The Brazos River Authority Waco Texas

BRAZOS RIVER AUTHORITYNOTES TO THE BASIC FINANCIAL STATEMENTSAUGUST 31, 2008AND 2007(in thousands)The Authority has constructed reservoir, water treatment and sewerage system facilities which werefinanced primarily by the issuance of revenue bonds and/or federal grants. The recipients of the servicesprovided by these facilities generally contract to pay the Authority amounts equivalent to operating andmaintenance expenses and the debt service requirements of the related revenue bonds. Revenue bonddebt service is predominantly applicable to interest in the early years, with the portion applicable toprincipal retirements increasing in later years. Depreciation expense, provided on the straight-linemethod, usually exceeds the portion of revenues applicable to the principal portion of bond retirementswhich partially results in reporting operating losses in early years which will reverse in later years.Cash and Cash Equivalents - All highly liquid investments (including restricted assets) with originalmaturities of three months or less when purchased are considered to be cash equivalents.Deposits - The Authority’s collateral agreement requires that all deposits be fully collateralized bygovernment securities or Texas municipal bonds rated A or better that have a market value exceedingthe total amount of cash and investments held at all times.Accounts Receivable - Accounts receivable are considered to be fully collectible; accordingly, noallowance for doubtful accounts is required. If amounts become uncollectible, they will be charged tooperating expenses when that determination is made.Capital Assets - All purchased capital assets are stated at historical cost. Donated assets are stated attheir estimated fair values on the date donated. Newly acquired assets with a cost of five thousanddollars or more and a useful life greater than three years will be capitalized. Repairs and maintenanceare recorded as expenses; renewals and betterments are capitalized. Depreciation is calculated on eachclass of depreciable property using the straight-line method. Estimated useful lives are as follows:Reservoir facilitiesWater and sewerage system facilitiesBuildings, structures, and improvementsVehicles, furniture, and equipment30 to 85 years25 to 50 years20 to 70 years3 to 35 yearsThe Authority capitalizes net interest costs, as applicable, as a component cost of construction inprogress. The two projects that meet the capitalization rule are the Morris Sheppard Dam project atPossum Kingdom Lake and the East Williamson County Regional Water System expansion. For theyears ended August 31, 2008 and 2007, the Authority had $1,491 and $639 in net capitalized interest,respectively for these two projects.Compensated Absences – Prior to May 1, 2002 the Authority’s employees were granted vacation andsick leave in specified amounts. Effective May 1, 2002 vacation and sick leave were superseded byPersonal Time Off (PTO). The Authority’s current policy states that upon termination an employee willbe paid for 100% of unused vacation time and 50% of their PTO balance up to a maximum of 160 hours(20 days) combined. In addition, for employees eligible to retire only, unused sick leave is paid out at arate of 50% of their balance or 144 hours (18 days) whichever is less. The total recorded liability forcompensated absences, as of August 31, 2008 and 2007, was $690 and $681 respectively.22