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HomeMy WebLinkAbout131121PREVISED 11/19/13 NOTICE OF THE EXECUTIVE, SPECIAL, AND REGULAR SESSIONS OF THE FOUNTAIN HILLS TOWN COUNCIL TIME: 5:30 PM - EXECUTIVE SESSION (Executive Session will be held in the Fountain Conference Room - 2nd floor) 6:25 PM - SPECIAL SESSION THE REGULAR SESSION TO CONVENE IMMEDIATELY FOLLOWING THE SPECIAL SESSION ADJOURNMENT WHEN: THURSDAY, NOVEMBER 21, 2013 WHERE: FOUNTAIN HILLS COUNCIL CHAMBERS 16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum of the Town’s various Commissions or Boards may be in attendance at the Council meeting. Notice is hereby given that pursuant to A.R.S. § 1-602.A.9, subject to certain specified statutory exceptions, parents have a right to consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording. Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. § 1-602.A.9 have been waived. PROCEDURE FOR ADDRESSING THE COUNCIL Anyone wishing to speak before the Council must fill out a speaker’s card and submit it to the Town Clerk prior to Council discussion of that Agenda item. Speaker Cards are located in the Council Chamber Lobby and near the Clerk’s position on the dais. Speakers will be called in the order in which the speaker cards were received either by the Clerk or the Mayor. At that time, speakers should stand and approach the podium. Speakers are asked to state their name and whether or not they reside in Fountain Hills (do not provide a home address) prior to commenting and to direct their comments to the Presiding Officer and not to individual Councilmembers. Speakers’ statements should not be repetitive. If a speaker chooses not to speak when called, the speaker will be deemed to have waived his or her opportunity to speak on the matter. Speakers may not (i) reserve a portion of their time for a later time or (ii) transfer any portion of their time to another speaker. If there is a Public Hearing, please submit the speaker card to speak to that issue during the Public Hearing. Individual speakers will be allowed three contiguous minutes to address the Council. Time limits may be waived by (i) discretion of the Town Manager upon request by the speaker not less than 24 hours prior to a Meeting, (ii) consensus of the Council at Meeting or (iii) the Mayor either prior to or during a Meeting. Please be respectful when making your comments. If you do not comply with these rules, you will be asked to leave. Mayor Linda M. Kavanagh Councilmember Dennis Brown Vice Mayor Cassie Hansen Councilmember Ginny Dickey Councilmember Henry Leger Councilmember Tait D. Elkie Councilmember Cecil A. Yates Z:\Council Packets\2013\R131121\131121A.docx Last printed 11/19/2013 8:38 AM Page 2 of 4 EXECUTIVE SESSION AGENDA  CALL TO ORDER – Mayor Linda M. Kavanagh 1. ROLL CALL AND VOTE TO GO INTO EXECUTIVE SESSION: Pursuant to (i) A.R.S. §38-431.03(A)(3), discussion or consultation for legal advice with the attorney or attorneys of the public body (Specifically, relating to the presiding judge position.). 2. ADJOURNMENT SPECIAL SESSION  CALL TO ORDER - Mayor Linda M. Kavanagh  ROLL CALL – Mayor Linda M. Kavanagh AGENDA 1. CONSIDERATION of RESOLUTION 2013-43, declaring and adopting the results of the Special General Election held on November 5, 2013. 2. ADJOURNMENT. REGULAR SESSION  CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh  INVOCATION – Moment of Silence  ROLL CALL – Mayor Linda M. Kavanagh  MAYOR’S REPORT i.) The Mayor may review RECENT EVENTS attended relating to Economic Development. ii.) The Mayor will read a PROCLAMATION proclaiming the week of November 28th through December 5th, 2013 as “CHABAD WEEK”.  SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS i) RECOGNITION of the Citizens for Saguaro Committee. ii) PRESENTATION of the Town’s Comprehensive Annual Financial Report for the fiscal year ending June 30, 2013, by Dennis Osuch, CPA, Partner with Clifton Larson Allen LLP. Z:\Council Packets\2013\R131121\131121A.docx Last printed 11/19/2013 8:38 AM Page 3 of 4 CALL TO THE PUBLIC Pursuant to A.R.S. §38-431-01(G), public comment is permitted (not required) on matters not listed on the agenda. Any such comment (i) must be within the jurisdiction of the Council and (ii) is subject to reasonable time, place, and manner restrictions. The Council will not discuss or take legal action on matters raised during “Call to the Public” unless the matters are properly noticed for discussion and legal action. At the conclusion of the call to the public, individual Councilmembers may (i) respond to criticism, (ii) ask staff to review a matter or (iii) ask that the matter be placed on a future Council agenda. CONSENT AGENDA ITEMS All items listed are considered to be routine, non-controversial matters and will be enacted by one motion and one roll call vote of the Council. All motions and subsequent approvals of consent items will be include all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a Council Member or member of the public co requests. If a Council Member or member of the public wishes to discuss an item on the consent agenda, they may request so prior to the motion to accept the Consent Agenda. The items will be removed from the Consent Agenda and considered in its normal sequence on the Agenda. 1. CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from November 7, 2013. 2. CONSIDERATION for approval of RESOLUTION 2013-53, abandoning whatever right, title, or interest the Town has in the portions of certain public utility and drainage easements located at the southerly and easterly property lines of Plat 401-B, Block 3, Lot 5 (10275 N. Nicklaus Drive) as recorded in Book 155 of Maps, Page 12, Records of Maricopa County, Arizona. EA2013-03 (Zemper) 3. CONSIDERATION of approving a PAYMENT to Maricopa Association of Governments (MAG) in the amount of $64,627.01 as proportionate reimbursement from proceeds from the sale of two grant funded street sweepers. REGULAR AGENDA ITEMS 4. CONSIDERATION of a REQUEST by the Public Art Committee for a New Project to designate a number of public locations throughout the community as “Photo opportunity” locations. 5. CONSIDERATION OF RESOLUTION 2013-56, authorizing the submission of a grant application to the Federal Emergency Management Agency (FEMA) for the purchase of portable radios by the Fire Department and approving the acceptance and execution of any resulting grant agreement. 6. CONSIDERATION of RESOLUTION 2013-45, declaring as a public record that certain document filed with the Town Clerk and entitled the “Amendments to Chapter 3 of the Town Code,” dated November 21, 2013. 7. CONSIDERATION of ORDINANCE 13-04, adopting the “Amendments to Chapter 3 of the Town Code,” dated November 21, 2013, by reference and replacing the Town of Fountain Hills Town Code, Chapter 3, Administration, with the November 21, 2013 amendments. Z:\Council Packets\2013\R131121\131121A.docx Last printed 11/19/2013 8:38 AM Page 4 of 4 8. COUNCIL DISCUSSION/DIRECTION to the Town Manager Ken Buchanan. Items listed below are related only to the propriety of (i) placing such items on a future agenda for action or (ii) directing staff to conduct further research and report back to the Council: A. NONE. 9. SUMMARY of Council requests and REPORT ON RECENT ACTIVITIES by the Town Manager Ken Buchanan. 10. ADJOURNMENT. DATED this 13th day of November, 2013. _____________________________________ Bevelyn J. Bender, Town Clerk The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480-816-5100 (voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in this meeting or to obtain agenda information in large print format. Supporting documentation and staff reports furnished the Council with this agenda are available for review in the Clerk’s office. REVISED 11/19/13 NOTICE OF THE EXECUTIVE, SPECIAL, AND REGULAR SESSIONS OF THE FOUNTAIN HILLS TOWN COUNCIL TIME: 5:30 PM - EXECUTIVE SESSION (Executive Session will be held in the Fountain Conference Room - 2nd floor) 6:25 PM - SPECIAL SESSION THE REGULAR SESSION TO CONVENE IMMEDIATELY FOLLOWING THE SPECIAL SESSION ADJOURNMENT WHEN: THURSDAY, NOVEMBER 21, 2013 WHERE: FOUNTAIN HILLS COUNCIL CHAMBERS 16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum of the Town’s various Commissions or Boards may be in attendance at the Council meeting. Notice is hereby given that pursuant to A.R.S. § 1-602.A.9, subject to certain specified statutory exceptions, parents have a right to consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording. Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. § 1-602.A.9 have been waived. PROCEDURE FOR ADDRESSING THE COUNCIL Anyone wishing to speak before the Council must fill out a speaker’s card and submit it to the Town Clerk prior to Council discussion of that Agenda item. Speaker Cards are located in the Council Chamber Lobby and near the Clerk’s position on the dais. Speakers will be called in the order in which the speaker cards were received either by the Clerk or the Mayor. At that time, speakers should stand and approach the podium. Speakers are asked to state their name and whether or not they reside in Fountain Hills (do not provide a home address) prior to commenting and to direct their comments to the Presiding Officer and not to individual Councilmembers. Speakers’ statements should not be repetitive. If a speaker chooses not to speak when called, the speaker will be deemed to have waived his or her opportunity to speak on the matter. Speakers may not (i) reserve a portion of their time for a later time or (ii) transfer any portion of their time to another speaker. If there is a Public Hearing, please submit the speaker card to speak to that issue during the Public Hearing. Individual speakers will be allowed three contiguous minutes to address the Council. Time limits may be waived by (i) discretion of the Town Manager upon request by the speaker not less than 24 hours prior to a Meeting, (ii) consensus of the Council at Meeting or (iii) the Mayor either prior to or during a Meeting. Please be respectful when making your comments. If you do not comply with these rules, you will be asked to leave. Mayor Linda M. Kavanagh Councilmember Dennis Brown Vice Mayor Cassie Hansen Councilmember Ginny Dickey Councilmember Henry Leger Councilmember Tait D. Elkie Councilmember Cecil A. Yates Z:\Council Packets\2013\R131121\131121A.docx Last printed 11/19/2013 8:38 AM Page 2 of 4 EXECUTIVE SESSION AGENDA  CALL TO ORDER – Mayor Linda M. Kavanagh 1. ROLL CALL AND VOTE TO GO INTO EXECUTIVE SESSION: Pursuant to (i) A.R.S. §38-431.03(A)(3), discussion or consultation for legal advice with the attorney or attorneys of the public body (Specifically, relating to the presiding judge position.). 2. ADJOURNMENT SPECIAL SESSION  CALL TO ORDER - Mayor Linda M. Kavanagh  ROLL CALL – Mayor Linda M. Kavanagh AGENDA 1. CONSIDERATION of RESOLUTION 2013-43, declaring and adopting the results of the Special General Election held on November 5, 2013. 2. ADJOURNMENT. REGULAR SESSION  CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh  INVOCATION – Moment of Silence  ROLL CALL – Mayor Linda M. Kavanagh  MAYOR’S REPORT i.) The Mayor may review RECENT EVENTS attended relating to Economic Development. ii.) The Mayor will read a PROCLAMATION proclaiming the week of November 28th through December 5th, 2013 as “CHABAD WEEK”.  SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS i) RECOGNITION of the Citizens for Saguaro Committee. ii) PRESENTATION of the Town’s Comprehensive Annual Financial Report for the fiscal year ending June 30, 2013, by Dennis Osuch, CPA, Partner with Clifton Larson Allen LLP. Z:\Council Packets\2013\R131121\131121A.docx Last printed 11/19/2013 8:38 AM Page 3 of 4 CALL TO THE PUBLIC Pursuant to A.R.S. §38-431-01(G), public comment is permitted (not required) on matters not listed on the agenda. Any such comment (i) must be within the jurisdiction of the Council and (ii) is subject to reasonable time, place, and manner restrictions. The Council will not discuss or take legal action on matters raised during “Call to the Public” unless the matters are properly noticed for discussion and legal action. At the conclusion of the call to the public, individual Councilmembers may (i) respond to criticism, (ii) ask staff to review a matter or (iii) ask that the matter be placed on a future Council agenda. CONSENT AGENDA ITEMS All items listed are considered to be routine, non-controversial matters and will be enacted by one motion and one roll call vote of the Council. All motions and subsequent approvals of consent items will be include all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a Council Member or member of the public co requests. If a Council Member or member of the public wishes to discuss an item on the consent agenda, they may request so prior to the motion to accept the Consent Agenda. The items will be removed from the Consent Agenda and considered in its normal sequence on the Agenda. 1. CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from November 7, 2013. 2. CONSIDERATION for approval of RESOLUTION 2013-53, abandoning whatever right, title, or interest the Town has in the portions of certain public utility and drainage easements located at the southerly and easterly property lines of Plat 401-B, Block 3, Lot 5 (10275 N. Nicklaus Drive) as recorded in Book 155 of Maps, Page 12, Records of Maricopa County, Arizona. EA2013-03 (Zemper) 3. CONSIDERATION of approving a PAYMENT to Maricopa Association of Governments (MAG) in the amount of $64,627.01 as proportionate reimbursement from proceeds from the sale of two grant funded street sweepers. REGULAR AGENDA ITEMS 4. CONSIDERATION of a REQUEST by the Public Art Committee for a New Project to designate a number of public locations throughout the community as “Photo opportunity” locations. 5. CONSIDERATION OF RESOLUTION 2013-56, authorizing the submission of a grant application to the Federal Emergency Management Agency (FEMA) for the purchase of portable radios by the Fire Department and approving the acceptance and execution of any resulting grant agreement. 6. CONSIDERATION of RESOLUTION 2013-45, declaring as a public record that certain document filed with the Town Clerk and entitled the “Amendments to Chapter 3 of the Town Code,” dated November 21, 2013. 7. CONSIDERATION of ORDINANCE 13-04, adopting the “Amendments to Chapter 3 of the Town Code,” dated November 21, 2013, by reference and replacing the Town of Fountain Hills Town Code, Chapter 3, Administration, with the November 21, 2013 amendments. Z:\Council Packets\2013\R131121\131121A.docx Last printed 11/19/2013 8:38 AM Page 4 of 4 8. COUNCIL DISCUSSION/DIRECTION to the Town Manager Ken Buchanan. Items listed below are related only to the propriety of (i) placing such items on a future agenda for action or (ii) directing staff to conduct further research and report back to the Council: A. NONE. 9. SUMMARY of Council requests and REPORT ON RECENT ACTIVITIES by the Town Manager Ken Buchanan. 10. ADJOURNMENT. DATED this 13th day of November, 2013. _____________________________________ Bevelyn J. Bender, Town Clerk The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480-816-5100 (voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in this meeting or to obtain agenda information in large print format. Supporting documentation and staff reports furnished the Council with this agenda are available for review in the Clerk’s office. An independent member of Nexia International Town Council Town of Fountain Hills, Arizona Fountain Hills, Arizona We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona (Town) as of and for the year ended June 30, 2013, and have issued our report thereon dated October 31, 2013. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Town of Fountain Hills, Arizona are described in Note 1 to the financial statements. As described in Note 1, the Town changed accounting policies by adopting Governmental Accounting Standards (GASB Statement) No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities , during the current fiscal year. The cumulative effect of the implementation of GASB Statement No. 65 are reported in the financial statements and resulted in a restatement due to a change in accounting principle, disclosed in Note 3.E. in the notes to the financial statements. We noted no transactions entered into by the Town during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were:  Management’s estimate of the useful lives and remaining useful lives of capital assets is based on the Town’s previous experience with similar assets and the current condition of those assets. We evaluated the key factors and assumptions used to develop the useful lives and estimated useful lives in determining that they are reasonable in relation to the financial statements taken as a whole.  Management’s estimate of the fair value of investments was based on quoted market prices provided by a third party. We evaluated the key factors and assumptions used to develop the fair market value of investments in determining the reasonableness in relation to the financial statements taken as a whole. Town Council and Senior Management Town of Fountain Hills, Arizona Page 2 Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements was:  The disclosure of the restate of net position in Note 3.E. to the financial statements to record a change in accounting principle from the implementation of GASB Statement No. 65, Items previously reported as Assets and Liabilities. The financial statement disclosures are neutral, consistent and clear. Difficulties encountered in performing the audit We encountered no significant difficulties in dealing with management in performing and completing our audit Uncorrected misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management did not identify and we did not notify them of any uncorrected financial statement misstatements: Corrected misstatements None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. No such disagreements arose during our audit. Management representations We have requested certain representations from management that are included in the management representation letter dated October 31, 2013. Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Town’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the Town’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Town Council and Senior Management Town of Fountain Hills, Arizona Page 3 Other information in documents containing audited financial statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI. With respect to the combining statements and schedules (collectively, the supplementary information) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated October 31, 2013. The introductory and statistical sections accompanying the financial statements, which is the responsibility of management, was prepared for purposes of additional analysis and is not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we did not express an opinion or provide any assurance on it. Our auditors’ opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document. * * * * * * This communication is intended solely for the information and use of the Town Council and management of the Town of Fountain Hills, Arizona and is not intended to be, and should not be, used by anyone other than these specified parties. Phoenix, Arizona October 31, 2013 An independent member of Nexia International           Town Council and Senior Management Town of Fountain Hills, Arizona Fountain Hills, Arizona   In planning and performing our audit of the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona (Town) as of and for the year ended June 30, 2013, in accordance with auditing standards generally accepted in the United States of America, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. This communication is intended solely for the information and use of management, the Town Council, and others within the Town, and is not intended to be, and should not be, used by anyone other than these specified parties. Phoenix, Arizona October 31, 2013 For the Fiscal Year Ended June 30, 2013 Comprehensive Annual Financial Report Town of Fountain Hills, Arizona THIS PAGE BLANK Issued By: Administration Department Finance Division TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2013 THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FISCAL YEAR ENDED JUNE 30, 2013 INTRODUCTORY SECTION  LETTER OF TRANSMITTAL 1  LIST OF PRINCIPAL OFFICIALS 9  ORGANIZATIONAL CHART 10  GFOA CERTIFICATE OF ACHIEVEMENT 11  FINANCIAL SECTION  INDEPENDENT AUDITORS’ REPORT 12  REQUIRED SUPPLEMENTARY INFORMATION  MANAGEMENT’S DISCUSSION AND ANALYSIS 15  BASIC FINANCIAL STATEMENTS  STATEMENT OF NET POSITION 26  STATEMENT OF ACTIVITIES 27  BALANCE SHEET – GOVERNMENTAL FUNDS 28  RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION 30  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES – GOVERNMENTAL FUNDS 31  RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 33  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND 34  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – HURF FUND 35  NOTES TO BASIC FINANCIAL STATEMENTS 36  COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES  NONMAJOR GOVERNMENTAL FUNDS  COMBINING BALANCE SHEET 56  COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES 58  TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2013 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED) SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – CAPITAL PROJECTS FUND 60  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL OBLIGATION DEBT SERVICE FUND 61  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – MUNICIPAL PROPERTY CORPORATION DEBT SERVICE 62  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – DEVELOPMENT FEES FUND 63  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – LOCAL COURT ENHANCEMENT FUND 64  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GRANTS FUND 65  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – EXCISE TAX FUND 66  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – COTTONWOODS MAINTENANCE FUND 67  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – EAGLE MOUNTAIN DEBT SERVICE FUND 68  STATISTICAL SECTION (UNAUDITED)  FINANCIAL TRENDS  NET POSITION BY COMPONENT 69  CHANGES IN NET POSITION 71  FUND BALANCES OF GOVERNMENTAL FUNDS 75  STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS 77  REVENUE CAPACITY  GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE 79  TAXABLE SALES BY CATEGORY 80  DIRECT AND OVERLAPPING SALES TAX RATES 82  ASSESSED VALUE AND ESTIMATED TOTAL VALUE OF TAXABLE PROPERTY 83  PRINCIPAL PROPERTY TAXPAYERS 84  PROPERTY TAX LEVIES AND COLLECTIONS 85  TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2013 STATISTICAL SECTION (UNAUDITED) (CONTINUED)  DEBT CAPACITY  RATIOS OF OUTSTANDING DEBT BY TYPE 86  RATIOS OF GENERAL BONDED DEBT OUTSTANDING 87  DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 88  LEGAL DEBT MARGIN INFORMATION 89  CALCULATION OF LEGAL DEBT MARGIN 91  REVENUE BOND COVERAGE 92  DEMOGRAPHIC AND ECONOMIC INFORMATION  DEMOGRAPHIC AND ECONOMIC STATISTICS 93  PRINCIPAL EMPLOYERS 95  OPERATING INFORMATION  FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION 96  OPERATING INDICATORS BY FUNCTION 97  CAPITAL ASSETS STATISTICS BY FUNCTION 99  THIS PAGE BLANK INTRODUCTORY SECTION THIS PAGE BLANK ( ) 1 October 31, 2013 To the Honorable Mayor, Members of the Town Council, and Citizens of the Town of Fountain Hills: State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) in the United States of America and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Town of Fountain Hills for the fiscal year ended June 30, 2013. This report consists of management’s representations concerning the finances of the Town of Fountain Hills. