REIMBURSABLE PUBLIC IMPROVEMENTS AND NOTE RECEIVABLE FROM THE SKY RANCH CAB
|9 Months Ended|
May 31, 2022
|REIMBURSABLE PUBLIC IMPROVEMENTS AND NOTE RECEIVABLE FROM THE SKY RANCH CAB|
|REIMBURSABLE PUBLIC IMPROVEMENTS AND NOTE RECEIVABLE FROM THE SKY RANCH CAB||
NOTE 2 – REIMBURSABLE PUBLIC IMPROVEMENTS AND NOTE RECEIVABLE FROM THE SKY RANCH CAB
The note receivable from the Sky Ranch CAB reports the balances owed by the Sky Ranch CAB to the Company, to reimburse the Company for public improvements paid for by the Company, project management fees, and interest accrued on the unpaid balances related to the ongoing development of the Sky Ranch master planned community. This is described in greater detail in Note 1 and Note 14 to the 2021 Annual Report. The Company has advanced funds to the Sky Ranch CAB for the cost of public improvements at Sky Ranch that are the ultimate responsibility of the Sky Ranch CAB. During the second quarter of fiscal 2021, the Company determined that the Sky Ranch CAB would be able to repay the Company for those improvements, along with the project management fees and interest on these expenses. Upon that determination, the Company began recording the reimbursable public improvements as a receivable from the Sky Ranch CAB (as opposed to the costs being expensed as land development construction costs) and began recognizing project management fee revenue and interest income on the entire note receivable from the Sky Ranch CAB. Prior to that date, payment was not deemed to be probable; therefore, the Company capitalized those costs as land under development and subsequently expensed the reimbursable public improvements and did not recognize any project management fees or interest income due to the uncertainty of collectability. During the three and nine months ended May 31, 2022, the Company spent $1.9 million and $8.8 million on public improvements which are payable by the Sky Ranch CAB to the Company and added to the note receivable from the Sky Ranch CAB. Additionally, for the three and nine months ended May 31, 2022, project management fees owed to the Company of $0.1 million and $0.5 million, and interest income on the outstanding note receivable of $0.3 million and $1.2 million were added to the note receivable. During the three months ended May 31, 2022, the Sky Ranch CAB made a $0.1 million interest payment on the note receivable.
Public improvements which are not probable of reimbursement at the time of being incurred are considered contract fulfillment costs and are recorded as land development construction costs as incurred. If public improvement costs are deemed probable of collection, the costs are recognized as notes receivable - related party. The Company assesses the collectability of the note receivable from the Sky Ranch CAB, which includes reimbursable public improvements, project management fees and the related interest income, when events or circumstances indicate the amounts may not be recoverable. The Sky Ranch CAB has an obligation to repay the Company, but the ability of the Sky Ranch CAB to do so before the contractual termination dates is dependent upon the establishment of a tax base or other fee generating activities sufficient to fund reimbursable costs incurred.
The following table summarizes the activity and balances associated with the reimbursable public improvements, project management fees, and accrued interest, all of which are included in the note receivable from the Sky Ranch CAB:
The note receivable from the Sky Ranch CAB accrues interest at 6% per annum. During fiscal 2021, the Company, through information obtained from the Sky Ranch CAB board, determined it was probable the Sky Ranch CAB would issue bonds within twelve months, from which an estimated $16.0 million would be available to repay the Company. During the three months ended May 31, 2022, the Sky Ranch CAB board began the process of issuing its second round of bonds, which, based on the estimates provided by the underwriters of the bond, the Company believes will be issued by August 31, 2022.
The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.
Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef