the balance was covered by collateral pledged in the name of the District and held in a third-party depositoiy. The carrying values of the deposits are included in the Governmental Funds Balance Sheet and the Statement of Net Position at September 30, 2018, as listed below:

GENERAL FUND

DEBT SERVICE FUND

TOTAL DEPOSITS

$

!_

Cash

814

52

867

,980 ,913 ,893 Investments

Under Texas law, the District is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity and that address investment diversification, yield, maturity, and the quality and capability of investment management, and all District funds must be invested in accordance with the following investment objectives: understanding the suitability of the investment to the District's financial requirements, fast; preservation and safety of principal, second; liquidity, third; marketability of the investments if the need arises to liquidate the investment before maturity, fourth; diversification of the investment portfolio, fifth; and yield, sixth. The District's investments must 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." No person may invest District funds without express written authority from the Board of Directors.

-25-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FmANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 5. DEPOSITS AND INVESTMENTS (Continued)

Investments (Continued)

Texas statutes include specifications for and limitations . applicable to the District and its authority to purchase investments as defined in the Public Funds Investment Act. The District has adopted a written investment policy to establish the guidelines by which it may invest. This policy is reviewed annually. The District's investment policy may be more restrictive than the Public Funds Investment Act.

The District invests in TexPool, an external investment pool that is not SEC-registered. The Texas Comptroller of Public Accounts has oversight of the pool. Federated Investors, Inc. manages the daily operations of the pool under a conb-act with the Comptoroller. TexPool measures all its portfolio assets at amortized cost. As a result, the District also measures its investments in TexPool at amortized cost for fmancial reporting purposes. There are no limitations or restrictions on withdrawals from TexPool.

The District invests in the Texas Short Term Asset Reserve Program ("TexSTAR"), an external public funds investment pool that is not SEC-registered. J. P. Morgan Investment Management Inc. provides investment management and FirstSouthwest, a Division ofHilltop Securities Inc., provides participant services and marketing under an agreement with the TexSTAR Board of Directors. Custodial, fund accounting and depositoiy services are provided by JPMorgan Chase

Bank, N.A. and/or its subsidiaiy J.P. M'organ Investors Services Co. Investments held by

TexSTAR are marked to market daily. The investments are considered to be Level I investments because their fair value is measured by quoted prices in active markets. The fair value of the District's position in the pool is the same as the value of the pool shares. There are no limitations or restrictions on withdrawals from TexSTAR.

-26-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTES. DEPOSITS AND INVESTMENTS (Continued)

Investments (Continued)

As of September 30, 2018, the District had the following investments and maturities:

Maturities in Years Fund and Investment Type

GENERAL FUND

TexPool TexSTAR

DEBT SERVICE FUND

TexPool

CAPITAL PROJECTS FUND

TexPool

TOTAL INVESTMENTS

Fair Value $3,339,336 514,457 761,205 105,004 $4,720,002 Less Than

1

$3,339,336 ; 514,457 761,205 105,004 $4,720,002 ; 1-5

$

$ -0-6-10 $ -0-More Than

10

$

$

-0-Credit Risk. -0-Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations. At September 30, 2018, the District's investments in TexPool and TexSTAR were rated "AAAm" by Standard and Poor's.

Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The District considers the investments in TexPool and TexSTAR to have a mahu-ity of less than one year due to the fact the share position can usually be redeemed each day at the discretion of the District.

Restrictions

All cash and investments of the Debt Service Fund are restricted for the payment of debt service and the cost of assessing and collecting taxes.

All cash and investments of the Capital Projects Fund are restricted for the purchase of capital assets.

-27-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FWANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 6. CAPITAL ASSETS

Capital asset activity for the year ended September 30, 2018:

Capital Assets Not Being Depreciated

Land and Land Improvements

Capital Assets Subject

to Depreciation

Water System

Wastewater System

Total Capital Assets Subject to Depreciation

Less Accumulated Depreciation

Water System

Wastewater System

Total Accumulated Depreciation Total Depreciable Capital Assets, Net of

Accumulated Depreciation

Total Capital Assets, Net of Accumulated Depreciation

The District has financed drainage facilities which have been conveyed to other entities for maintenance.

NOTE 7. MAINTENANCE TAX

At an election in April 1978, the voters of the District authorized the levy and collection of an

annual maintenance tax for the operation and maintenance of the District's improvements in an

amount not to exceed $0.15 per $100 of assessed valuation. Such tax is in addition to taxes which the District is authorized to levy for paying principal and interest on the bonds and any tax bonds which may be issued in the future. During the year ended September 30, 2018, the District levied an ad valorem maintenance tax at the rate of $0.15 per $100 of assessed valuation, which resulted in a tax levy of $331,733 on the adjusted taxable valuation of $220,793,266 for the 2017 tax year. This maintenance tax is to be used by the General Fund to pay expendihires of operating the District.

October 1, 2017 $ 186,262 $ 4,641,036 5,828,206 $ 10,469,242 $ 1,604,075 2,455,291 $ 4,059,366 $ 6,409,876 $ 6,596,138 Increases $

-0-$

$ -0-$ 185,937 255,287 $ 441,224 $ (441,224) $ (441,224) Decreases $

-0-$

$

-0-$

$ $ $ -0-September 30, 2018 $ 186,262 $ 4,641,036 5,828,206 $ 10,469,242 $ 1,790,012 2,710,578 $ 4,500,590 $ 5,968,652 $ 6,154,914

-28-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FmANCIAL STATEMENTS

SEPTEMBER 30,2018

NOTE 8. NORTH HARRIS COUNTY REGIONAL WATER AUTHORITY

The District is located within the boundaries of the North Harris County Regional Water Authority (the "Authority"). The Authority was created under Article 16, Section 59 of the Texas Constitution by House Bill 2965 (the "Act"), as passed by the 76th Texas Legislature, in

1999. The Act empowers the Authority to provide for the conservation, preservation, protection, recharge and prevention of waste of groundwater, and for the reduction of groundwater withdrawals. The Authority has entered into a contract for purchase of surface water from the City of Houston, Texas to assure that its participants comply with the Han-is-Galveston Subsidence District ("HGSD") pumpage requirements, which mandate that districts within HGSD boundaries, including the District, convert a percentage of their water use to surface water

over a period of time.

The Authority currently charges a fee, based on the amount of water pumped from a well, to the owner of wells located within the boundaries of the Authority, unless exempted. This fee enables the Authority to fulfill its purpose and regulatory functions. The current rate is $3.40 per 1,000 gallons of water pumped from each well. The District recorded an expenditure of $640,024 for fees assessed during the current fiscal year.

NOTE 9. RISK ASSESSMENT

The District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the District carries commercial insurance. There have been no significant reductions in coverage from the prior year and

settlements have not exceeded coverage in the past three years.

NOTE 10. STRATEGIC PARTNERSHIP AGREEMENT

Effective March 31, 2005, the District entered into a Strategic Partnership Agreement ("SPA") with the City of Houston, Texas (the "City") pursuant to Chapter 43 of the Texas Local Government Code. The SPA provides for a "limited purpose annexation" for that portion of the District which is developed for retail and commercial purposes in order to apply certain City health, safety, planning and zoning ordinances within the District. Areas of residential development within the District are not subject to the limited purpose annexation. The SPA also provides that the City will not annex the District for "full purposes" for at least 30 years.

-29-NORTH PARK PUBLIC UTILITY DISTRICT

NOTES TO THE FmANCIAL STATEMENTS

SEPTEMBER 30, 2018

NOTE 10. STRATEGIC PARTNERSHIP AGREEMENT (Continued)

The District will continue to develop, to own, and to operate and maintain a water, wastewater, and drainage system in the District. The taxable property within the District is not liable for any present or future debts of the City, and current and future taxes levied by the City may not be levied on taxable property within the District. The City's municipal courts have jurisdiction to adjudicate criminal cases filed under the Planning, Zoning, Health and Safety Ordinances and certain state laws. The District's assets, liabilities, indebtedness, and obligations will remain the responsibility of the District during the period preceding full-purpose annexation. The qualified voters of the District may vote in City elections pursuant to Local Government Code. The City is responsible for notifying the voters within the District.

The City imposes a Sales and Use Tax within the boundaries of the District under the SPA on the receipts from the sale and use at retail of taxable items at the rate of one percent or the rate specified under the future amendments to Chapter 321 of the Tax Code. The City agreed to pay to the District an amount equal to one-half of all Sales and Use Tax receipts generated within the District. The City agreed to deliver to the District its share of the sales tax receipts within 30 days of the City receiving the funds from the State Controller's office. During the current fiscal year, the District recorded sales tax receipts of $257,076, of which $62,156 was recorded as receivable at the end of the year.

NOTE 11. INTERFUND BALANCES

The General Fund owes the Debt Service Fund (Tax Account) $4,393 for excess maintenance tax transfers. This is a timing difference. The Debt Service owes the General Fund $1,669 for arbitrage rebate report fees.

-30-NORTH PARK PUBLIC UTILITY DISTRICT

REQUIRED SUPPLEMENTARY mFORMATION

NORTH PARK PUBLIC UTILITY DISTRICT

SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND

FOR THE YEAR ENDED SEPTEMBER 30,2018

Original and

Final Budget Actual

Variance Positive

(Negative)