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town of Fountain Hills has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town of Fountain Hills’ financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town of Fountain Hills’ comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Town of Fountain Hills’ financial statements have been audited by Clifton Larson Allen LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of Fountain Hills for the fiscal year ended June 30, 2013, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town of Fountain Hills’ financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Town of Fountain Hills’ MD&A can be found immediately following the report of the independent auditors. ( ) 2 Town of Fountain Hills Profile The Town of Fountain Hills is a planned, family-oriented community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the late 1960s and designed by Charles Wood, Jr. (designer of Disneyland in southern California). The centerpiece of Fountain Hills is one of the world's tallest man-made fountains, a focal point that attracts thousands of visitors each year. Located on 13,006 acres of land, and bordering northeast Scottsdale, Fountain Hills is surrounded by the 3,500-foot McDowell Mountains on the west, the Fort McDowell Indian Reservation on the east, the Salt River Pima Maricopa Indian Community on the south and by the McDowell Mountain Regional Park on the north. Elevation is 1,520 feet at the fountain, 3,000 feet on Golden Eagle Boulevard, and is 500 feet above Phoenix. Over the past twenty-three years, Fountain Hills has grown from 10,190 residents to a town of approximately 22,500 based on the 2010 census. On June 5, 2006 the Town of Fountain Hills became twenty square miles and about ten percent larger by annexing 1,300 acres of State Trust Land. The process to annex the State Trust Land occurred over a two and one-half year period and development of the land will occur over the next decade. Annexing this property into the Town ensures that its future development will be of the highest quality under such Town’s standards as the cut-and-fill ordinance and strict zoning regulations. Fountain Hills will have an opportunity to demonstrate that it is truly the best place to live in the Valley. The Town offers a range of living styles, from small community subdivisions to a number of large custom homes. Fountain Hills also offers recreational, cultural and retirement programs that address the needs and lifestyles of active families and adults. The community consists of primarily residential property; of the total 20.32 square miles of land only 2.6% of the total is zoned commercial and/or industrial, 23.0% is reserved as open space and 51.3% is residential. The Town’s Mission Statement for the Organization The Town of Fountain Hills’ purpose is to serve the best interests of the community by: providing for its safety and well-being; respecting its special, small-town character and quality of life; providing superior public services; sustaining the public trust through open and responsive government; and maintaining the stewardship and preservation of its financial and natural resources. To serve and respect, and provide trust and stewardship. (3) The Town of Fountain Hills is an Arizona Municipal Corporation, acting as a general law Town as prescribed in the Arizona Revised Statutes. The Town was incorporated on December 5, 1989, with the governmental and administrative affairs of the Town operating under the Council-Manager form of government. The Town Council is responsible, among other things, for the adoption of local ordinances, budget adoption, the development of citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and administering the Town’s operations through three department directors and approximately 50 FTE employees. The Judge, Town Attorney and Town Prosecutor are under the direction of the Town Council. The Town provides or administers a full range of services including public safety (law enforcement, fire, animal control, building inspection); development services (code enforcement, planning, zoning and public works); the construction and maintenance of streets and infrastructure, municipal court, recreational activities, community center, senior center and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise funds. The financial reporting entity (the Town) includes all the funds of the primary government (i.e., the Town of Fountain Hills as legally defined) as well as all of its component units. The component units consist of legally separate entities for which the primary government is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the primary government’s operations and are included as part of the primary government. Accordingly, the Cottonwoods Maintenance District, Eagle Mountain Community Facilities District and Fountain Hills Municipal Property Corporation are included in the financial reports of the Town. The annual budget serves as the foundation for the Town of Fountain Hills’ financial planning and control. The Town Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, these funds have appropriated budgets, and budget to actual information is presented. On or before the second meeting in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 30, the close of the Town of Fountain Hills’ fiscal year. The budget is legally enacted through passage of an ordinance and is prepared by fund and department. The ordinance sets the limit for expenditures during the fiscal year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. Fountain Hills Town Hall ( ) 4 Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Town of Fountain Hills operates. Local Economy. The great recession appears to be recovering modestly in Fountain Hills; this is indicated by the local sales tax receipts in retail and restaurant categories. While retail activity has remained consistent with prior years the restaurant/bar activity has jumped 12% over the prior year which we interpret as a leading indicator of a rebounding economy. The Town of Fountain Hills’ local tax revenue base consists of two major tax categories, the most significant being retail sales and transportation/communication/utilities (construction was a third significant category in prior years). The chart below is a look at the past three years’ local sales tax activity by sector: As can be seen in the chart on the left sales tax collections continue to show signs of moderate growth. Retail sales experienced less than 1% increase over the prior year; restaurant/bar revenues have exceeded prior years and had an increase of 12% from FY11-12. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and decreased 7% over the prior year; recent building permit activity indicates that construction sales tax is likely to increase over the next two years. Transportation/communication tax revenues remain flat. Construction activity provides revenue to the Town through local sales tax, the proceeds of which are utilized for capital expenditures. Without the resources to fund capital projects the Town must find additional funds to pay for necessary infrastructure projects. For operating costs the Town is dependent upon state shared revenues and local sales tax as a major source of operating revenue, accounting for 90% of total General Fund revenue for fiscal year 2012-13. State shared revenues are derived as a proportionate share of state sales, income and vehicle license taxes which are distributed based on the Town’s population compared to all other incorporated cities and towns in Arizona (currently 0.045%). State shared income tax revenue category is based on two years prior personal and corporate earnings; from FY09-10 through FY11-12 the Town lost 53% of this revenue source ($1.7M or 13% of the General Fund operating budget). However, the revenue from the State income tax increased by 19% in FY12-13 and is anticipated to increase another 11% for FY13- 14. After a 16% decrease in State sales tax from FY08-09 through FY11-12 this revenue has recovered with a 7% increase in FY12-13 and anticipated to increase another 3% in FY13-14. Other local activity has remained fairly level during the recessionary period due to the lack of major retailers (the Town has three grocery stores and one major retailer). Fountain Hills is past the historic period of rapid growth and the long-term economic outlook for the Town must recognize this fact. The opportunity to further expand the retail tax base in Fountain Hills is limited by the lack of available commercial land – 72% of the currently available commercial lots are already developed. ( ) 5 Development Activity over the past year: Development Services has been involved with the following development activities during fiscal year 2012-13 Two Concept Plans were approved by the Planning & Zoning Commission during the period: J&D Auto Sales Prevco Subsea Housings Three Special Use Permits were granted: AT&T Cell Tower at Presbyterian Church Prevco Subsea Housings (pending) Three Temporary Use Permits were issued during the period: Halloween Carnival Sofritas Outdoor Seating & Dancing K-Group Development Twenty-one new Single-Family Residential Building Permits were issued. One new Commercial Building Permit was issued: FH Water & Ice There were thirty-two commercial tenant improvement permits issued during the last fiscal year that indicate that Fountain Hills is still a desirable place to locate a business. Fiscal year SFR DUP MULTI Dwelling Units Comm Pools & Fences Add'ns (Not Garages Garages & Carports Other MONTH TOTAL Bldgs. Total Units Bldgs. Total Units JULY 2 0 0 0 0 0 2 11 3 2 21 41 AUGUST 1 0 0 0 0 0 2 4 3 0 27 37 SEPTEMBER 2 0 0 0 0 0 3 6 1 0 14 26 OCTOBER 0 0 0 0 0 0 4 8 1 1 25 39 NOVEMBER 1 0 0 0 0 0 1 5 1 0 23 31 DECEMBER 1 0 0 0 0 0 3 6 3 0 19 32 JANUARY 0 0 0 0 0 0 3 4 0 1 31 39 FEBRUARY 3 0 0 0 0 0 5 4 3 1 21 37 MARCH 5 0 0 0 0 0 1 5 4 0 23 38 APRIL 1 0 0 0 0 0 3 7 5 1 24 41 MAY 0 0 0 0 0 0 3 4 2 0 13 22 JUNE 5 0 0 0 0 0 2 11 2 0 16 36 YEARLY TOTAL 21 0 0 0 0 0 32 75 28 6 257 419 Long-term Financial Planning Fountain Hills’ financial policies are balanced on sound financial reserves and conservative revenue growth forecasts for the foreseeable future. Potential for State legislative impacts to revenue-sharing or local revenues and additional demands for essential Town services remain. The Town’s financial policies set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. ( ) 6 In early 2009, the Strategic Planning Advisory Commission began the process of gathering public input to update the Strategic Plan’s vision, confirm residents’ values, and create a fresh structure for the Strategic Plan revision. Subsequently, Strategic Plan 2010 is built upon the foundation of a clearly defined vision statement and eight key values, with specific indicators to evaluate Council and staff priorities. Based on citizen input, the Strategic Plan is designed to guide our future decisions grounded on these common values: 1. Civility 2. Civic Responsibility 3. Environmental Stewardship 4. Economic Vitality 5. Education, Learning and Culture 6. Maintain and Improve Community Infrastructure 7. Public Safety, Health and Welfare 8. Recreational Opportunities and Amenities These values guide the Town’s annual budget process. The Fountain Hills Town Council maintains a fund balance policy that ensures adequate reserves that will provide financial stability in the event of an unanticipated economic downturn. The policy was amended in FY08-09 to include the establishment of a Rainy Day Fund beginning in FY09-10. In FY11- 12 the Town adopted Governmental Accounting Standards Board (GASB) Statement No. 54 which changed how governments report fund balance. The overall principal and goal of GASB No. 54 is to report governmental fund balances based on a hierarchy that shows, from the highest to the lowest, the level or form of constraints on fund balance, and accordingly, the extent to which governments are bound to honor them: 1. Nonspendable – The initial distinction that is made in reporting fund balance information is identifying amounts that are considered nonspendable, such as fund balance associated with inventories or prepaids. In Fountain Hills this classification would apply to our inventory and prepaid items. 2. Restricted – The restricted fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external reporting providers, or through enabling legislation. In Fountain Hills this classification would apply to Highway User Revenue Fund (HURF), Development Fees, the Grant/Special Revenue Fund and the Debt Service Fund. 3. Committed – The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision- making authority. In Fountain Hills this classification would apply to the Rainy Day Fund, Excise/Downtown Development Fund, and any General Fund surplus. 4. Assigned – Amounts in the assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. In Fountain Hills this classification would apply to the current Public Art funds as well as assignments for ongoing capital projects and equipment replacement. ( ) 7 5. Unassigned – The unassigned fund balance is the residual classification for the government’s general fund and includes all spendable amounts not contained in the other classifications. In other funds, the unassigned classification should be used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. In Fountain Hills this classification would be any residual balance of monies not contained in any of the other classifications. The fund balance amounts will not be programmed for expenditure and are only available for use within the confines of expenditure limitations imposed by the State. A Capital Projects Fund has been created and is funded with proceeds from excess revenues collected over budget and any unexpended appropriations not needed to meet fund balance requirements or re-appropriation. The Council also adopted financial policies that include guidelines for the issuance of debt for capital expenditures, Community Facility Districts, financing alternatives, expenditure controls and financial planning. The policy was amended during fiscal year 2009-10 to reduce the allocation of the local construction sales tax to the Capital Projects Fund from 85% to 50%, reflecting the transition from one- time building activity to ongoing redevelopment activity. The debt policy was prepared with a preference for “pay-as-you-go” financing for capital spending, however, the policy did not anticipate the lack of funding for capital projects and bond funding is being reconsidered. Major Initiatives The Town of Fountain Hills’ adopted FY2012-13 budget reflects the continued recession in the local economy as well as an 8% decline in population resulting from the 2010 census, which is also mirrored at the national and state levels. Due to the challenging current economic conditions, the Town has made significant reductions in staff and service levels. This was accomplished by a thorough assessment of all existing and proposed programs and workload; as a result Town staffing was reduced from 81 to 56 FTE’s (full time equivalents) over the last three years. The Town Council established priorities for FY13-14 of which the top two are Economic Development and Pavement Management. In order to operationalize the Pavement Management program the Council approved the use of Vehicle License Tax revenues to be dedicated to annual pavement maintenance with an effective date of July 1, 2013. Economic Development initiatives are funded through a new dedicated local sales tax which provides funding for business attraction, retention and expansion. AWARDS AND ACKNOWLEDGEMENT Awards. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Fountain Hills for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2012. This was the sixteenth consecutive year that the government has received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR 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. ( ) 8 In addition, the government also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year ending June 30, 2013. In order to qualify for the Distinguished Budget Presentation Award, the government’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. This is the twelfth consecutive year that the Town has received the award. An investment policy was adopted and was awarded the Investment Policy Certification from the Association of Public Treasurers of United States and Canada. Acknowledgements. The preparation of this report would not have been possible without the efficient and dedicated services of the entire team of the Finance and Administration Department. I would also like to extend my appreciation to the Mayor and Council for their leadership and support. Each member of the department has my sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, Ken Buchanan Town Manager TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2013 (9) ELECTED OFFICIALS Mayor Ms. Linda Kavanagh Vice-Mayor Mr. Tait Elkie Councilmember Mr. Dennis Brown Councilmember Mr. Cecil Yates Councilmember Mr. Henry Leger Councilmember Ms. Cassie Hansen Councilmember Ms. Ginny Dickey DEPARTMENT DIRECTORS Town Manager Deputy Town Manager/ Finance Director Ken Buchanan Julie A. Ghetti, MPA, CPA, CGFM Presiding Judge Mitchell S. Eisenberg Community Services Director Mark Mayer Development Services Director Paul Mood Interim Fire Chief Randy Roberts Rural Metro Corporation District Commander Captain Joe Rodriquez Maricopa County Sheriff’s Office Town Prosecutor Iacovino & Kayler Town Attorney Andrew McGuire, Gust Rosenfeld, P.L.C. TOWN OF FOUNTAIN HILLS, ARIZONA ORGANIZATIONAL CHART JUNE 30, 2013 (10) (11) THIS PAGE BLANK FINANCIAL SECTION THIS PAGE BLANK An independent member of Nexia International (12) INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona Fountain Hills, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona (Town), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Town’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. Auditors’ 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 auditors’ 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 Town’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 Town’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. The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona (13) Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona as of June 30, 2013, and the respective changes in financial position and the budgetary comparison schedules of the General Fund and HURF Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter The prior year financial statements were restated due to the adoption of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, which resulted in a change in accounting principle. A summary of the restatement is presented in Note 3.E. The auditors’ opinion was not modified with respect to the restatement. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis on pages 15 - 25 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 financial 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 forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The combining and individual nonmajor fund financial statements and schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules is the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including 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 combining and individual nonmajor fund financial statements and schedules is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona (14) The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Phoenix, Arizona October 31, 2013 THIS PAGE BLANK REQUIRED SUPPLEMENTARY INFORMATION THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (15) As management of the Town of Fountain Hills, Arizona (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 June 30, 2013. This discussion and analysis is intended to be an easily readable breakdown of the Town of Fountain Hills’ financial activities based on currently known facts, decisions and conditions. This analysis focuses on current year activities and operations and should be read in combination with the transmittal letter and the financial statements that follow. 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 in the introductory section of this report. FINANCIAL HIGHLIGHTS  The assets of the Town exceeded its liabilities at the close of fiscal year 2012-13 and fiscal year 2011-12 by $116.1 million and $118.2 million, respectively. Of these amounts, $20.6 million and $20.2 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors.  Governmental activities program revenues decreased overall by $1,095,510 (29%) over the previous year. The completion of a major street project funded by grants/contributions contributed to the majority of the decline of capital grants. Fees, Fines and Charges for services increased by 15.6% indicating an improving economy, particularly in development permits.  At June 30, 2013, total fund balance of the governmental funds was $24.5 million virtually unchanged from the previous year. Of this, $4.1 million is unassigned in the General Fund, while the remainder is classified as restricted, committed, and assigned.  The major governmental funds which includes the General Fund, total $16.5 million in revenues, consisting primarily of local taxes, intergovernmental taxes, charges for services and licenses and permits. The total expenditures of the General Fund were $12.0 million and the fund balance increased from $7.2 million to $7.7 million including the Rainy Day, Public Art, and Vehicle Replacement Funds. The Highway User Revenue Fund (HURF) revenues were $1.2 million with expenditures of $2.0 million – the General Fund transferred $767,000 to the HURF fund to initiate a pavement maintenance program. The non-major governmental funds revenues were $1.0 million with the majority from local sales taxes (Excise Tax Fund) and property taxes (Eagle Mountain Community Facilities District). Expenditures for the non-major funds were $0.7 million primarily for debt service for Eagle Mountain Community Facilities District.  The Town’s total net position of governmental activities decreased $2,034,091 (1.7%) from the prior fiscal year. Revenues decreased 2.3% with the expiration of grant funding; expenditures for long term debt were reduced but increased in Highways and Streets to initiate a program for pavement maintenance.  General revenues accounted for $15.0 million in revenue, or 85% of all current fiscal year revenues. Program specific revenues in the form of charges for services and grants and contributions accounted for $2.6 million or 15% of total current fiscal year revenues.  The Town had approximately $19.7 million in expenses related to governmental activities, an increase of 6.6% over the prior fiscal year, attributed to programmed increases in public safety contracts and the implementation of a pavement maintenance program.  Per local policy, residual unassigned General Fund revenues may be transferred to the Rainy Day fund, supplement pay-as-you-go capital outlay expenditures or prepay existing town debt. The Council authorized the use of general fund surplus revenues in FY11-12 to transfer funds to the Municipal Property Corporation Debt Service Fund to provide funds that were placed in an irrevocable trust to provide for future principal and interest payments on bonds that were issued in 2005 for the Town Hall. The general fund balance will include the surplus, the Rainy Day and vehicle replacement funds in the amount of $7.7 million. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (16) OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial 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. The accrual basis of accounting is used for the government-wide financial statements. The Statement of Net Position presents information on all of the Town’s assets and liabilities, with the difference between the two 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. 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 in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). The government-wide financial statements outline functions of the Town that are principally supported by taxes and intergovernmental revenues. The governmental activities of the Town include general government, public safety, highways and streets, culture and recreation, development services, and interest on long-term debt. 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 uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town are included in the governmental 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 use the modified accrual basis of accounting and focus on near-term inflows 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 evaluating the Town’s near-term financing requirements. 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 Town’s near-term financing decision. Both the governmental fund balances 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. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (17) 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, Highway Users Revenue Fund (HURF), General Obligation Debt Service Fund, Municipal Property Corporation Debt Service Fund, and Capital Projects Fund, all of 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 non-major governmental funds is provided in the form of combining statements and schedules. Notes to Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found immediately following the basic financial statements. Other Information Governments have the option of including the budgetary comparison statements for the General Fund and major special revenue funds as either part of the fund financial statements within the basic financial statements, or as required supplementary information following the notes to the basic financial statements. The Town has chosen to present these budgetary statements as part of the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the Town to provide services to our citizens, the Statement of Net Position and the Statement of Activities serve to provide an answer to the question of how the Town, as a whole, did financially throughout the year. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by the private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the Town’s assets and the changes in those assets. The change in assets is important because it tells the reader whether the financial position of the Town as a whole has improved or diminished. However, in evaluating the overall position of the Town, non-financial information such as changes in the Town’s tax base and the condition of the Town’s capital assets will also need to be evaluated. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (18) Analysis of Net Position Net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town, assets exceeded liabilities by $116.1 million at the current fiscal year end. The following table presents a summary of the Town’s net position for the fiscal years ended June 30, 2013 and June 30, 2012. 2013 2012 (Restated) Percent Change ASSETS Current and Other Assets 28,460,597$ 27,817,313$ 2.3% Capital Assets: Non-depreciable 26,223,288 25,934,778 1.1% Depreciable (net) 77,222,272 81,921,325 -5.7% Total Assets 131,906,157 135,673,416 -2.8% LIABILITIES Other Liabilities 3,820,104 3,256,053 17.3% Long-Term Liabilities: Due Within One Year 2,449,599 2,319,551 5.6% Due in More Than One Year 9,501,392 11,928,659 -20.3% Total Liabilities 15,771,095 17,504,263 -9.9% NET POSITION Net Investment in Capital Assets 89,800,560 92,006,103 -2.4% Restricted 5,721,744 5,951,416 -3.9% Unrestricted 20,612,758 20,211,634 2.0% Total Net Position 116,135,062$ 118,169,153$ -1.7% Town of Fountain Hills, Arizona Statement of Net Position The largest portion of the Town’s net position (77%) reflects its investment in capital assets (e.g., land, infrastructure, buildings, improvements other than buildings, vehicles, machinery and equipment, and artwork) less any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In addition, a portion of the Town’s net position (5%) is for the specified purposes of debt service repayment, capital outlay investment, and highways and streets. At the end of the current fiscal year, the Town reported positive balances in all three categories of net position. The same situation held true for the prior fiscal year. The Town’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (19) Analysis of Changes in Net Position The Town’s total net position decreased by $2,034,091 during the FY12-13; the decrease was primarily a result of the use of reserves to pay down long term debt for the Town Hall. The elimination of the annual debt service payment provided the General Fund with an additional $350,000 for operations. Total governmental revenues decreased over the prior year with a net decrease of $424,257 (2%); primarily due to the expiration of capital grants of $1,242,171 (89%). The decrease was offset with an increase in revenues for programs. The Town also saw a modest increase in local sales taxes of $169,674 (2%) as well as revenues shared with cities/towns by the State (income tax, state sales tax and vehicle license taxes – increase of 11%) reflecting a modest economic recovery. The Town’s total revenues for the current fiscal year were $17.7 million. The total cost of all programs and services was $19.7 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2013 and June 30, 2012. 2013 2012 (Restated) Percent Change REVENUES Program Revenues: Fees, Fines and Charges for Services 1,223,499$ 1,058,088$ 15.6% Operating Grants and Contributions 1,266,906 1,285,656 -1.5% Capital Grants and Contributions 150,535 1,392,706 -89.2% General Revenues: Sales Taxes 7,957,163 7,787,489 2.2% Property Taxes 1,385,147 1,453,405 -4.7% Franchise Taxes 334,668 332,130 0.8% State Shared Revenues 4,226,234 3,793,385 11.4% Auto Lieu Taxes 752,949 722,126 4.3% Investment Earnings 69,998 88,877 -21.2% Miscellaneous 300,899 178,393 68.7% Total Revenues 17,667,998 18,092,255 -2.3% EXPENSES General Government 2,909,443 3,119,113 -6.7% Public Safety 6,100,131 5,820,136 4.8% Highways and Streets 5,712,817 4,718,047 21.1% Culture and Recreation 2,779,294 2,754,731 0.9% Development Services 1,633,361 1,442,613 13.2% Interest on Long-Term Debt 567,043 620,478 -8.6% Total Expenses 19,702,089 18,475,118 6.6% CHANGE IN NET POSITION (2,034,091) (382,863) -431.3% Net Position - Beginning of Year - Restated 118,169,153 118,552,016 -0.3% NET POSITION - END OF YEAR 116,135,062$ 118,169,153$ -1.7% Town of Fountain Hills, Arizona Changes in Net Position TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (20) General revenues such as property, business, and privilege taxes are not shown by program, but are effectively used to support program activities town-wide. For governmental activities overall, without regard to program, business taxes which includes Sales and Use Taxes and Franchise Taxes, are the largest single source of funds (47%), followed by state shared revenues (24%), property taxes (8%), grants (8%), charges for services (7%) and auto lieu (4%). The charts below compare the governmental expenses from fiscal year 2012-13 and fiscal year 2011- 12. General Government Public Safety Highways and Streets Culture and Recreation Community Development Interest on long-term debt TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (21) The following items are significant current year transactions that had an impact on the Statement of Net Position and Statement of Activities:  Overall revenues decreased by 2.3% compared to last year largely due to the intergovernmental grant funds that expired. Additionally, state shared revenues increased 4.8% which reflected the improving economy. The town does not have a primary property tax that is used for operations; the town property tax levy is dependent upon the annual debt payment for voter approved bonds.  Depreciable assets declined 5.7% ($4,699,053) with the Town’s deferred investment in capital infrastructure and improvements, specifically roads. A major road project, Shea Boulevard climbing lane, was funded through the American Recovery and Reinvestment Act (ARRA) through Arizona Department of Transportation ($1.8 million). This project was a federal grant that was awarded to the Arizona Department of Transportation for a project within the town infrastructure. The Town was not considered a subrecipient of the grant; however, the improvements were donated from the Arizona Department of Transportation.  The increase in miscellaneous revenues is primarily attributable to recovery from the State Local Government Investment Pool ($38,263) as well as employee 401(A) forfeitures ($170,853).  State shared revenues are determined by the prior two years of income tax returns in Arizona and is shared with cities and towns based on population; last fiscal year revenues, both State income tax and State sales tax, were higher than anticipated with an increase of $432,849.  Sales tax revenues in Fountain Hills are derived primarily from retail, telecommunications, restaurant/bars and construction activity. Construction activity saw the steepest declines from $2.4 million in FY08 to less than $600 thousand in FY13; retail and telecommunications activity, have dropped slightly by less than ½%. Restaurants and bars increased by 8.6% reflecting the improving economy.  Overall expenses increased 6.6% despite the implementation of a major pavement management program ($767,000) which was accomplished with reductions in staff and programs.  General Government expenditures were less due to decreased grant funding.  Development Services includes Public Works, Streets, Building Safety, Planning, Code Enforcement and Facilities. Pavement maintenance program resulted in an increase in Development Services expenditures.  Public Safety costs include contracts for police and fire; those contracts are multi-year with automatic increases.  Other significant expense reductions were deferral of replacement equipment and vehicles until the economy shows signs of recovery. FINANCIAL ANALYSIS OF THE TOWN’S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the Town’s governmental funds is to provide information on near- term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Types of Major Governmental Funds reported by the Town include the General Fund, Capital Projects Fund, General Obligation Debt Service Fund, Highway Users Revenue Fund and the Municipal Property Corporation Debt Service Fund. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (22) The financial performance of the Town as a whole is reflected in its governmental funds. As the Town completed the year, its governmental funds reported a combined fund balance of $24.5 million, an increase of $26,313. Increase (Decrease) Fund Balance From FY 2011-12 General Fund 7,696,822$ 466,962$ HURF Fund 858,181 (9,038) Capital Projects Fund 9,005,276 (306,892) General Obligation Debt Service Fund 61,228 (2,089) Municipal Property Corporation Debt Service Fund 2,343,186 (396,325) Nonmajor Governmental Funds 4,573,003 273,695 24,537,696$ 26,313$ The General Fund is the chief operating fund of the Town of Fountain Hills, Arizona. At the end of the current fiscal year, the fund balance of the General Fund was $7,696,822, while total fund balance of all funds reached $24.5 million. As a measure of the General Fund’s liquidity, it may be useful to compare both General Fund balance and total fund balance to total fund expenditures. General Fund balance represents 64 percent of total General Fund expenditures, while total fund balance represents 140 percent of total expenditures. The fund balance of the Town of Fountain Hills, Arizona’s General Fund decreased by $0.5 million which includes the Vehicle Replacement Fund balance. Any residual balance will be transferred to the Capital Projects Fund per the Town Council policy. Expenditures within the General Fund increased 2.2% over the prior year – the primary reason for the increase is the contractual obligations for public safety contracts. The General Fund comprises 31 percent of the total fund balance. Approximately $4.1 million or 54 percent of the General Fund’s fund balance constitutes unassigned fund balance. The remaining fund balance is committed, assigned and non-spendable for inventory and prepaid items. The General Fund is the principal operating fund of the Town; overall the General Fund’s performance resulted in revenues over expenditures for FY13 in an amount of $1.3 million. The fund balance of $7.7 million in the General Fund as of June 30, 2013 increased in the current year substantially due to an increase in revenues. The fund balance of the HURF Fund decreased $9,078. The decrease was not significant during the year. The fund balance of the Capital Project’s Fund decreased $306,892 during the current fiscal year. The decrease was primarily due to the planned use of capital project fund balance to fund pay as you go projects that were committed through matching funds for grants. The fund balance of the General Obligation Debt Service Fund decreased $2,089 during the current fiscal year. The decrease was largely due to the use of prior year reserves for debt service. The fund balance of the Municipal Property Corporation (MPC) Debt Service Fund decreased $396,325 during the current fiscal year. Revenues for the MPC are derived from local sales tax collections which were consistent with the prior year. The annual debt payment committed for the MPC is fixed but there were sufficient reserves to pay annual debt service. Reserves from this fund contributed to the defeasance of Town Hall bonds in the prior year. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (23) All nonmajor governmental funds of the Town are combined into one column on the governmental fund statements. The nonmajor governmental funds reported a $273,695 increase in fund balance mainly due to the local sales tax and revenues from development fee permits. BUDGETARY HIGHLIGHTS A statement showing the original and final budget amounts compared to the town’s actual financial activity for the general fund is provided in this report as part of the basic financial statements. The significant variances are summarized as follows: The unfavorable revenue variance of $268,332 in franchise taxes is due to the appropriation of revenue from a potential franchise agreement between the Town and the private water company that did not occur. The unfavorable variance in intergovernmental revenues of $89,779 was a result of the state’s projection of state sales and vehicle license taxes being less than actual collections which affects the distribution to cities and towns. The unfavorable revenue variance of $22,342 in licenses and permits reflects the continued economic recession, particularly in construction related activities but an increase over the prior year. Building permit revenues declined as well as business license renewals and applications. The unfavorable revenue variance of $116,776 in fines and forfeiture reflects decreased court activity related to decreased traffic citations within town borders. The unfavorable revenue variance of $259,444 in Charges for Services was due to the projection for a movie theater project that would have contributed approximately $200,000 to public art, however, the project did not materialize. The favorable expenditure variance of $1,616,220 includes all departments. During the year the Town Council made a major shift in priorities to focus on the Town’s infrastructure, specifically pavement maintenance which resulted in several reductions in force. Additionally, planned projects or major maintenance projects were deferred due to staff’s reprioritization to the pavement program resulting in unspent funds in all departments. The general government Administration variance is due primarily to the appropriation of approximately $300,000 in the event the economy worsened during the fiscal year; this contingency was not required. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2013, the Town had invested $193.0 million in capital assets, including buildings, vehicles, computers, equipment, infrastructure and artwork. This amount represents a net increase prior to depreciation of $489,681 from the prior fiscal year. Total depreciation expense for the current fiscal year was $4.9 million. The schedule on the following page presents a summary of capital asset balances for the fiscal years ended June 30, 2013 and June 30, 2012. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (24) 2013 2012 Percent Change Land 23,571,668$ 23,571,668$ 0.0% Artwork 1,886,500 1,829,500 3.1% Construction in Progress 765,120 533,610 43.4% Infrastructure 55,215,185 58,772,006 -6.1% Buildings 14,189,682 14,550,487 -2.5% Improvements other than Buildings 7,148,597 7,833,033 -8.7% Vehicles, Machinery and Equipment 668,808 765,799 -12.7% Total Capital Assets 103,445,560$ 107,856,103$ -4.1% Town of Fountain Hills, Arizona Capital Assets (Net of Accumulated Depreciation) Additional information on the Town’s capital assets can be found in Note 3.A.3. Long-Term Debt At year-end, the Town had $11.6 million in bonds outstanding, $2.4 million due within one year; this represents a net decrease of $2.3 million. The chart below is a summary of the Town’s outstanding debt as of year-end: 2013 2012 General Obligation Bonds 5,700,000$ 6,845,000$ Revenue Bonds 5,905,000 7,040,000 Total Outstanding Debt 11,605,000$ 13,885,000$ Town of Fountain Hills, Arizona Outstanding Long-term Bonds The Town’s general obligation bonds are subject to two limits; the Constitutional debt limit (total debt limit) on all general obligation bonds (up to 20% of the total secondary assessed valuation) and the statutory debt limit on general municipal purpose bonds (up to 6% of the total secondary assessed valuation). The current total debt limitation for the Town is $95.3 million, which is more than the Town’s outstanding general obligation debt. Additional information on the Town’s long-term debt can be found in Notes 3.C. ECONOMIC FACTORS The Town continues to maintain strong reserves for unforeseen circumstances, whether of a financial nature or a natural (or other) disaster. The Town’s reserves, in combination with our consistent adherence to adopted financial policies and management practices, proved big factors in the Aa3 credit rating awarded to Fountain Hills by the major credit rating companies. The housing market has shown signs of recovery (both nationally and regionally), indicating that the overall economy may continue to experience moderate growth in the year ahead. The Town’s local housing economy provides building permit and construction sales tax revenue, which have declined over the past four fiscal years. With a limited inventory of available lots the Town will have to adjust to the new economy, one that is less dependent upon building activity as a source of reliable revenue. There is an area of almost 1,300 acres that was annexed in 2006 that is planned to be developed but the first building permit is not scheduled to be issued until beyond 2015. The Town’s local sales tax collections, which represent the largest town revenue source is made up of primarily retail, telecommunications and restaurant bar activity. Construction related sales tax are projected to stop declining for the foreseeable future; retail collections, however, are projected to remain steady due to the fact that the existing retail base is not significantly affected by the recession (major retail activity consists of three grocery stores and one shopping center with a major retailer). TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2013 (25) The Town is heavily dependent upon state shared revenues for general fund operations (37%); state- shared income tax revenues are anticipated to increase slightly during fiscal year 2013-14 with increased individual and business revenues and state collections. The Town is aggressively pursuing economic vitality and redevelopment opportunities, specifically a proposed development in the downtown center. The Town partnered with the Fountain Hills Chamber of Commerce to commission a vision for the downtown core including the world renowned Fountain lake area. The plan was presented to the public late summer of 2009 and serves as a useful tool for economic development to attract developers. As of June 30, 2013 the Town had set aside $9.0 million in the capital improvement fund but the majority of capital projects will be deferred until the economy improves. The Town has been successful in obtaining a contract with ADOT to fund a major road improvement along Shea Boulevard that was completed in FY11. The Town completed a second construction project for another major road improvement on Shea Boulevard with further funding from ADOT in FY12. NEXT YEAR’S BUDGETS AND RATES The protracted economic recession has forced the town to evaluate core services and, in some cases, to reduce existing service levels. Prudent long-term fiscal planning dictates that we remain conservative, focus on the highest Council and citizen priorities, and fund only those enhancements we can sustain financially. The FY14 general fund operating budget is $13.2 million representing a 3% decrease from fiscal year 2012-13 budget. The operating budget is comprised of the costs to continue operations from year to year without any capital expenditures. It encompasses all the basic services provided to Fountain Hills’ residents: police and fire protection; parks, recreation, streets maintenance; planning and zoning; building inspection; economic development and administrative services. The capital budget is set at $19.2 million, a 66% increase over fiscal year 2012-13 in anticipation of a successful road bond sale in November. There are some projects in the five-year plan that are considered affordable within current revenue sources, others will require other sources of revenue for funding such as bonds, grants, etc. Capital budgets tend to rise and fall each year depending on the timing of projects – especially if a town, such as Fountain Hills, strives to achieve a “pay-as-you-go” program. The capital improvement program (CIP) is the town’s financial plan for supporting large capital projects. The five-year CIP addresses the growing needs of the community and enhances the quality of life through major public investment, and is an essential ingredient in the town’s service delivery plan. The CIP is closely aligned with the general plan, and integrates a number of specialized facility and infrastructure master plans. Looking ahead, the five-year CIP totals $24.1 million; with the capital budget for fiscal year 2013-14 totaling $19.2 million (which includes carryover funds for some large projects currently underway). In fiscal year 2013-14, the CIP places major emphasis on major road improvements and maintenance. Due to the economy there are no recreational or non essential projects proposed. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the Town’s finances and to demonstrate the Town’s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Finance Division, Town of Fountain Hills, 16705 East Avenue of the Fountains, Fountain Hills, Arizona 85268. THIS PAGE BLANK BASIC FINANCIAL STATEMENTS TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (26) Governmental Activities ASSETS Cash and Investments 22,661,466$ Cash with Paying Agent 2,269,987 Receivables, Net: Accounts Receivable 177,837 Intergovernmental Receivables 853,807 Property Taxes Receivable 25,090 Inventory, At Cost 10,201 Prepaid Items 37,199 Restricted Assets 2,425,010 Capital Assets: Non-Depreciable 26,223,288 Depreciable (Net) 77,222,272 Total Assets 131,906,157 LIABILITIES Accounts Payable 969,871 Accrued Wages and Benefits 127,907 Interest Payable 277,793 Unearned Revenue 404,533 Matured Debt Principal Payable 2,040,000 Noncurrent Liabilities: Due Within One Year 2,449,599 Due in More Than One Year 9,501,392 Total Liabilities 15,771,095 NET POSITION Net Investment in Capital Assets 89,800,560 Restricted For: Highways and Streets 906,011 Public Safety 243,650 Capital Outlay 2,138,386 Debt Service 2,425,370 Cottonwoods Maintenance District 8,327 Unrestricted 20,612,758 Total Net Position 116,135,062$ TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (27) NET (EXPENSE) REVENUE AND CHANGES IN NET POSITION Fees, Fines and Operating Capital Charges for Grants and Grants and Governmental FUNCTIONS/PROGRAMS EXPENSES Services Contributions Contributions Activities Governmental Activities: General Government 2,909,443$ 1,204,356$ -$ 76,958$ (1,628,129)$ Public Safety 6,100,131 14,227 34,719 - (6,051,185) Highways and Streets 5,712,817 4,916 1,232,187 73,577 (4,402,137) Culture and Recreation 2,779,294 - - - (2,779,294) Development Services 1,633,361 - - - (1,633,361) Interest on Long-Term Debt 567,043 - - - (567,043) Total Governmental Activities $19,702,089 $ 1,223,499 $ 1,266,906 $ 150,535 (17,061,149) GENERAL REVENUES Taxes: Sales Taxes 7,957,163 Property Taxes 1,385,147 Franchise Taxes 334,668 State Sales Tax Revenue Sharing - Unrestricted 4,226,234 Auto Lieu Tax Revenue Sharing - Unrestricted 752,949 Investment Earnings 69,998 Miscellaneous 300,899 Total General Revenues 15,027,058 Change in Net Position (2,034,091) Net Position - Beginning, As Restated 118,169,153 Net Position - Ending 116,135,062$ PROGRAM REVENUES TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (28) General Obligation General HURF Capital Projects Debt Service ASSETS Cash and Investments 7,196,392$ 1,502,179$ 9,225,975$ 53,718$ Cash with Paying Agent - - - 927,906 Accounts Receivable 120,358 49,176 - - Intergovernmental Receivable 674,916 116,526 - - Taxes Receivable 1,588 - - 20,219 Inventory, at cost 10,201 - - - Prepaid Items 32,493 4,706 - - Restricted Assets 75,595 - - - Total Assets 8,111,543$ 1,672,587$ 9,225,975$ 1,001,843$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable 254,754$ 675,002$ 20,699$ -$ Accrued Wages and Benefits 115,910 11,997 - - Unearned Revenue 2,500 79,577 200,000 - Interest Payable - - - 72,906 Matured Debt Principal Payable - - - 855,000 Total Liabilities 373,164 766,576 220,699 927,906 Deferred Inflows of Resources Unavailable Revenues 41,557 47,830 - 12,709 Fund Balances Nonspendable Cash with Escrow Agent - - - - Inventory 10,201 - - - Prepaid Items 32,493 4,706 - - Restricted - 853,475 - 61,228 Committed 1,345,200 - - - Assigned 2,191,063 - 9,005,276 - Unassigned 4,117,865 - - - Total Fund Balances 7,696,822 858,181 9,005,276 61,228 Total Liabilities, Deferred Inflows of Resources and Fund Balances 8,111,543$ 1,672,587$ 9,225,975$ 1,001,843$ (29) Municipal Property Nonmajor Total Corporation Governmental Governmental Debt Service Funds Funds -$ 4,683,202$ 22,661,466$ 989,838 352,243 2,269,987 - 8,303 177,837 41,577 20,788 853,807 - 3,283 25,090 - - 10,201 - - 37,199 2,349,415 - 2,425,010 3,380,830$ 5,067,819$ 28,460,597$ -$ 19,416$ 969,871$ - - 127,907 - 122,456 404,533 142,644 62,243 277,793 895,000 290,000 2,040,000 1,037,644 494,115 3,820,104 - 701 102,797 2,301,609 - 2,301,609 - - 10,201 - - 37,199 41,577 2,397,909 3,354,189 - 2,175,094 3,520,294 - - 11,196,339 - - 4,117,865 2,343,186 4,573,003 24,537,696 3,380,830$ 5,067,819$ 28,460,597$ THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (30) Total Fund Balances for Governmental Funds 24,537,696$ Governmental Capital Assets 193,269,683 Less Accumulated Depreciation (89,824,123) Capital Assets Used in Governmental Activities 103,445,560 Property Taxes 12,709 Miscellaneous Permits 89,387 Grants 701 General Obligation Bonds (5,700,000) Revenue Bonds Payable (5,905,000) Compensated Absences (345,991) Total Net Position of Governmental Activities 116,135,062$ Long-term liabilities, including bonds payable and compensated absences, are not due and payable in the current period and therefore are not reported in the governmental funds. Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Amounts reported for governmental activities in the Statement of Net Position are different because: Some revenues are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in the funds. TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS FISCAL YEAR ENDED JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (31) General Obligation General HURF Capital Projects Debt Service REVENUES Taxes: Sales Taxes 6,758,279$ -$ 281,775$ -$ Property Taxes - - - 998,602 Franchise Taxes 334,668 - - - Intergovernmental 4,925,637 1,232,187 40,001 - Fines and Forfeitures 173,024 - - - Licenses and Permits 416,437 - - - Charges for Services 157,170 4,916 - - Rents and Royalties 213,871 - - - Investment Earnings 22,611 711 21,140 372 Other 279,033 10,240 11,626 - Total Revenues 13,280,730 1,248,054 354,542 998,974 EXPENDITURES Current: General Government 2,530,796 - - - Public Safety 6,022,269 - - - Highways and Streets - 2,024,092 - - Culture and Recreation 1,780,492 - - - Development Services 1,643,757 - - - Debt Service: Principal Retirement - - - 855,000 Interest on Long-Term Debt - - - 145,813 Fiscal Charges - - - 250 Capital Outlay - - 436,377 - Total Expenditures 11,977,314 2,024,092 436,377 1,001,063 Excess (Deficiency) of Revenues Over Expenditures 1,303,416 (776,038) (81,835) (2,089) OTHER FINANCING SOURCES (USES) Transfers In - 767,000 108,943 - Transfers Out (836,454) - (334,000) - Total Other Financing Sources (Uses) (836,454) 767,000 (225,057) - Net Change in Fund Balance 466,962 (9,038) (306,892) (2,089) FUND BALANCE Beginning of Year 7,229,860 867,219 9,312,168 63,317 End of Year 7,696,822$ 858,181$ 9,005,276$ 61,228$ (32) Municipal Property Nonmajor Total Corporation Governmental Governmental Debt Service Funds Funds 611,406$ 305,703$ 7,957,163$ - 423,012 1,421,614 - - 334,668 - 125,222 6,323,047 - 14,227 187,251 - 154,467 570,904 - - 162,086 - - 213,871 13,602 11,562 69,998 - - 300,899 625,008 1,034,193 17,541,501 - 168,313 2,699,109 - - 6,022,269 - 34,898 2,058,990 - 10,526 1,791,018 - - 1,643,757 1,135,000 290,000 2,280,000 285,287 123,760 554,860 4,500 7,433 12,183 - 16,625 453,002 1,424,787 651,555 17,515,188 (799,779) 382,638 26,313 403,454 - 1,279,397 - (108,943) (1,279,397) 403,454 (108,943) - (396,325) 273,695 26,313 2,739,511 4,299,308 24,511,383 2,343,186$ 4,573,003$ 24,537,696$ TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (33) Net Change in Fund Balances of Governmental Funds 26,313$ Expenditures for Capital Assets 467,691 Less Current Year Depreciation (4,935,234) Excess Depreciation Over Capital Expenditures (4,467,543) Capital Contributions 57,000 Property Taxes (9,410) Miscellaneous Permits 61,629 Grants 701 Principal Payments on General Obligation Bonds 1,145,000 Principal Payments on Revenue Bonds 1,135,000 Net Decrease in Compensated Absences 17,219 Change in Net Position of Governmental Activities (2,034,091)$ Amounts reported for governmental activities in the Statement of Activities are different because: 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 expense. Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Some revenues reported in the Statement of Activities do not provide current financial resources and therefore are not reported as revenues in governmental funds. The Statement of Activities reports losses arising from the disposal of existing capital assets as well as capital contributions received from other governments. Conversely, governmental funds do not report any gain or loss on disposals of capital assets or capital contributions. The issuance of long-term debt (e.g. bonds) 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. The issuance of long-term debt increases long-term liabilities on the Statement of Net Position and the repayment of principal on long-term debt reduces long-term debt on the Statement of Net Position. Also, governmental funds report the effect of issuance costs, premiums, and similar items when the debt is first issued, whereas these items are deferred and amortized over the term of the long term debt in the Statement of Activities. TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FISCAL YEAR ENDED JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (34) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales Taxes 6,765,120$ 6,715,080$ 6,758,279$ 43,199$ Franchise Taxes 603,000 603,000 334,668 (268,332) Intergovernmental 5,015,416 5,015,416 4,925,637 (89,779) Fines and Forfeitures 289,800 289,800 173,024 (116,776) Licenses and Permits 438,779 438,779 416,437 (22,342) Charges for Services 416,614 416,614 157,170 (259,444) Rents and Royalties 228,224 222,090 213,871 (8,219) Investment Earnings 60,000 60,000 22,611 (37,389) Other 287,371 287,371 279,033 (8,338) Total Revenues 14,104,324 14,048,150 13,280,730 (767,420) EXPENDITURES Current: General Government: Mayor and Council 82,811 82,811 76,005 6,806 Administration 2,998,227 2,683,305 2,080,837 602,468 Municipal Court 402,933 402,933 373,954 28,979 Total General Government 3,483,971 3,169,049 2,530,796 638,253 Public Safety: Law Enforcement 2,946,362 2,946,362 2,890,429 55,933 Fire and Emergency Medical 3,255,335 3,255,335 3,131,840 123,495 Total Public Safety 6,201,697 6,201,697 6,022,269 179,428 Culture and Recreation: Community Services 2,250,838 2,241,484 1,780,492 460,992 Development Services: 2,091,732 1,981,304 1,643,757 337,547 Total Expenditures 14,028,238 13,593,534 11,977,314 1,616,220 Excess (Deficiency) of Revenues Over Expenditures 76,086 454,616 1,303,416 848,800 OTHER FINANCING SOURCES (USES) Transfers Out (233,750) (235,454) (836,454) (601,000) Net Change in Fund Balance (157,664) 219,162 466,962 247,800 FUND BALANCE Beginning of Year 7,416,368 7,416,368 7,229,860 (186,508) End of Year 7,258,704$ 7,635,530$ 7,696,822$ 61,292$ TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL HIGHWAY USER REVENUE FUND FISCAL YEAR ENDED JUNE 30, 2013 See accompanying Notes to Basic Financial Statements. (35) Variance with Original Budget Final Budget Actual Final Budget REVENUES Intergovernmental 1,265,640$ 1,265,640$ 1,232,187$ (33,453)$ Charges for Services 50,240 50,240 4,916 (45,324) Investment Earnings 1,200 1,200 711 (489) Other 4,800 4,800 10,240 5,440 Total Revenues 1,321,880 1,321,880 1,248,054 (73,826) EXPENDITURES Current: Highways and Streets 1,321,880 2,348,880 2,024,092 324,788 Excess (Deficiency) of Revenues Over Expenditures - (1,027,000) (776,038) 250,962 OTHER FINANCING SOURCES (USES) Transfers In - - 767,000 767,000 Net Change in Fund Balance - (1,027,000) (9,038) 1,017,962 FUND BALANCE Beginning of Year 680,710 680,710 867,219 186,509 End of Year 680,710$ (346,290)$ 858,181$ 1,204,471$ NOTES TO BASIC FINANCIAL STATEMENTS THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (36) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Town’s accounting policies are described below. During the year ended June 30, 2013, the Town adopted GASB Statements No. 63 and 65. GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources. GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, establishes accounting and financial reporting standards that reclassify as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities. A. Reporting Entity The Town is a municipal entity governed by an elected Mayor and Council. As required by accounting principles generally accepted in the United States of America, these financial statements present the Town and its component units, entities for which the Town is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town’s operations and so data from these units are combined with data of the Town, the primary government. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The Town is a primary government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, component units combined with the Town for financial statement presentation purposes and the Town is not included in any other governmental reporting entity. Consequently, the Town’s financial statements include only the funds of those organizational entities for which its elected governing body is financially accountable. Eagle Mountain Community Facilities District and the Cottonwoods Improvement District. As special purpose districts and separate political subdivisions under the Arizona Constitution, the districts can levy taxes and issue bonds independently of the Town. Property owners in the designated areas are assessed for Town taxes, and thus for the costs of operating the districts. The Town Council serves as the Board of Directors; however, the District has no liability for the districts’ debt, the Town is responsible for the debt; the debt is therefore, not subject to the Town’s debt limit; therefore, providing a financial benefit to the Town. For financial reporting purposes, transactions of the Districts are combined together and included as if they were part of the Town’s operations. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (37) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Reporting Entity (Continued) Town of Fountain Hills, Arizona Municipal Property Corporation. The Town of Fountain Hills, Arizona Municipal Property Corporation’s (MPC) Board of Directors consists of three members which are appointed by the Fountain Hills Town Council. The MPC, which is a nonprofit corporation incorporated under the laws of the State of Arizona, was formed for the sole purpose of assisting the Town in obtaining financing for various projects of the Town. The Town has a “moral obligation” for the repayment of the MPC’s bonds. For financial reporting purposes, transactions of the MPC are combined together and included as if they were part of the Town’s operations. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) present financial information about the Town as a whole. For the most part, the effect of internal activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the Town. Governmental activities normally are supported by taxes and intergovernmental revenues. The Town does not have any business-type activities. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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 that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, state shared revenues, investment earnings and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-Wide Financial Statements The government-wide 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 grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the government-wide financial statements; however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (38) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as 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 resources are provided during the current year for payment of long-term debt principal and interest due early in the following year (not to exceed one month) and therefore the expenditures and related liabilities have been recognized. Compensated absences are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses and permits, charges for services, special assessments and investment earnings associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Unearned revenues arise when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. Delinquent property taxes not received within 60 days of the fiscal year end are reported as deferred inflows of resources. Other receivables that will not be collected within the available period have also been reported as deferred inflows on the governmental fund financial statements. When both restricted and unrestricted resources are available for use, it is the Town’s policy to use restricted resources first, then unrestricted resources as they are needed. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (39) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The Town reports the following major governmental funds. Major Governmental Funds General Fund This fund is the Town’s primary operating fund. The Fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Highway Users Revenue Fund (HURF) This special revenue fund accounts for the Town’s share of motor fuel tax revenues and lottery proceeds. Capital Projects Fund This fund accounts for the capital improvements to various projects and equipment purchases of the Town. General Obligation Debt Service Fund This fund accounts for the Town’s property tax revenues received to pay the debt service of the Town’s general obligation bonds. Municipal Property Corporation Debt Service Fund This fund accounts for the revenues received to pay the debt service on MPC revenue bonds. D. Assets, Liabilities, and Net Position or Fund Balance 1. Deposits and Investments The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the State Treasurer, and highly liquid investments with maturities of three months or less from the date of acquisition. Cash and investments are pooled except for funds required to be held by fiscal agents or restricted under provisions of bond indentures. Interest earned from investments purchased with such pooled monies is allocated to each of the funds based on the average daily cash balances. State statutes authorize the Town to invest in obligations of the U.S. Treasury and U.S. agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties or incorporated cities, towns or duly organized school districts, improvement districts in this state and the State Treasurer’s Local Government Investment Pool. Investments are stated at fair value. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (40) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Position or Fund Balance (Continued) 2. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (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.” All trade and property tax receivables are shown net of an allowance for uncollectibles. Property taxes are levied by the Town and collected by the Maricopa County Treasurer. Property taxes are levied no later than the third Monday in August and are payable in two installments due October 1 of the current year and March 1 of the subsequent year. Taxes become delinquent after the first business day of November and May, respectively. Interest attaches on installments after the delinquency date. Pursuant to Arizona Revised Statutes (A.R.S.) a lien against assessed real and personal property attaches on the first day of January preceding assessment and levy; however according to case law, an enforceable legal claim to the asset does not arise. The State Constitution and State law specify a property tax levy limitation system. The system consists of two levies, a limited levy known as the primary property tax levy and an unlimited levy referred to as the secondary levy, which may only be used to retire bonded indebtedness. The primary tax levy is limited to an increase of 2 percent over the previous year’s maximum allowable primary levy, plus an increased dollar amount because of a net gain in property not taxed the previous year. Also, the primary property tax from all taxing jurisdictions for homeowners may not exceed 1 percent of the market value of their homes. If the combined primary property tax (for the Town, County, School District, etc.) exceeds 1 percent of the market value of the homes, the school districts will reduce their rate until the homeowners’ aggregate rate is equal to or less than the allowable 1 percent. The State will then subsidize the school districts for the reduced revenue. This 1 percent limitation applies to primary property taxes only and does not affect the secondary property tax levy. There is also a control on the assessed value of property for primary tax purposes. The base year for the new tax system is fiscal year 1978-79. From this base year, two assessed values evolve. The primary assessed values are allowed to increase by no more than 10 percent a year. The dollar amount of the secondary property tax levy is “unlimited” and the actual full cash value of property is used in determining the tax rate. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (41) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Position or Fund Balance (Continued) 2. Receivables and Payables (Continued) Intergovernmental receivables include amounts due from other government agencies and include Town sales tax ($540,498), Highway User Revenue fuel tax ($116,526), state sales tax ($160,265), and auto lieu ($36,518) in the governmental funds and governmental activities column of the government-wide financial statements. 3. Inventory Inventories are stated at average cost using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed in the government-wide financial statements, and as expenditures when consumed on the fund financial statements. 4. 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. In the government-wide and fund financial statements prepaids are recognized as expenses/expenditures when goods and/or services are received rather than when purchased. 5. Restricted Assets The Town reported restricted assets in the amount of $75,595 for funds held in an escrow account. The agreement provides that if, prior to July 1, 2014, any future Council fails to ratify this agreement or fails to provide severance when required as set forth in the agreement between the Town Council and Town Manager, the Town Manager shall be permitted to withdraw all funds from the escrow, minus any interest earned, which interest shall be payable to the Town upon the Town Manager’s withdrawal of the amounts in escrow. The Town also has $2,349,415 deposited in an irrevocable trust with an escrow agent to make future principal and interest payments on the 2004 Municipal Property Corporation Revenue Bond. 6. Capital Assets Capital assets, which include land, artwork, buildings, improvements other than buildings, vehicles, machinery, and equipment, construction in progress, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost of $10,000 or more and an estimated useful life of more than one year. The capital assets include all infrastructure assets acquired by the Town since incorporation. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (42) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Position or Fund Balance (Continued) 6. Capital Assets (Continued) Such assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets of the Town are depreciated using the straight-line method over the following estimated useful lives: Assets Years Infrastructure 15-50 Buildings 50 Improvements other than buildings 20 Vehicles, machinery and equipment 5-20 7. Compensated Absences The Town’s employee vacation and sick leave policies generally provide for granting vacation and sick leave with pay. Sick leave and vacation benefits vest after 30 days at the employee’s then current rate of pay. Effective October 7, 2004, all eligible full-time and part-time employees can accrue vacation leave. Full-time employees can accrue up to a maximum of 224 hours of vacation, while part-time employees can accrue up to 112 hours, depending upon their length of service. In the event of termination, employees will be paid for any accrued, but unused, vacation hours. Also effective October 7, 2004, full-time employees started to accrue sick leave, based on their length of service, up to a maximum of 720 hours. A portion of this balance will be paid upon a satisfactory separation of service. The current and long-term liabilities, including related benefits, for accumulated vacation and sick leave are reported on the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (43) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Position or Fund Balance (Continued) 8. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the Statement of Net Position. Bond premiums and discounts and the difference between the reacquisition price and the net carrying amount of the old debt, are deferred and amortized over the life of the bonds using the straight-line method over the term of the related debt. The difference between the reacquisition price and the net carrying value of the old debt is reported as either a deferred inflow or a deferred outflow of resources and the premium and/or discount are recorded against the outstanding debt. Issuance costs are expended when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts of debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 9. Net Position In the government-wide financial statements, net position is reported in three categories: net investment in capital assets; restricted net position; and unrestricted net position. The net investment in capital assets, is separately reported because capital assets make up a significant portion of total net position. Restricted net position account for the portion of net position restricted by parties outside the Town. Unrestricted net position is the remaining net position not included in the previous two categories. 10. Fund Balance Classifications Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, committed, assigned, and unassigned fund balance classifications. The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form such as inventories and prepaid items, or are legally or contractually required to be maintained intact. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (44) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Position or Fund Balance (Continued) 10. Fund Balance Classifications (Continued) Restricted fund balances are those that have externally imposed restrictions on their usage by creditors (such as through debt covenants), grantors, contributors, or laws and regulations. Committed fund balances are self-imposed limitations approved by the Town’s Council, which is the highest level of decision-making authority within the Town. Only the Town Council can remove or change the constraints placed on committed fund balances. Fund balances must be committed prior to fiscal year end through formal council action at a public meeting. Assigned fund balances are resources constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. The Town Council has authorized the Deputy Town Manager/Finance Director to assign fund balances. The unassigned fund balance is the residual classification for the General Fund and includes all amounts not reported in the other classifications. Also, deficits in fund balances of the other governmental funds are reported as unassigned. It is the Town’s policy to use restricted fund balance first, then committed, assigned, and lastly unassigned amounts. The Town has established a fund balance policy whereas the combined General Fund operating fund balance of at least 30% of revenues is recommended. The Town has established a stabilization fund (rainy day fund) in the Town’s fund balance policy. The rainy day fund had a balance of $1,345,200, reported as a committed fund balance at June 30, 2013. The rainy day funds may only be used for the following: 1) to replace the loss of more than 25% of the Town’s local share of state shared revenues, 2) for any event that threatens the health, safety or welfare of the Town’s citizens, 3) for any event that threatens the fiscal stability of the Town, and lastly 4) to address any matter declared by the Governor of the State of Arizona or the Mayor of the Town. All withdrawals from the rainy day funds shall be subject to the following rules: 1) any appropriation shall require the approval by at least 2/3 vote by the Town Council, and 2) the maximum amount of rainy day withdrawal in any fiscal year shall not exceed one-half of the total balance in the fund. Replenishment of the rainy day funds spent by the Town should not exceed a period of more than five years, and should be repaid in equal annual installments of not less than 1% of the previous fiscal year General Fund fund balance. Repayments shall be appropriated as part of the annual budget adoption. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (45) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Position or Fund Balance (Continued) 11. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the Statement of Activities. Interfund transfers in the fund statements are reported as other financing sources/uses in governmental funds. 12. Estimates The preparation of the 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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information The Town Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Arizona Revised Statutes, the Town Manager submits a proposed budget for the fiscal year commencing the following July 1 to the Town Council. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comment. 3. Prior to the third Monday in August, the expenditure limitation for the Town is legally enacted through passage of an ordinance. To ensure compliance with the expenditure limitation, a uniform expenditure report must be filed with the State each year. This report, issued under a separate cover, reconciles total Town expenditures from the audited basic financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S. §41-1279.07). 4. Expenditures may not legally exceed the expenditure limitation described below for all fund types as a whole. For management purposes, the Town adopts a budget by department for the General Fund and in total by fund for other funds. The Town Manager, subject to Town Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between a department or activity. The adopted budget cannot be amended in any way without Town Council approval. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (46) NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) A. Budgetary information (Continued) 5. Formal budgetary integration is employed as a management control device during the year for the General, Special Revenue, Debt Service, and Capital Projects Funds (except for the HURF Debt Service and Cottonwoods Special Assessment Funds, in which the Town did not adopt a budget) on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. The Town is subject to the State of Arizona’s Spending Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carryover unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. The Town complied with this law during the year. No supplementary budgetary appropriations were necessary during the year. B. Excess of Expenditures Over Appropriations Expenditures exceeded appropriations in the following funds: Amount of Overexpenditure Major Funds: Municipal Property Corporation Debt Service Fund 348,087$ Nonmajor Governmental Funds: Grants Fund 85,222 Cash was available to cover the over expenditures listed above. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (47) NOTE 3 DETAILED NOTES ON ALL FUNDS A. Assets 1. Deposits and Investments Deposits and investments at June 30, 2013, consist of the following: Deposits: Cash on Hand 650$ Cash in Bank 431,054 Cash on Deposit with Paying Agent 2,269,987 Investments Local Government Investment Pool 7,109,344 Wells Fargo Money Market 118,351 U.S. Agency Securities 5,056,063 U.S. Treasury Securities 2,425,010 U.S. Treasury Notes 9,946,004 Total 27,356,463 Less Cash with Paying Agent (2,269,987) Less Restricted Assets (2,425,010) Total Cash and Investments 22,661,466$ Deposits The Town’s deposits at June 30, 2013, had a carrying value of $431,054 and a bank balance of $441,366. Of the bank balance, $250,000 was insured by federal depository insurance and $191,366 was collateralized by securities held by the pledging financial institutions in the Town’s name. Investments The Town’s investments at June 30, 2013 were as follows: Investment Type Amount Local Government Investment Pool 7,109,344$ Wells Fargo Money Market 118,351 U.S. Agency Securities 5,056,063 U.S. Treasury Securities 2,425,010 U.S. Treasury Notes 9,946,004 24,654,772$ The State Board of Deposit provides oversight for the LGIP, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. The shares are not identified with specific investments and are not subject to custodial credit risk. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (48) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 1. Deposits and Investments (Continued) Credit Risk – Credit risk is the risk that an issuer or counterparty to an investment will not fulfill its obligations. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in A.R.S 835- 323. When possible, analysis of the credit worthiness of all individual debt issuers held in the portfolio should be conducted on an annual basis in an effort to guard against investing in weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisors with which the Town will do business. At June 30, 2013, credit risk for the Town’s investments was as follows: Investment Type Rating Agency Amount Local Government Investment Pool AA+ S&P 7,109,344$ Wells Fargo Money Market N/A N/A 118,351 U.S. Agency Securities AA+ S&P 5,056,063 U.S. Treasury Securities N/A N/A 2,425,010 U.S. Treasury Notes AA+ S&P 9,946,004 24,654,772$ Custodial credit risk – Concentration credit risk is the risk of loss associated with the significant of investments in a single issuer. The Town of Fountain Hills will diversify its investments by security type and institution. With the exception of U.S. Treasury notes and securities and authorized pools, no more than 25% of the Town’s total investment portfolio will be invested in a single security type or with a single financial institution. At June 30, 2013, the Town had the following diversification of Town investments: Percent of Town Investment Type Amount Investments Local Government Investment Pool 7,109,344$ 28.84% Wells Fargo Money Market 118,351 0.48% U.S. Agency Securities 5,056,063 20.51% U.S. Treasury Securities 2,425,010 9.84% U.S. Treasury Notes 9,946,004 40.34% 24,654,772$ 100.00% Interest rate risk – Interest rate risk is the risk that changes in interest rates will adversely affect an investment’s fair value. The Town will look to mitigate interest rate risk by performing the following: TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (49) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 1. Deposits and Investments (Continued)  Structuring the investment portfolio so that securities mature concurrent with the anticipated cash requirements for ongoing operations, thereby avoiding, as much as possible, the need to sell securities into an adverse market environment prior to maturity.  Investing funds primarily in shorter-term securities or similar investment pools and limiting the average maturity of the portfolio in accordance with the needs of the Town.  With respect to any firm or individual given responsibility for investments utilizing external research and advice regarding the current interest rate outlook and global economic condition to optimize portfolio duration strategy. The following is a table of the Town’s investment maturities: Investment 0-6 Months 6-12 Months 12+ Months Total Local Government Investment Pool 7,109,344$ -$ -$ 7,109,344$ Wells Fargo Advantage Money Market 118,351 - - 118,351 Federal Home Loan Bank Global Notes - 1,011,731 - 1,011,731 Federal Home Loan Mortgage Corp. Notes 125,172 - 1,307,220 1,432,392 Federal National Mortgage Association Notes - - 2,611,940 2,611,940 U.S. Treasury Securities 409,555 306,950 1,708,505 2,425,010 U.S. Treasury Notes - 1,767,659 8,178,345 9,946,004 Total 7,762,422$3,086,340$ 13,806,010$ 24,654,772$ Maturity 2. Receivables Governmental funds report deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also record unearned revenue in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred inflows of resources and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Miscellaneous General Fund 41,557$ 2,500$ Highway User Revenue Fund 47,830 79,577 Capital Projects Fund - 200,000 Property Taxes General Obligation Debt Service Fund 12,709 - Grants Nonmajor Governmental Funds 701 122,456 102,797$ 404,533$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (50) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 3. Capital Assets Capital assets for the year ended June 30, 2013, were as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land 23,571,668$ -$ -$ 23,571,668$ Artwork 1,829,500 57,000 - 1,886,500 Construction in Progress 533,610 377,133 (145,623) 765,120 Total Capital Assets, Not Being Depreciated 25,934,778 434,133 (145,623) 26,223,288 Capital Assets, Being Depreciated: Infrastructure 130,788,513 - - 130,788,513 Buildings 18,008,744 - - 18,008,744 Improvements Other Than Buildings 14,639,264 127,390 - 14,766,654 Vehicles, Machinery and Equipment 3,408,693 108,791 (35,000) 3,482,484 Total Capital Assets, Being Depreciated 166,845,214 236,181 (35,000) 167,046,395 Accumulated Depreciation for: Infrastructure (72,016,507) (3,556,821) - (75,573,328) Buildings (3,458,257) (360,805) - (3,819,062) Improvements Other Than Buildings (6,806,231) (811,826) - (7,618,057) Vehicles, Machinery and Equipment (2,642,894) (205,782) 35,000 (2,813,676) Total Accumulated Depreciation (84,923,889) (4,935,234) 35,000 (89,824,123) Total Capital Assets, Being Depreciated, Net 81,921,325 (4,699,053) - 77,222,272 Governmental Activities Capital Assets, Net 107,856,103$ (4,264,920)$ (145,623)$ 103,445,560$ Depreciation expense was charged to functions/programs as follows: Governmental Activities: General Government 224,309$ Public Safety 77,533 Highways and Streets 3,654,931 Culture and Recreation 978,461 Total Depreciation Expense 4,935,234$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (51) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) B. Interfund Transfers Interfund transfers for the year ended June 30, 2013, consisted of the following: Municipal Property Capital Corporation HURF Projects Debt Service Transfers Out Fund Fund Fund Total General Fund 433,000$ -$ 403,454$ 836,454$ Capital Projects Fund 334,000 - - 334,000 Nonmajor Governmental Funds - 108,943 - 108,943 Total 767,000$ 108,943$ 403,454$ 1,279,397$ Transfers In The General Fund transferred $403,454 to pay for debt service costs on the Municipal Property Corporation’s outstanding bonds. The General Fund and Capital Projects Fund transferred $433,000 and $334,000 respectively, to the HURF Fund for pavement projects. The Nonmajor Governmental Funds transferred $108,943 to the Capital Projects Fund to fund a portion of capital acquisitions. C. Long-Term Obligations Bonds payable at year end consisted of general obligation, municipal property corporation and community facilities district bonds. The bonds are both callable and noncallable with the interest payable semiannually. Property taxes from the General Obligation Bond Debt Service Fund and Eagle Mountain Debt Service Fund are used to pay general obligation and community facilities district bonds. State shared revenues from the HURF Fund are used to pay street and highway user bonds. Tax revenues from the General Fund and Excise Tax Fund are used to pay municipal facilities bonds. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (52) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Long-Term Obligations (Continued) Bonds outstanding at June 30, 2013, were as follows: Interest Maturity Original Outstanding Purpose Rates Date Amount Amount Governmental Activities: General Obligation Bonds: General Obligation Refunding Bonds, Series 2005 3.75-4.00 07/01/13-19 $ 7,225,000 $ 2,900,000 Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2005 3.75-4.125 7/1/2013-21 4,555,000 2,800,000 Total General Obligation Bonds $ 11,780,000 $ 5,700,000 Revenue Bonds: Municipal Facilities Revenue Bonds, Series 2004 4.00-4.50 7/01/13-15 3,645,000 2,170,000 Municipal Facilities Revenue Refunding Bonds, Series 2005 3.75-4.50 7/01/13-20 5,330,000 3,735,000 Total Revenue Bonds $ 8,975,000 $ 5,905,000 The Town has pledged future excise taxes to repay a total of $5,905,000 in outstanding municipal facilities revenue and refunding bonds. For fiscal year ended June 30, 2013, the net revenues available to service this debt were $13.8 million. The debt principal and interest paid on this debt in fiscal year 2012-13 was $1,135,000 and $285,287, respectively (10 percent of available pledged revenues). Changes in long-term obligations for the year ended June 30, 2013, are as follows: Due Within July 1, 2012 Increases Decreases June 30, 2013 One Year Governmental Activities Bonds General Obligation Bonds 6,845,000$ -$ (1,145,000)$ 5,700,000$ 1,205,000$ Revenue Bonds 7,040,000 - (1,135,000) 5,905,000 1,210,000 Total Bonds 13,885,000 - (2,280,000) 11,605,000 2,415,000 Other Liabilities: Compensated Absences 363,210 236,984 (254,203) 345,991 34,599 Governmental Activities Long-Term Liabilities 14,248,210$ 236,984$ (2,534,203)$ 11,950,991$ 2,449,599$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (53) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Long-Term Obligations (Continued) Debt service requirements on long-term debt at June 30, 2013, are as follows: Principal Interest 2014 2,415,000$ 476,569$ 2015 1,970,000 386,581 2016 2,830,000 307,136 2017 1,120,000 186,406 2018 1,150,000 141,606 2019 - 2021 2,120,000 161,152 11,605,000$ 1,659,450$ Governmental Activities Year Ending June 30, In prior years, the Town defeased certain general obligation and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the defeased bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Town’s financial statements. At year end, $6,145,000 of defeased bonds are still outstanding. D. Fund Balances Fund Balances at June 30, 2013 were as follows: Municipal General Property Nonmajor Capital Obligation Corporation Governmental General HURF Projects Debt Service Debt Service Funds Total Nonspendable: Cash with Escrow Agent -$ -$ -$ -$ 2,301,609$ -$ 2,301,609$ Inventory 10,201 - - - - - 10,201 Prepaids 32,493 4,706 - - - - 37,199 Restricted: Debt Service - - - 61,228 41,577 7,546 110,351 Highways and Streets - 853,475 - - - - 853,475 Local Court Enhancement - - - - - 243,650 243,650 New Development - - - - - 2,138,386 2,138,386 Cottonwoods Maintenance District - - - - - 8,327 8,327 Committed Rainy Day Funds 1,345,200 - - - - - 1,345,200 Town Beautification and Economic Development - - - - - 2,175,094 2,175,094 Assigned Public Art 1,563 - - - - - 1,563 Vehicle Replacement 775,700 - - - - - 775,700 Capital Projects 565,520 - 9,005,276 - - - 9,570,796 Equipment Replacement 848,280 - - - - - 848,280 Unassigned 4,117,865 - - - - - 4,117,865 Total Fund Balance 7,696,822$ 858,181$ 9,005,276$ 61,228$ 2,343,186$ 4,573,003$ 24,537,696$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (54) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) E. Change in Accounting Principle For the year ended June 30, 2013 The Town restated governmental fund net position due to the implementation of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, which resulted in a change in accounting principle. The change in accounting principle resulted in the restatement of net position to retroactively expense bond issuance costs previously reported as deferred charges and amortized over the life of the bonds. The effect of the restatement is as follows: Restatement Due to Change in Net Position as Accounting Net Position Previously Stated Principle As Restated Governmental Activities 119,021,786$ (852,633)$ 118,169,153$ NOTE 4 OTHER INFORMATION A. Contingent Liabilities Lawsuits The Town is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the Town’s legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of the Town. B. Risk Management The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The Town’s insurance protection is provided by the Arizona Municipal Risk Retention Pool, of which the Town is a participating member. The limit for basic coverage is for $2,000,000 per occurrence on a claims made basis. Excess coverage is for an additional $8,000,000 per occurrence on a follow form, claims made basis. No significant reduction in insurance coverage occurred during the year, and no settlements exceeded insurance coverage during any of the past three fiscal years. The Town was unable to obtain workers’ compensation insurance at a cost considered to be economically justifiable. Therefore, the Town joined the Arizona Municipal Workers’ Compensation Pool (AMWCP). AMWCP is a public entity risk pool currently operating as a common workers’ compensation insurance program for 67 member cities and towns. The Town is responsible for paying a premium, based on an experience rating formula that allocates pool expenditures and liabilities among members. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (55) NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans Defined Contribution Pension Plan All full-time employees of the Town participate in a defined contribution pension plan administered by the ICMA Retirement Corporation as a 401(a) plan. The payroll for the Town employees covered by this plan for the year ended June 30, 2013, was $2,561,493. The Town’s total payroll was $2,881,474. A defined contribution pension plan provides benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined, instead of specifying the amount of benefit the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account, the returns earned on investment of those contributions, and forfeitures of other participants’ benefits that may be allocated to such participant’s account. All non-peace officer full-time Town employees must participate in the pension plan from the date they are hired. Contributions made by an employee vest immediately and contributions made by the Town vest after three years of service. An employee that leaves the employment of the Town is entitled to his or her contributions and the vested portion of the Town’s contributions, plus interest earned. Each employee must contribute 11% of his or her gross earnings. The Town must match the employee contribution of 11%. During fiscal year 2012-13, the Town’s required and actual contributions amounted to $281,746. The employees’ contributions totaled $281,746. Employees may also contribute to the lCMA Retirement Corporation 457 plan on a voluntary basis; there is no employer match for those contributions. During fiscal year 2012-13, employees contributed $140,764 to that plan. In the current year, there were a significant amount of forfeitures ($164,057) that were forfeited from participant accounts back to the Town. This is due to employees making withdrawals on their balances without being 100% vested in the plan. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2011-12 or as of the close of the fiscal year. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES THIS PAGE BLANK NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Development Fees Fund - accounts for development fees collected from developers restricted for projects approved by the Town Council. Local Court Enhancement Fund - accounts for a local court surcharge. Grants Fund - accounts for the activities of various grants and contributions received by the Town. Excise Tax Fund - accounts for the portion of Town sales tax reserved by the Town Council for special projects including Town beautification and economic development. Cottonwoods Maintenance Fund - accounts for all special assessments received to pay for maintenance of the Cottonwoods Special Assessment District. DEBT SERVICE FUNDS Eagle Mountain Debt Service Fund – accounts for the property tax revenues received to pay the debt service of the Eagle Mountain Community Facilities District component unit. TOWN OF FOUNTAIN HILLS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2013 (56) Development Fees Local Court Enhancement Grants Excise Tax Cottonwoods Maintenance ASSETS Cash and Investments 2,141,653$ 243,615$ 123,906$ 2,160,191$ 8,873$ Cash with Paying Agent - - - - - Accounts Receivable - 91 8,212 - - Intergovernmental Receivable - - - 20,788 - Taxes Receivable - - - - - Total Assets 2,141,653$ 243,706$ 132,118$ 2,180,979$ 8,873$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable 3,267$ 56$ 9,662$ 5,885$ 546$ Unearned Revenue - - 122,456 - - Interest Payable - - - - - Matured Debt Principal Payable - - - - - Total Liabilities 3,267 56 132,118 5,885 546 Deferred Inflows of Resources Unavailable Revenges - - - - - Fund Balances Restricted 2,138,386 243,650 - - 8,327 Committed - - - 2,175,094 - Total Fund Balances 2,138,386 243,650 - 2,175,094 8,327 Total Liabilities, Deferred Inflows of Resources and Fund Balances 2,141,653$ 243,706$ 132,118$ 2,180,979$ 8,873$ Special Revenue Funds (57) Debt Service Fund Total Special Revenue Funds Eagle Mountain Debt Service Total Nonmajor Governmental Funds 4,678,238$ 4,964$ 4,683,202$ - 352,243 352,243 8,303 - 8,303 20,788 - 20,788 - 3,283 3,283 4,707,329$ 360,490$ 5,067,819$ 19,416$ -$ 19,416$ 122,456 - 122,456 - 62,243 62,243 - 290,000 290,000 141,872 352,243 494,115 - 701 701 2,390,363 7,546 2,397,909 2,175,094 - 2,175,094 4,565,457 7,546 4,573,003 4,707,329$ 360,490$ 5,067,819$ TOWN OF FOUNTAIN HILLS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2013 (58) Development Fees Local Court Enhancement Grants Excise Tax Cottonwoods Maintenance REVENUES Taxes: Sales Taxes -$ -$ -$ 305,703$ -$ Property Taxes - - - - 3,339 Intergovernmental - - 125,222 - - Fines and Forfeitures - 14,227 - - - Licenses and Permits 154,467 - - - - Investment Earnings 5,578 196 - 5,656 10 Total Revenues 160,045 14,423 125,222 311,359 3,349 EXPENDITURES Current: General Government - 11,298 78,603 67,380 11,032 Highways and Streets 15,430 - 19,468 - - Culture and Recreation - - 10,526 - - Debt Service Principal Retirement - - - - - Interest on Long-Term Debt - - - - - Fiscal Charges - - - - - Capital Outlay - - 16,625 - - Total Expenditures 15,430 11,298 125,222 67,380 11,032 Excess (Deficiency) of Revenues Over Expenditures 144,615 3,125 - 243,979 (7,683) OTHER FINANCING SOURCES (USES) Transfers Out - - - (108,943) - Net Change in Fund Balances 144,615 3,125 - 135,036 (7,683) FUND BALANCES Beginning of Year 1,993,771 240,525 - 2,040,058 16,010 End of Year 2,138,386$ 243,650$ -$ 2,175,094$ 8,327$ Special Revenue Funds (59) Debt Service Fund Total Special Revenue Funds Eagle Mountain Debt Service Total Nonmajor Governmental Funds 305,703$ -$ 305,703$ 3,339 419,673 423,012 125,222 - 125,222 14,227 - 14,227 154,467 - 154,467 11,440 122 11,562 614,398 419,795 1,034,193 168,313 - 168,313 34,898 - 34,898 10,526 - 10,526 - 290,000 290,000 - 123,760 123,760 - 7,433 7,433 16,625 - 16,625 230,362 421,193 651,555 384,036 (1,398) 382,638 (108,943) - (108,943) 275,093 (1,398) 273,695 4,290,364 8,944 4,299,308 4,565,457$ 7,546$ 4,573,003$ TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL CAPITAL PROJECTS FUND FISCAL YEAR ENDED JUNE 30, 2013 (60) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales Taxes 120,000$ 120,000$ 281,775$ 161,775$ Intergovernmental 5,758,000 5,758,000 40,001 (5,717,999) Investment Earnings - - 21,140 21,140 Other 15,000 15,000 11,626 (3,374) Total Revenues 5,893,000 5,893,000 354,542 (5,538,458) EXPENDITURES Capital Outlay 11,587,281 11,253,281 436,377 10,816,904 Excess (Deficiency) of Revenues Over Expenditures (5,694,281)(5,360,281) (81,835) 5,278,446 OTHER FINANCING SOURCES (USES) Transfers In 1,299,000 1,299,000 108,943 (1,190,057) Transfers Out - - (334,000) (334,000) Total Other Financing Sources (Uses) 1,299,000 1,299,000 (225,057) (1,524,057) Net Change in Fund Balance (4,395,281)(4,061,281) (306,892) 3,754,389 FUND BALANCE Beginning of Year 9,312,168 9,312,168 9,312,168 - End of Year 4,916,887$ 5,250,887$ 9,005,276$ 3,754,389$ TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL OBLIGATION DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2013 (61) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property Taxes 1,000,800$ 998,602$ (2,198)$ Investment Earnings 1,200 372 (828) Total Revenues 1,002,000 998,974 (3,026) EXPENDITURES Debt Service: Principal Retirement 855,000 855,000 - Interest on Long-Term Debt 145,813 145,813 - Fiscal Charges 2,100 250 1,850 Total Expenditures 1,002,913 1,001,063 1,850 Excess (Deficiency) of Revenues Over Expenditures (913) (2,089) (1,176) FUND BALANCE Beginning of Year 63,317 63,317 - End of Year 62,404$ 61,228$ (1,176)$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL MUNICIPAL PROPERTY CORPORATION DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2013 (62) Variance with Final Budget Actual Final Budget REVENUES Taxes: Sales Taxes 591,120$ 611,406$ 20,286$ Investment Earnings 500 13,602 13,102 Total Revenues 591,620 625,008 33,388 EXPENDITURES Debt Service: Principal Retirement 880,000 1,135,000 (255,000) Interest on Long-Term Debt 189,700 285,287 (95,587) Fiscal Charges 7,000 4,500 2,500 Total Expenditures 1,076,700 1,424,787 (348,087) Excess (Deficiency) of Revenues Over Expenditures (485,080) (799,779) (314,699) OTHER FINANCING SOURCES (USES) Transfers In 193,500 403,454 209,954 Net Change in Fund Balance (291,580) (396,325) (104,745) FUND BALANCE Beginning of Year 115,616 2,739,511 2,623,895 End of Year (175,964)$ 2,343,186$ 2,519,150$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL DEVELOPMENT FEES FUND FISCAL YEAR ENDED JUNE 30, 2013 (63) Variance with Final Budget Actual Final Budget REVENUES Licenses and Permits $ 130,632 $ 154,467 $ 23,835 Investment Earnings 100 5,578 5,478 Total Revenues 130,732 160,045 29,313 EXPENDITURES Current Highways and Streets 50,000 15,430 34,570 Excess (Deficiency) of Revenues Over Expenditures 80,732 144,615 63,883 FUND BALANCE Beginning of Year 1,993,775 1,993,771 (4) End of Year 2,074,507$ 2,138,386$ 63,879$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL LOCAL COURT ENHANCEMENT FUND FISCAL YEAR ENDED JUNE 30, 2013 (64) Variance with Final Budget Actual Final Budget REVENUES Taxes: Fines and Forfeitures 14,250$ 14,227$ (23)$ Investment Earnings 300 196 (104) Total Revenues 14,550 14,423 (127) EXPENDITURES Current: General Government 47,250 11,298 35,952 Excess (Deficiency) of Revenues Over Expenditures (32,700) 3,125 35,825 FUND BALANCE Beginning of Year 240,525 240,525 - End of Year 207,825$ 243,650$ 35,825$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GRANTS FUND FISCAL YEAR ENDED JUNE 30, 2013 (65) Variance with Original Final Actual Final Budget REVENUES Intergovernmental $ 1,500,000 $ 1,500,000 $ 125,222 $ (1,374,778) EXPENDITURES Current: General Government 40,000 40,000 78,603 (38,603) Highways and Streets - - 19,468 (19,468) Culture and Recreation - - 10,526 (10,526) Capital Outlay - - 16,625 (16,625) Total Expenditures 40,000 40,000 125,222 (85,222) Excess (Deficiency) of Revenues Over Expenditures 1,460,000 1,460,000 - (1,460,000) OTHER FINANCING SOURCES (USES) Transfers In 40,000 40,000 - (40,000) Transfers Out (1,500,000) (1,240,000) - 1,240,000 Total Other Finance Sources (Uses) (1,460,000) (1,200,000) - 1,200,000 Net Change in Fund Balance - 260,000 - (260,000) FUND BALANCE Beginning of Year - - - - End of Year -$ 260,000$ -$ (260,000)$ Budget TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL EXCISE TAX FUND FISCAL YEAR ENDED JUNE 30, 2013 (66) Variance with Final Budget Actual Final Budget REVENUES Taxes: Sales Taxes 295,560$ 305,703$ 10,143$ Investment Earnings - 5,656 5,656 Total Revenues 295,560 311,359 15,799 EXPENDITURES Current: General Government 183,968 67,380 116,588 Excess (Deficiency) of Revenues Over Expenditures 111,592 243,979 132,387 OTHER FINANCING SOURCES (USES) Transfers Out - (108,943) (108,943) Net Change in Fund Balance 111,592 135,036 23,444 FUND BALANCE Beginning of Year 2,040,058 2,040,058 - End of Year 2,151,650$ 2,175,094$ 23,444$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL COTTONWOODS MAINTENANCE FUND FISCAL YEAR ENDED JUNE 30, 2013 (67) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property Taxes 3,315$ 3,339$ 24$ Investment Earnings - 10 10 Total Revenue 3,315 3,349 34 EXPENDITURES Current: General Government 18,315 11,032 7,283 Excess (Deficiency) of Revenue Over Expenditures (15,000) (7,683) (3,715) FUND BALANCE Beginning of Year 16,010 16,010 - End of Year 1,010$ 8,327$ (3,715)$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL EAGLE MOUNTAIN DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2013 (68) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property Taxes 422,100$ 419,673$ (2,427)$ Investment Earnings 600 122 (478) Total Revenues 422,700 419,795 (2,905) EXPENDITURES Debt Service: Principal Retirement 290,000 290,000 - Interest on Long-Term Debt 123,760 123,760 - Fiscal Charges 7,350 7,433 (83) Total Expenditures 421,110 421,193 (83) Excess (Deficiency) of Revenues Over Expenditures 1,590 (1,398) (2,988) FUND BALANCE Beginning of Year 8,944 8,944 - End of Year 10,534$ 7,546$ (2,988)$ Original and STATISTICAL SECTION (UNAUDITED) The statistical