REVENUES

Property Taxes Sales Tax Receipts Water Service Wastewater Service

Regional Water Authority Fees Penalty and Interest

Tap Connection and Inspection Fees

Investment Revenues Miscellaneous Revenues

TOTAL REVENUES

EXPENDITURES

Services Operations: Professional Fees Contracted Services Utilities

Regional Water Authority Assessments Repairs and Maintenance

Other

TOTAL EXPENDITURES

NET CHANGE IN FUND BALANCE

FUND BALANCE - OCTOBER 1, 2017

FUND BALANCE - SEPTEMBER 30, 2018

$ 318,000

280,000 430,000 390,000 621,000 11,000 29,000 20,000 1,000 $ 2,100,000 $ 197,500 78,000 125,000 621,000 255,000 269,500 $ 1,546,000 $ 554,000 4,150,076 $ 4,704,076 $ 345,514 257,076 426,884 390,942 624,960 23,656 34,901 58,476

815

$ 2,163,224 $ 223,390 73,988 125,887 640,024 262,239 276,049 $ 1,601,577

$ 561,647

4,150,076 $ 4,711,723

$

$

$

27,514

(22,924)

(3,116)

942

3,960 12,656 5,901 38,476

(185)

63,224

(25,890)

4,012

(887)

(19,024)

(7,239)

(6,549)

(55,577)

7,647 7,647

See. accompanying independent auditor's report.

-32-NORTH PARK PUBLIC UTILITY DISTRICT

SUPPLEMENTARY INFORMATION REQUIRED BY THE

WATER DISTRICT FINANCIAL MANAGEMENT GUIDE

1.

NORTH PARK PUBLIC UTILITY DISTRICT

SERVICES AND RATES

FOR THE YEAR ENDED SEPTEMBER 30,2018

SERVICES PROVIDED BY THE DISTRICT DURING THE FISCAL YEAR:

x

x

Retail WaterRetail Wastewater Parks/Recreation

Solid Waste/Garbage

Participates in joint venture, re^ emergency interconnect)

Other (specify):

Wholesale Water Wholesale Wastewater Fire Protection Flood Control

^ional system and/or wastewater

X Drainage

Irrigation

Security Roads service (other than

2.

RETAIL SERVICE PROVIDERS

a. RETAIL RATES FOR A 2" METER (OR EQUFVALENT):

Based on the rate order effective September 19, 2018.

WATER:

WASTEWATER:

Minimum Charge $ 12.50 $ 12.50 Minimum Usage 7,000 7,000 Flat Rate

Y/N

N N Rate per 1,000 Gallons over Minimum Use $1.25 $1.50 $ 1.75 $2.00 $2.50 $ 1.50 Usage Levels 7,001 to 10,000 10,001 to 20,000 20,001 to 30,000 30,001 to 50,000 50,001 and over 7,001 and over

SURCHARGE:

Regional Water Authority Fees

District employs winter averaging for wastewater usage?

N

,3.74 All

x Yes No Total monthly charges per 10,000 gallons of water usage: Water: $16.25 Wastewater: $17.00 Surcharge: $37.40 Total: $70.65

See accompanying independent auditor's report.

-34-NORTH PARK PUBLIC UTILITY DISTRICT

SERVICES AND RATES

FOR THE YEAR ENDED SEPTEMBER 30,2018

2. RETAIL SERVICE PROVIDERS (Continued)

b. WATER AND WASTEWATER RETAIL CONNECTIONS: (Unaudited)

Meter Size Unmetered <3/4" 1" r/2" 2" 3" 4" 6" 8" 10"

Total Water Connections Total Wastewater Connections

Total Connections _3

11

J2

J9

_8 _2 _Z5 _54 Active Connections .1 _9

JO

_39 _8 _2 _Z1 -5fl

ESFC

Factor x 1.0 x 1.0 x 2.5 x 5.0 x 8.0 x 15.0 x 25.0 x 50.0 x 80.0 x 115.0 x 1.0 Active

ESFCs

_3 .23 -50

312

200

100

688

M

3. TOTAL WATER CONSUMPTION DURING THE FISCAL YEAR ROUNDED

TO THE NEAREST THOUSAND: (Unaudited)

Gallons pumped into system: 202,255,000 Water Accountability Ratio: 93%

(Gallons billed* and sold/Gallons

pumped and purchased)

. Gallons billed to customers: 179,881,000

Leaks & Flushing: 8,475,000 * Includes gallons for leaks and flushing

See accompanying independent auditor's report.

-35-NORTH PARK PUBLIC UTILITY DISTRICT

SERVICES AND RATES

FOR THE YEAR ENDED SEPTEMBER 30,2018

4. STANDBY FEES (authorized only under TWC Section 49.231):

Does the District have Debt Service standby fees? Yes _ No X Does the District have Operation and Maintenance standby fees? Yes _ No X

5. LOCATION OF DISTRICT:

Is the District located entirely within one county? Yes X No

County or Counties in which District is located: Harris County, Texas

Is the District located within a city?

Entirely _ Partly _ Not at all X Is the District located within a city's extra territorial jurisdiction (ETJ)?

Entirely X Partly _ Not at all ETJ's in which District is located:

City of Houston, Texas.

Are Board Members appointed by an office outside the District? Yes No X

See accompanying independent auditor's report.