section presents financial statement trends as well as detailed financial and operational information not available elsewhere in the report. The statistical section is intended to enhance the reader’s understanding of the information presented in the financial statements, notes to the financial statements, and other supplementary information presented in this report. The statistical section is comprised of the five categories of statistical information presented below. Financial Trends These schedules contain information on financial trends to help the reader understand how the Town’s financial position and financial activities have changed over time. Revenue Capacity These schedules contain information to help the reader assess the factors affecting the Town’s ability to generate revenue. Debt Capacity These schedules present information to help the reader evaluate the Town’s current levels of outstanding debt as well as assess the Town’s ability to make debt payments and/or issue additional debt in the future. Demographic and Economic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the Town’s financial activities take place and to help make comparisons with other cities. Operating Information These schedules contain information about the Town’s operations and various resources to help the reader draw conclusions as to how the Town’s financial information relates to the services provided by the Town. See the table of contents for page numbers of the schedules that encompass the above sections. TOWN OF FOUNTAIN HILLS, ARIZONA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (69) 2004 2005 2006 2007 Governmental Activities: Net Investment in Capital Assets 11,261,256$ 17,495,539$ 20,806,507$ 92,508,637$ Restricted 6,471,863 5,144,127 12,446,147 12,210,966 Unrestricted 7,976,113 10,821,304 9,053,611 14,276,126 Total Governmental Activities Net Position 25,709,232$ 33,460,970$ 42,306,265$ 118,995,729$ Fiscal Year Source: The source of this information is the Town’s financial records. (70) 2008 2009 2010 2011 2012 2013 94,939,805$ 94,611,110$ 95,467,509$ 92,579,483$ 92,006,103$ 89,800,560$ 12,799,502 11,828,137 11,396,116 4,385,595 5,951,416 5,721,744 13,230,726 13,765,293 12,321,090 22,598,669 21,064,267 20,612,758 120,970,033$ 120,204,540$ 119,184,715$ 119,563,747$ 119,021,786$ 116,135,062$ Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (71) 2004 2005 2006 2007 EXPENSES Governmental Activities: General Government 3,686,452$ 3,766,500$ 3,875,014$ 4,292,515$ Public Safety 4,918,280 5,024,686 5,403,620 5,935,742 Highways and Streets 1,419,509 1,281,061 1,581,068 5,225,835 Culture and Recreation 2,068,613 2,362,661 2,576,406 3,282,160 Development Services 1,144,964 1,460,181 1,812,469 2,512,170 Interest on Long-Term Debt 1,499,575 1,162,796 1,297,119 1,163,370 Total Government Activities Expenses 14,737,393 15,057,885 16,545,696 22,411,792 PROGRAM REVENUES Governmental activities: Fees, Fines, and Charges for Services General Government 3,388,923 4,431,154 4,029,437 910,978 Public Safety - - - 982,659 Highways and Streets - - - - Other Activities 32,209 59,550 103,826 626,431 Operating Grants and Contributions 1,590,787 1,692,712 2,022,675 - Capital Grants and Contributions 237,307 989,100 Total Governmental Activities Program Revenues 5,011,919 6,420,723 6,155,938 3,509,168 Net (Expenses)/Revenues (9,725,474)$ (8,637,162)$ (10,389,758)$ (18,902,624)$ Fiscal Year Source: The source of this information is the Town’s financial records. (72) 2008 2009 2010 2011 2012 2013 3,921,588$ 4,231,529$ 3,720,236$ 2,876,848$ 3,119,113$ 2,909,443$ 6,532,292 7,312,415 6,293,323 5,963,067 5,820,136 6,100,131 5,981,347 5,051,294 5,202,285 5,567,973 4,718,047 5,712,817 3,092,661 3,336,616 2,927,848 2,840,154 2,754,731 2,779,294 2,861,653 2,218,994 1,612,287 1,572,202 1,442,613 1,633,361 1,132,947 1,033,536 950,484 851,957 779,576 567,043 23,522,488 23,184,384 20,706,463 19,672,201 18,634,216 19,702,089 830,963 544,753 1,340,457 1,126,926 1,025,940 1,204,356 746,227 55,042 32,667 21,222 20,323 14,227 - - 2,556 16,270 11,825 4,916 752,621 888,249 - - - - 56,802 - 1,666,498 1,614,462 1,285,656 1,266,906 835,659 1,353,409 632,617 2,273,414 1,392,706 150,535 3,222,272 2,841,453 3,674,795 5,052,294 3,736,450 2,640,940 (20,300,216)$ (20,342,931)$ (17,031,668)$ (14,619,907)$ (14,897,766)$ (17,061,149)$ (Continued) Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CHANGES IN NET POSITION (CONTINUED) LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (73) 2004 2005 2006 2007 (Concluded) GENERAL REVENUES AND OTHER Governmental Activities: Taxes: Sales Taxes 7,733,643$ 8,879,798$ 11,007,924$ 11,407,714$ Property Taxes 2,195,856 2,020,800 1,648,947 1,385,953 Franchise Taxes 126,362 216,031 314,359 324,318 State Shared Revenues 4,489,844 4,756,481 5,389,551 8,444,731 Investment Earnings 122,082 395,124 673,351 1,094,994 Miscellaneous 195,978 120,666 200,921 85,418 Total Governmental Activities 14,863,765 16,388,900 19,235,053 22,743,128 CHANGE IN NET POSITION Governmental Activities 5,138,291$ 7,751,738$ 8,845,295$ 3,840,504$ Fiscal Year Source: The source of this information is the Town’s financial records. (74) 2008 2009 2010 2011 2012 2013 10,489,591$ 8,932,374$ 7,644,440$ 8,013,480$ 7,787,489$ 7,957,163$ 1,635,542 1,531,770 1,928,028 1,349,079 1,453,405 1,385,147 336,290 321,964 285,881 322,659 332,130 334,668 8,848,199 8,456,552 6,000,923 5,217,140 4,515,511 4,979,183 780,935 258,478 22,831 28,456 88,877 69,998 183,963 76,300 129,740 68,125 178,393 300,899 22,274,520 19,577,438 16,011,843 14,998,939 14,355,805 15,027,058 1,974,304$ (765,493)$ (1,019,825)$ 379,032$ (541,961)$ (2,034,091)$ Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (75) 2004 2005 2006 2007 General Fund: Reserved $ 77,485 $ 40,664 $ 14,393 $ 2,934,144 Unreserved, Designated for: Vehicle Replacement - - - - Unreserved, Undesignated 6,293,941 9,041,779 6,515,855 3,666,005 Total General Fund $ 6,371,426 $ 9,082,443 $ 6,530,248 $ 6,600,149 All Other Governmental Funds: Unreserved, Designated for Vehicle Replacement $ - $ - $ - $ - Unreserved, Undesignated Reported in: Special Revenue Funds 5,969,830 2,176,086 1,951,434 5,305,432 Capital Projects Funds - 2,429,225 9,496,266 9,916,670 Debt Service Funds 530,372 644,089 159,530 1,386,674 Total All Other Governmental Funds $ 6,500,202 $ 5,249,400 $ 11,607,230 $ 16,608,776 2011 2012 2013 General Fund: Nonspendable Inventory $ 13,183 $ 9,332 $ 10,201 Prepaid Items 29,234 28,245 32,493 Restricted - - - Committed - 1,345,200 1,345,200 Assigned - 2,190,910 2,191,063 Unassigned 8,263,549 3,656,173 4,117,865 Total General Fund $ 8,305,966 $ 7,229,860 $ 7,696,822 All Other Governmental Funds: Nonspendable Cash with Escrow Agent $ - $ 2,623,895 $ 2,301,609 Prepaid Items 6,217 5,474 4,706 Restricted 4,379,987 3,300,426 3,354,189 Committed 11,480,869 2,039,560 2,175,094 Assigned - 9,312,168 9,005,276 Total All Other Governmental Funds $ 15,867,073 $ 17,281,523 $ 16,840,874 Fiscal Year Fiscal Year Source: The source of this information is the Town’s financial records. Note: During fiscal year 2011, the Town implemented GASB Statement No. 54. Therefore, starting in the fiscal year ended June 30, 2011, governmental fund balances will be presented based on the GASB Statement No. 54 hierarchy. (76) 2008 2009 2010 $ 3,053,070 $ 3,234,860 $ 3,235,811 - 127,916 333,796 3,526,738 3,302,373 3,418,799 $ 6,579,808 $ 6,665,149 $ 6,988,406 $ - $ 95,620 $ 159,484 3,876,927 4,198,782 4,498,523 10,764,857 10,246,395 10,020,336 1,585,740 1,218,971 1,182,834 $ 16,227,524 $ 15,759,768 $ 15,861,177 Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (77) 2004 2005 2006 2007 2008 REVENUES Taxes 9,997,706$ 11,151,893$ 12,993,876$ 13,159,087$ 12,457,086$ Intergovernmental 6,080,631 6,686,500 7,412,226 8,444,731 9,353,260 Fines and Forfeitures 361,339 249,564 235,050 304,214 287,120 Licenses and Permits 1,600,934 2,230,046 1,918,107 1,239,318 1,125,957 Charges for Services 1,038,170 1,834,205 1,689,046 898,955 620,300 Rents and Royalties 242,704 222,327 255,527 267,350 296,434 Special Assessments 3,612 1,512 21,147 4,228 4,337 Investment Income (Loss)122,082 395,124 673,351 1,094,994 780,935 Other 261,561 179,657 233,565 85,418 183,963 Total Revenues 19,708,739 22,950,828 25,431,895 25,498,295 25,109,392 EXPENDITURES General Government 3,614,458 9,547,409 4,459,183 4,024,551 3,548,295 Public Safety 4,616,161 4,754,523 5,208,770 5,689,020 6,321,669 Highways and Streets 1,402,502 1,682,563 2,121,986 2,028,397 2,214,557 Culture and Recreation 1,597,150 3,004,216 3,607,750 2,131,374 2,257,007 Development Services 1,144,964 1,460,181 1,812,469 2,462,643 2,751,740 Capital Outlay 101,951 - - 2,002,887 5,239,169 Debt Service Principal Retirement 1,423,228 1,308,228 1,968,228 1,968,228 2,153,228 Interest on Long-Term Debt 1,499,575 1,164,561 1,192,414 1,058,665 1,025,320 Other Debt Service - 229,990 532,762 - - Total Expenditures 15,399,989 23,151,671 20,903,562 21,365,765 25,510,985 Excess of Revenues Over (Under) Expenditures 4,308,750 (200,843) 4,528,333 4,132,530 (401,593) OTHER FINANCING SOURCES (USES) Transfers In 1,630,907 4,805,635 10,146,663 4,383,069 2,756,988 Transfers Out (1,630,907) (4,805,635) (10,146,663) (4,383,069) (2,756,988) Issuance of Refunding Debt - 12,555,000 4,555,000 - - Issuance of Long-Term Debt - 3,783,896 - - - Payment to Refunded Debt Escrow Agent - (14,677,838) (4,338,781) - - Total Other Financing Sources (Uses)- 1,661,058 216,219 - - Net Change in Fund Balance 4,308,750$ 1,460,215$ 4,744,552$ 4,132,530$ (401,593)$ Debt Service as a Percentage of Noncapital Expenditures 23.62% 13.22% 21.46% 18.53% 18.60% Fiscal Year Source: The source of this information is the Town’s financial records. (78) 2009 2010 2011 2012 2013 10,960,001$ 9,818,985$ 9,704,054$ 9,577,321$ 9,713,445$ 9,607,961 7,672,037 7,165,103 6,035,448 6,323,047 339,658 297,030 236,221 223,673 187,251 541,627 399,094 312,367 194,976 570,904 316,676 464,036 388,635 405,663 162,086 290,083 215,520 227,195 206,018 213,871 4,037 - - - - 258,478 22,831 28,456 88,877 69,998 43,683 129,740 72,125 178,393 300,899 22,362,204 19,019,273 18,134,156 16,910,369 17,541,501 3,514,249 3,186,368 2,575,975 2,887,321 2,699,109 6,624,141 6,200,227 5,772,800 5,869,445 6,022,269 1,199,850 973,746 1,123,230 1,054,930 2,058,990 2,215,065 2,007,737 1,871,446 1,794,332 1,791,018 2,036,295 1,669,449 1,564,615 1,421,787 1,643,757 3,708,277 1,254,223 1,043,304 884,323 453,002 2,240,000 2,460,000 2,115,000 1,965,000 2,280,000 929,134 842,857 744,330 639,135 554,860 - - - 55,752 12,183 22,467,011 18,594,607 16,810,700 16,572,025 17,515,188 (104,807) 424,666 1,323,456 338,344 26,313 3,759,735 1,127,776 431,880 2,470,027 1,279,397 (3,950,654) (1,127,776) (431,880) (2,470,027) (1,279,397) - - - - - - - - - - - - - - - (190,919) - - - - (295,726)$ 424,666$ 1,323,456$ 338,344$ 26,313$ 20.33% 18.29% 17.41% 17.09% 16.63% Fiscal Year THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (79) Fiscal Year Sales Taxes Property Taxes Franchise Taxes Total 2004 7,733,643$ 2,195,856$ 126,362$ 10,055,861$ 2005 8,879,798 2,020,800 216,031 11,116,629 2006 11,007,924 1,648,947 314,359 12,971,230 2007 11,407,714 1,385,953 324,318 13,117,985 2008 10,489,591 1,635,542 336,290 12,461,423 2009 8,932,374 1,531,770 321,964 10,786,108 2010 7,644,440 1,928,028 285,881 9,858,349 2011 8,013,480 1,349,079 322,659 9,685,218 2012 7,787,489 1,453,405 332,130 9,573,024 2013 7,957,163 1,385,147 334,668 9,676,978 Source: The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA TAXABLE SALES BY CATEGORY LAST TEN FISCAL YEARS (UNAUDITED) (80) 2004 2005 2006 2007 2008 Sales Category: Construction 1,482,981$ 1,837,317$ 3,362,079$ 2,694,700$ 2,062,028$ Restaurants and Bars 419,107 524,368 547,276 537,596 582,226 Transportation and Utilities 916,498 1,124,677 1,240,120 1,330,052 1,422,158 Services 423,433 185,868 263,239 280,290 327,411 Real estate, Rental and Leasing 341,951 604,356 626,364 792,358 982,198 Wholesale/Retail 3,212,062 3,536,045 3,796,192 4,144,263 3,912,512 Other 706,816 933,366 1,030,966 1,296,171 1,182,349 Total 7,502,848$ 8,745,997$ 10,866,236$ 11,075,430$ 10,470,882$ Fiscal Year Source: The source of this information is the Town’s financial records. (81) 2009 2010 2011 2012 2013 1,414,240$ 538,551$ 567,136$ 600,402$ 563,540$ 493,242 509,624 559,930 575,705 1,402,193 1,311,735 1,424,827 1,388,074 1,407,331 3,601,212 258,138 241,686 276,566 274,481 645,258 664,999 650,071 731,615 678,267 719,884 3,687,409 3,555,974 3,567,615 3,600,619 309,827 910,561 691,972 733,454 730,956 715,249 8,740,324$ 7,612,705$ 7,824,390$ 7,867,761$ 7,957,163$ Fiscal Year THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) (82) Fiscal Year 2004 2.60 0.70 5.60 8.90 2005 2.60 0.70 5.60 8.90 2006 2.60 0.70 5.60 8.90 2007 2.60 0.70 5.60 8.90 2008 2.60 0.70 5.60 8.90 2009 2.60 0.70 5.60 8.90 2010 2.60 0.70 6.60 9.90 2011 2.60 0.70 6.60 9.90 2012 2.60 0.70 6.60 9.90 2013 2.60 0.70 5.60 8.90 Total Tax Rate Town Rate Maricopa County State Rate Source: The source of this information is the Arizona Department of Revenue. TOWN OF FOUNTAIN HILLS, ARIZONA ASSESSED VALUE AND ESTIMATED TOTAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) (83) Fiscal Year Net Assessed Value Total Direct Tax Rate Total Value 2004 323,385,230$ $ 0.48 2,942,849,050$ 10.99 % 2005 349,398,334 0.42 3,162,854,959 11.05 2006 375,183,181 0.35 3,411,460,877 11.00 2007 397,380,162 0.30 3,615,453,567 10.99 2008 610,738,122 0.21 5,840,184,927 10.46 2009 684,742,347 0.20 6,648,954,354 10.30 2010 651,218,464 0.23 6,255,310,705 10.41 2011 576,535,714 0.16 5,461,763,819 10.56 2012 451,860,136 0.23 4,370,950,262 10.34 2013 377,521,718 0.27 3,668,373,751 10.29 Assessed Value as a Percentage of Source: The source of this information is the Arizona Department of Revenue’s Abstract of the Assessment Roll and the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA PRINCIPAL PROPERTY TAXPAYERS JUNE 30, 2013 AND 2004 (UNAUDITED) (84) Taxpayer Net Secondary Assessed Value Rank Net Secondary Assessed Value Rank Inland Western Fountain Hills Four Peaks, LLC 3,353,109$ 1 0.89 % -$ N/A % Chaparral City Water Company 3,177,001 2 0.84 2,963,381 3 0.92 WSL Fountain View Investors V, LLC 2,177,727 3 0.58 - N/A J & R Holdings XX, LLC 1,921,863 4 0.51 - N/A Target Corporation 1,889,956 5 0.50 1,344,738 7 0.42 Qwest Corporation 1,647,941 6 0.44 3,385,045 2 1.05 EN II, LLC 1,444,647 7 0.38 - N/A Sun Tech Development, LLC 1,320,356 8 0.35 927,446 10 0.29 Firerock, LLC 1,317,707 9 0.35 4,294,133 1 1.33 Arizona State Land Department 1,260,640 10 0.33 - N/A MCO Properties, LP - - 2,050,345 4 0.63 Fountain Hills Village LLC - - 1,947,937 5 0.6 Four Peaks Limited Partnership - - 1,353,366 6 0.42 MCO Properties, Inc. - - 1,069,752 8 0.33 Fountain Vista Properties LLC - - 930,135 90.29 19,510,947$ 5.17 20,266,278$ 6.28 Percentage of Total Net Secondary Assessed Value 2013 2004 Percentage of Total Net Secondary Assessed Value Source: The source of this information is the Maricopa County Assessor’s Office. TOWN OF FOUNTAIN HILLS, ARIZONA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) (85) Ratio of Current Percent of Delinquent Total Tax Fiscal Total Tax Current Taxes Tax Total Tax Collections to Year Tax Levy Collections Collected Collections Collections Total Tax Levy 2004 2,125,505$ 2,053,055$ 96.6% 57,506$ 2,110,561$ 99.3% 2005 2,041,230 1,992,532 97.6% 22,283 2,014,815 98.7% 2006 1,673,519 1,618,877 96.7% 34,011 1,652,888 98.8% 2007 1,391,521 1,359,035 97.7% 27,203 1,386,238 99.6% 2008 1,630,534 1,578,583 96.8% 48,013 1,626,596 99.8% 2009 1,719,105 1,660,820 96.6% 53,548 1,714,368 99.7% 2010 1,895,552 1,838,909 97.0% 52,478 1,891,387 99.8% 2011 1,340,544 1,307,092 97.5% 27,530 1,334,622 99.6% 2012 1,446,076 1,414,482 97.8% 26,255 1,414,482 97.8% 2013 1,429,284 1,395,359 97.6% - 1,395,359 97.6% Source: The source of this information is the Maricopa County Treasurer’s Office. TOWN OF FOUNTAIN HILLS, ARIZONA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) (86) Community Municipal Highway General Facilities Property User Special Total Debt Obligation District Corporation Revenue Assessment Outstanding Per Fiscal Year Bonds Bonds Bonds Bonds Bonds Debt Capita 2004 11,110,000$ 4,615,000$ 11,005,000$ 630,000$ 16,138$ 27,376,138$ 1,242$ 2005 10,675,000 4,455,000 12,975,000 540,000 12,910 28,657,910 1,271 2006 9,600,000 4,415,000 12,310,000 455,000 9,683 26,789,683 1,176 2007 8,620,000 4,255,000 11,595,000 345,000 6,455 24,821,455 1,082 2008 7,570,000 4,070,000 10,790,000 235,000 3,228 22,668,228 986 2009 6,530,000 3,860,000 9,905,000 130,000 - 20,425,000 898 2010 5,415,000 3,630,000 8,920,000 - - 17,965,000 799 2011 4,595,000 3,370,000 7,885,000 - - 15,850,000 703 2012 3,755,000 3,090,000 7,040,000 - - 13,885,000 612 2013 2,900,000 2,800,000 5,905,000 - - 11,605,000 522 Governmental Activities Source: The source of this information is the Town’s financial records and the Bureau of Economic Analysis. TOWN OF FOUNTAIN HILLS, ARIZONA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) (87) Fiscal Year General Obligation Bonds Taxable Assessed Value of Property Percentage of Taxable Assessed Value of Property Net General Obligation Bonded Debt per Capita Municipal Property Corporation Bonds Net Municipal Property Corporation Debt per Capita Total Revenues - All Sources 2004 11,110,000$ 2,942,849,050$ 0.38%504$ 11,005,000$ 499$ 19,708,739$ 2005 10,675,000 3,162,854,959 0.34%473 12,975,000 575 22,950,828 2006 9,600,000 3,411,460,877 0.28%421 12,310,000 540 25,431,895 2007 8,620,000 3,615,453,567 0.24%376 11,595,000 506 25,498,295 2008 7,570,000 5,840,184,927 0.13%329 10,790,000 469 25,109,392 2009 6,530,000 6,648,954,354 0.10%287 9,905,000 436 22,362,204 2010 5,415,000 6,255,310,705 0.09%241 8,920,000 397 19,019,273 2011 4,595,000 5,461,763,819 0.08%204 7,885,000 350 18,134,156 2012 3,755,000 4,370,950,262 0.09%165 7,040,000 310 18,910,369 2013 2,900,000 3,668,373,751 0.08%128 5,905,000 271 18,813,259 Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2013 (UNAUDITED) (88) Governmental Unit Outstanding Debt Estimated Percentage Applicable Estimated Share of Overlapping Debt Overlapping: Maricopa County 120,350,000$ 1.14%1,367,853$ Maricopa County Community College District 616,235,000 1.14%7,003,893 East Valley Institute of Technology - 2.62%- Fountain Hills Unified School District 9,505,000 93.44%8,881,454 Eagle Mountain Community Facilities District 2,800,000 100.00%2,800,000 Subtotal, Overlapping Debt 20,053,200 Direct: Town of Fountain Hills, Arizona 2,900,000 Total Direct and Overlapping Debt 22,953,200$ Source: The source of this information is the Town’s records and the State and County Abstract of the Assessment the Arizona Department of Revenue Report of Indebtedness and the applicable governmental unit. Note: The estimated percentage of debt outstanding applicable to the Town is calculated based on the Town’s secondary assessed valuation (full cash value) as a percentage of the secondary assessed valuation of the overlapping jurisdiction. Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town of Fountain Hills. This schedule further estimates the portion of outstanding debt of those overlapping governments that is borne by residents and businesses of the Town. This process recognizes that, when considering a town’s ability to issue and repay long-term debt, the entire debt burden borne by residents should be taken into account. However, this fact does not imply that every taxpayer is a resident, and therefore, responsible for repaying the debt of each overlapping government. TOWN OF FOUNTAIN HILLS, ARIZONA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (UNAUDITED) (89) 6% Debt Limit 2004 2005 2006 2007 Debt Limit 19,403,114$ 20,963,900$ 22,510,991$ 23,842,810$ Total Applicable to Limit 4,735,000 1,325,000 800,000 550,000 Legal Debt Margin 14,668,114$ 19,638,900$ 21,710,991$ 23,292,810$ Total Net Debt Applicable to the Limit as a Percentage of the Debt Limit 24% 6% 4% 2% 20% Debt Limit 2004 2005 2006 2007 Debt Limit 64,677,046$ 69,879,667$ 75,036,636$ 79,476,032$ Total Applicable to Limit 6,375,000 9,350,000 8,800,000 8,070,000 Legal Debt Margin 58,302,046$ 60,529,667$ 66,236,636$ 71,406,032$ Total Net Debt Applicable to the Limit as a Percentage of the Debt Limit 10% 13% 12% 10% Fiscal Year Fiscal Year Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. (90) 2008 2009 2010 2011 2012 2013 36,644,287$ 41,084,541$ 39,073,108$ 34,592,143$ 27,111,608$ 22,651,303$ 275,000 - - - - - 36,369,287$ 41,084,541$ 39,073,108$ 34,592,143$ 27,111,608$ 22,651,303$ 1% 0% 0% 0% 0% 0% 2008 2009 2010 2011 2012 2013 122,147,624$ 136,948,469$ 130,243,693$ 115,307,143$ 90,372,027$ 75,504,344$ 7,295,000 6,530,000 5,415,000 4,595,000 3,755,000 2,900,000 114,852,624$ 130,418,469$ 124,828,693$ 110,712,143$ 86,617,027$ 72,604,344$ 6% 5% 4% 4% 4% 4% Fiscal Year Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CALCULATION OF LEGAL DEBT MARGIN AS OF JUNE 30, 2013 (UNAUDITED) (91) Net Secondary Assessed Valuation 377,521,718$ Water, Sewer, Light, Parks, Open Space and Recreational Facility Bonds Debt Limit - 20% of Net Secondary Assessed Valuation 75,504,344$ Net Debt Applicable to Limit 2,900,000 20% Legal Debt Margin 72,604,344 All other general obligation bonds Debt Limit - 6% of Net Secondary Assessed Valuation 22,651,303 Net Debt Applicable to Limit - 6% Legal Debt Margin 22,651,303 Total legal debt margin 95,255,647$ Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA REVENUE BOND COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) (92) Fiscal Year Principal Interest Total Pledged Revenues Coverage 2004 $ 425,000 550,983$ 975,983$ 14,044,597$ 14.4 2005 620,000 456,892 1,076,892 16,171,235 15.0 2006 665,000 546,576 1,211,576 18,746,928 15.5 2007 715,000 473,349 1,188,349 19,379,717 16.3 2008 805,000 498,878 1,303,878 18,890,944 14.5 2009 885,000 460,379 1,345,379 16,440,872 12.2 2010 985,000 424,538 1,409,538 14,380,648 10.2 2011 1,035,000 373,768 1,408,768 14,001,045 9.9 2012 845,000 332,463 1,177,463 13,075,001 11.1 2013 1,135,000 285,287 1,420,287 13,765,970 9.7 Municipal Facilities Revenue Bonds Source: The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS (UNAUDITED) (93) 2003 2004 2005 2006 Population 22,243 22,541 23,217 24,452 Personal income 106,385,325$ 115,604,165$ 125,718,070$ 132,423,154$ Per capital personal income 29,607$ 31,133$ 32,414$ 35,046$ Median age N/A N/A N/A N/A School enrollment 2,450 2,453 2,373 2,425 Town of Fountain Hills unemployment rate 2.6% 2.1% 2.0% 1.8% Land use Total acres N/A N/A N/A 12,296.0 Total square miles N/A N/A N/A 20.31 Vacant lots N/A N/A N/A N/A Number of units Housing N/A N/A N/A 12,681 Lodging N/A N/A N/A 4 Restaurants N/A N/A N/A 50 Shopping centers N/A N/A N/A 14 Schools Public N/A N/A N/A 4 Preschool N/A N/A N/A 5 Charter N/A N/A N/A 2 Calendar Year Source: The source of the “Personal Income” and “Per Capita” information is the Bureau of Economic Analysis. The source of the “Population” and “Unemployment Rate” information is State of Arizona, Department of Administration, Office of Employment and Population Statistics. The source of School Enrollment is the Fountain Hills Unified School District No. 98. Other information is from the Town’s records. Note: N/A indicates that the information is not available. * Information obtained is based on calendar years; therefore, the latest information obtained was from 2012. (94) 2007 2008 2009 2010 2011 2012 25,540 26,633 25,388 22,489 22,554 22,695 139,665,253$ N/A N/A N/A N/A N/A 36,135$ 32,230$ 38,439$ 38,918$ N/A 47,260$ 46.4 46.4 49.7 49.7 N/A 54$ 2,307 2,233 2,203 2,103 1,981 1,886 1.6% 2.5% 4.4% 4.5% 6.8% 5.6% 13,005.7 13,005.7 13,005.7 13,005.7 13,005.7 13,005.7 20.32 20.32 20.32 20.32 20.32 20.32 3,355 1,295 1,253 1,226 1,218 1,209 12,850 12,832 12,927 13,167 13,167 12,977 4 4 4 4 4 4 53 47 52 53 56 56 14 19 19 20 20 20 4 4 4 4 4 3 4 4 4 4 4 6 1 1 1 1 1 1 Calendar Year TOWN OF FOUNTAIN HILLS, ARIZONA PRINCIPAL EMPLOYERS JUEN 30, 2012, AND 2002* (UNAUDITED) (95) Employer Employees Rank Percentage of Total Town Employment Employees Rank Fountain Hills Unified School District No. 98 335 1 6.6% 250 1 Fountain View Village 136 2 2.7% - Rural Metro Corporation 111 3 2.2% - Fry's 105 4 2.1% Target Stores 100 5 2.0% Firerock Country Club 100 6 2.0% Safeway Stores 87 7 1.7% 95 4 Holiday Inn 80 8 Eagle Mountain Golf Club 70 9 1.4% 40 9 Bashas 63 10 1.2% 70 6 Town of Fountain Hills 60 11 1.2% 115 3 Sunridge Canyon Golf Course 59 12 1.2% 70 7 Desert Canyon Golf Club 50 8 MCO Properties, Inc. 85 5 Monks Construction 150 2 Total 1,306 24.0% 925 Total Town employment 5,102 2002**2012 Source: The source of this information is the Town’s financial records. * Data for 2013, 2003 and 2004 were not available. TOWN OF FOUNTAIN HILLS, ARIZONA FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (96) Function 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Municipal Court 5.00 5.00 5.50 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Administration 10.00 11.00 12.50 13.00 13.50 13.50 13.25 11.25 11.58 11.68 Public Safety 1.00 - - - - - - - - - Development Services 40.00 39.50 41.00 41.00 40.50 40.00 35.75 23.25 20.25 18.75 Community Services 20.00 21.50 23.50 28.00 29.25 29.75 27.10 21.63 21.53 21.18 Total 76.00 77.00 82.50 87.00 88.25 88.25 81.10 61.13 58.36 56.61 Fiscal Year Source: The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (97) Function/Program 2004 2005 2006 2007 2008 2009 Municipal Court: Cases filed N/A N/A N/A N/A N/A N/A Hearings/Trials held N/A N/A N/A N/A N/A N/A Administration: FTEs per 1,000 residents 3.4 3.4 3.6 3.6 3.5 3.3 Registered voters - general election 13,349 none 13,669 none 14,335 none Voter turnout - general election 23% none 21% none 39% none Development Services: Building permits issued 228 430 468 759 716 391 Building inspections conducted 6,985 8,446 9,377 7,975 5,692 3,189 Number of code violation cases N/A N/A N/A N/A N/A N/A Number of zoning cases N/A N/A N/A N/A N/A N/A Community Services: Number of Community Center bookings N/A N/A N/A N/A N/A N/A Number of participants in recreational programs N/AN/AN/AN/AN/AN/A Number of Senior Services members N/A N/A N/A N/A N/A N/A Number of home delivered meals N/A N/A N/A N/A N/A N/A Law Enforcement (contracted): Physical arrests 601 644 N/A 993 524 825 Traffic violations 3,186 2,432 N/A 2,315 2,504 4,900 Fire & Emergency Medical (contracted): Total incident responses N/A N/A 3,056 3,069 2,694 2,787 Average response time (in minutes) N/A N/A 3:47 3:49 3:37 3:44 Fiscal Year Source: The source of this information is the Town’s financial records. Note: N/A indicates that the information is not available. * Includes permits issued for all types of activities requiring permits. (98) 2010 2011 2012 2013 3,520 2,584 2,173 1,740 1,089 738 731 703 3.2 2.7 2.6 2.5 15,511 none 16,074 none 50% none 34% none 409 354 352 419 1,936 1,546 1,257 1,395 1,024 843 804 746 7 14 7 10 3,396 3,315 3,236 3,196 1,960 1,759 1596* 1,789* 1,105 1,205 1208* 1,118* 10,169 9,742 8000* 6,941* 679 645 522 545 2,959 1,909 1,366 1,296 2,875 3,179 3,082 3,136 4:32 3:46 3:50 3:53 Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CAPITAL ASSETS STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (99) Function/Program 2004 2005 2006 2007 2008 2009 Public Safety: Number of Fire stations 222222 Other Public Works: Streets (Miles) 178.5 178.5 178.5 178.5 178.5 178.5 Streets (Lane Miles) 395 395 395 395 395 395 Streetlights N/A N/A 34 34 34 34 Traffic Signals 11 11 12 13 12 12 Parks and Recreation: Acreage 116 116 116 116 116 116 Playgrounds 333333 Baseball/Softball Diamonds 666666 Soccer/Football Fields 443333 Community Centers 111111 Preserve Acreage N/A N/A N/A N/A N/A N/A Miles of Trails N/A N/A N/A N/A N/A N/A Fiscal Year Source: The source of this information is the Town’s facilities records. (100) 2010 2011 2012 2013 2222 178.5 178.5 178.5 178.5 395 395 395 395 34 34 34 34 12 13 13 13 116 116 116 116 3444 6666 3555 1111 N/A N/A 740 740 N/A N/A 4.3 10.43 Fiscal Year 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Phone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT YEAR ENDED JUNE 30, 2013 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS YEAR ENDED JUNE 30, 2013 INDEPENDENT ACCOUNTANTS’ REPORT 1  ANNUAL EXPENDITURE LIMITATION REPORT - PART I 2  ANNUAL EXPENDITURE LIMITATION REPORT - PART II 3  ANNUAL EXPENDITURE LIMITATION REPORT - RECONCILIATION 4  NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT 5  An independent member of Nexia International (1) INDEPENDENT ACCOUNTANTS’ REPORT The Auditor General of the State of Arizona and The Honorable Mayor and the Town Council Town of Fountain Hills, Arizona Fountain Hills, Arizona We have examined the accompanying Annual Expenditure Limitation Report of the Town of Fountain Hills, Arizona, for the year ended June 30, 2013. This report is the responsibility of the Town of Fountain Hills, Arizona’s management. Our responsibility is to express an opinion on this report based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence supporting the amounts and disclosures in the report and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. In our opinion, the Annual Expenditure Limitation Report of the Town of Fountain Hills, Arizona, referred to above presents, in all material respects, the information prescribed by the uniform expenditure reporting system as described in Note 1. Phoenix, Arizona October 31, 2013 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT - PART I YEAR ENDED JUNE 30, 2013 See accompanying notes to report. (2) 1. Economic Estimates Commission expenditure limitation 25,503,864$ 2. Voter approved alternative expenditure limitation (Approved for fiscal year 2009-2010.)- 3. Enter applicable amount from Line 1 or Line 2 25,503,864$ 4. Amount subject to the expenditure limitation (total amount from Part II, Line C) 13,279,595 5. Board-authorized expenditures necessitated by a disaster not declared by the Governor [Article IX, §20(20)(a), Arizona Constitution]- 6. Board-authorized expenditures necessitated by a disaster not declared by the Governor [Article IX, §20(20)(b), Arizona Constitution]- 7. Prior-year voter approved expenditures to exceed the expenditure limitation for the reporting fiscal year [Article IX, §20(2)(c), Arizona Constitution]- 8. Subtotal 13,279,595 9. Board-authorized excess expenditures for the previous fiscal year necessitated by a disaster not declared by the Governor and not approved by the voters [Article IX, §20(2)(b), Arizona Constitution]- 10. Total adjusted amount subject to the expenditure limitation 13,279,595 11. Amount under (in excess of) the expenditure limitation (If excess expenditures are reported, provide an explanation.) 12,224,269$ I hereby certify, to the best of my knowledge and belief, that the information contained in this report is accurate and in accordance with the requirements of the uniform expenditure reporting system. Signature of Chief Fiscal Officer: Name and Title: Julie Ghetti, Deputy Town Manager Telephone Number: (480) 816-5113 Date: October 31, 2013 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT - PART II YEAR ENDED JUNE 30, 2013 See accompanying notes to report. (3) DescriptionGovernmental Funds Enterprise Funds Internal Service Funds Fiduciary Funds Total A.Amounts reported on the Reconciliation Line D 15,658,176$ -$ -$ -$ 15,658,176$ B.Less exclusions claimed:1Bond proceeds - - - - - Debt service requirements on bonded indebtedness 1,001,063 - - - 1,001,063 Debt service requirements on other long-term obligations - - - - - 2Dividends, interest and gains on sale of investment securities - - - - - 3Trustee or custodian - - - - - 4Grants and aid from the federal government - - - - - 5- - - - - 6Amounts received from the state 125,222 - - - 125,222 7- - - - - 8- - - - - 9Highway user revenues in excess FY 1979-80 1,252,296 - - - 1,252,296 10Contracts with other political subdivisions - - - - - 11Refunds, reimbursements and other recoveries - - - - - 12Voter approved exclusions not identified above - - - - - 13Prior years carryforward - - - - - 14Total exclusions claimed 2,378,581 - - - 2,378,581 C.Amounts subject to the expenditure limitation 13,279,595$ -$ -$ -$ 13,279,595$ Grants, aid, contributions or gifts from private agency, organization or individualQuasi-external interfund transactions (town sewer fees a/c 10-41-217, 10-55-217)Amounts accumulated for purchase of land, purchase or construction of buildings or improvements TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT - RECONCILIATION YEAR ENDED JUNE 30, 2013 See accompanying notes to report. (4) DescriptionGovernmental Funds Enterprise Funds Internal Service Funds Fiduciary Funds Total A.Total Expenditures within the fund-based financial statements 17,515,188$ -$ -$ -$ 17,515,188$ B.Subtract:1Items not requiring use of working capitalDepreciation - - - - - Loss on disposal of capital assets - - - - - Bad debt expense - - - - - Claims incurred but not reported - - - - - Landfill Closure - - - - - 2Expenditures of separate legal entities established under ARS 1,857,012 - - - 1,857,012 3Present value of net minimum capital leases - - - - - 4Charges for services paid to Internal Service Funds - - - - - 5Involuntary court judgments - - - - - 6Total subtractions 1,857,012 - - - 1,857,012 C.Additions:1Principal payments on long-term debt - - - - - 2Acquisition of capital assets - - - - - 3Claims paid in the current year but reported as expenses incurred but not reported in previous years- - - - - 4Landfill closure as expended in previous years - - - - - 5Total additions - - - - - D.Amounts reported on Part II Line A15,658,176$ -$ -$ -$ 15,658,176$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT JUNE 30, 2013 (5) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Annual Expenditure Limitation Report (AELR) is presented on the basis of accounting prescribed by the Uniform Expenditure Reporting System (UERS), as required by Arizona Revised Statutes §41-1279.07, which excludes expenditures, expenses, or deductions of certain revenues specified in the Arizona Constitution, Article IX, §20 from the total expenditures, expenses or deductions reported in the fund-based financial statements. In accordance with the UERS requirements, a note to the AELR is presented below for any exclusion claimed on Part II and each subtraction or addition in the reconciliation that cannot be traced directly to an amount reported in the fund-based financial statements. All references to financial statement amounts in the following notes refer to the Statement of Revenues, Expenditures, and Changes in Fund Balances for the Governmental Funds. NOTE 2 EXPENDITURES OF SEPARATE LEGAL ENTITIES ESTABLISHED UNDER ARS The exclusion claimed for expenditures of separate legal entities established under A.R.S. in the Governmental Funds consists of expenditures from the Eagle Mountain Debt Service Fund, Cottonwoods Special Assessment Fund and the Municipal Property Corporation Debt Service Fund. NOTE 3 DEBT SERVICE REQUIREMENTS ON BONDED INDEBTEDNESS The exclusion claimed for debt service requirements on bonded indebtedness in the Governmental Funds consist of principal retirement and interest expense. NOTE 4 AMOUNTS RECEIVED FROM STATE Amounts received from the State consist of the following: State Grants 46,619$ Proposition 202 78,603 125,222$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT JUNE 30, 2013 (6) NOTE 5 HIGHWAY USER REVENUE IN EXCESS OF 1979-80 Highway user revenues (HURF) in excess of in-lieu fees expended: HURF Fund Revenue 1,232,187$ HURF Fund Expenditures 2,024,092$ Less: In-Lieu Fees Expended (4,796) Less: 1979-80 Revenue - (767,000) Amount Excluded 1,252,296$ Less: Amounts Transferred from General Fund The exclusion exceeded current year revenue due to the use of unspent prior year carryover. An independent member of Nexia International INDEPENDENT ACCOUNTANTS’ REPORT The Honorable Mayor and Town Council Town of Fountain Hills, Arizona Fountain Hills, Arizona We have examined the Town of Fountain Hills, Arizona’s (Town) compliance as to whether highway user revenue fund monies received by the Town pursuant to Arizona Revised Statutes title 28, chapter 18, article 2 and any other dedicated state transportation revenues received by the Town are being used solely for the authorized transportation purposes during the fiscal year ended June 30, 2013. Management is responsible for the Town of Fountain Hills, Arizona’s compliance with those requirements. Our responsibility is to express an opinion on the Town of Fountain Hills, Arizona’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence about the Town of Fountain Hills, Arizona’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the Town of Fountain Hills, Arizona’s compliance with specified requirements. In our opinion, the Town of Fountain Hills, Arizona complied, in all material respects, with the aforementioned requirements for the fiscal year ended June 30, 2013. Phoenix, Arizona October 31, 2013 An independent member of Nexia International (1) INDEPENDENT ACCOUNTANT’S REPORT The Honorable Mayor and the Town Council Town of Fountain Hills, Arizona Fountain Hills, Arizona We have examined the accompanying Schedule of LTAF II Funds, Revenues and Expenditures of the Town of Fountain Hills, Arizona for the year ended June 30, 2013. This report is the responsibility of the Town of Fountain Hills, Arizona’s management. Our responsibility is to express an opinion on this report based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence supporting the amounts and disclosures in the report and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. In our opinion, the Schedule of LTAF II Funds, Revenues and Expenditures of the Town of Fountain Hills, Arizona, referred to above presents, in all material respects, the information required by the State of Arizona, Department of Transportation, on the basis of accounting described in Note 1. Phoenix, Arizona October 31, 2013 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF LTAF II FUNDS REVENUE AND EXPENDITURES YEAR ENDED JUNE 30, 2013 See accompanying notes to this schedule. (2) LTAF II Funds Revenues (1) $ 66,132 Expenditures (2) Transit Operating 9,662 Capital - Other - Transportation Operating - Capital - Other - Total expenditures 9,662 Total unexpended LTAF II funds 56,470 Beginning fund balance, July 1 65,986 Ending fund balance, June 30 $ 122,456 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE SCHEDULE OF LTAF II FUNDS JUNE 30, 2013 (3) (1) Revenues and expenditures are reported on the modified accrual basis of accounting. (2) The Town has not yet expended the funds received from fiscal year 2011-12 or fiscal year 2012- 13. The Town is planning to expend the monies on a feasibility study to determine what transit services the Town could provide. Project 1 Transit feasibility study for transit options within the Town limits. 122,456$ 2008460.1 RESOLUTION NO. 2013-45 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, DECLARING AS A PUBLIC RECORD THAT CERTAIN DOCUMENT FILED WITH THE TOWN CLERK AND ENTITLED THE “AMENDMENTS TO CHAPTER 3 OF THE TOWN CODE,” DATED NOVEMBER 21, 2013. BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS as follows: SECTION 1. That certain document entitled the “Amendments to Chapter 3 of the Town Code,” dated November 21, 2013, of which three copies are on file in the office of the Town Clerk and open for public inspection during normal business hours, is hereby declared to be a public record, and said copies are ordered to remain on file with the Town Clerk. PASSED AND ADOPTED BY the Mayor and Council of the Town of Fountain Hills, Arizona, November 21, 2013. FOR THE TOWN OF FOUNTAIN HILLS: ATTESTED TO: Linda M. Kavanagh, Mayor Bevelyn J. Bender, Town Clerk REVIEWED BY: APPROVED AS TO FORM: Kenneth W. Buchanan, Town Manager Andrew J. McGuire, Town Attorney 2008031.1 ORDINANCE NO. 13-04 AN ORDINANCE OF THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, ADOPTING THE “AMENDMENTS TO CHAPTER 3 OF THE TOWN CODE,” DATED NOVEMBER 21, 2013, BY REFERENCE AND REPLACING THE TOWN OF FOUNTAIN HILLS TOWN CODE, CHAPTER 3, ADMINISTRATION, WITH THE NOVEMBER 21, 2013 AMENDMENTS. BE IT ORDAINED BY THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS as follows: SECTION 1. That certain document known as the “Amendments to Chapter 3 of the Town Code,” dated November 21, 2013 (the “Chapter 3 Amendments”), three copies of which are on file in the office of the Town Clerk, which document was made a public record by Resolution No. 2013- 45 of the Town of Fountain Hills, Arizona, is hereby referred to, adopted and made a part hereof as if fully set out in this Ordinance. SECTION 2. The Fountain Hills Town Code, Chapter 3 (Administration), is hereby deleted in its entirety and replaced by the Chapter 3 Amendments, which shall be inserted into the Fountain Hills Town Code as a new Chapter 3 (Administration). SECTION 3. Any person found guilty of violating any provision of the Chapter 3 Amendments shall be guilty of a class one misdemeanor, punishable by a fine in an amount not to exceed $2,500.00 or by imprisonment for a period not to exceed six months, or by both such fine and imprisonment. Each day that a violation continues shall be a separate offense punishable as described above. SECTION 4. If any section, subsection, sentence, clause, phrase or portion of this Ordinance or any part of the Chapter 3 Amendments adopted herein by reference is for any reason to be held invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions thereof. SECTION 5. The Mayor, the Town Manager, the Town Clerk and the Town Attorney are hereby authorized and directed to take all steps and execute all documents necessary to carry out the purpose and intent of this Ordinance. PASSED AND ADOPTED by the Mayor and Council of the Town of Fountain Hills, Arizona, November 21, 2013. FOR THE TOWN OF FOUNTAIN HILLS: ATTESTED TO: Linda M. Kavanagh, Mayor Bevelyn J. Bender, Town Clerk REVIEWED BY: APPROVED AS TO FORM: Kenneth W. Buchanan, Town Manager Andrew J. McGuire, Town Attorney 1996892.2 Amendments to Chapter 3 of the Town Code November 21, 2013 Fountain Hills Town Code 1996892.2 Chapter 3 ADMINISTRATION Articles: 3-1 OFFICERS IN GENERAL 3-2 MERIT SYSTEM 3-3 PURCHASINGPROCUREMENT 3-4 DISPOSITION OF PROPERTY 3-5 CONTRACT ADMINISTRATION3-6 CIVIL PREPAREDNESS AND DISASTER Fountain Hills Town Code 2 1996892.2 Article 3-1 OFFICERS IN GENERAL Sections: 3-1-1 Town Manager 3-1-2 Town Attorney 3-1-3 Town Presiding Judge 3-1-4 Town Clerk 3-1-5 Town Marshal/Law Enforcement Agent 3-1-6 Department HeadsDirectors 3-1-7 Additional Officers 3-1-8 Bond3-1-9 Vacancies; Deputies; Holding More Thanthan One Office 3-1-109 Additional Powers and Duties Section 3-1-1 Town Manager A. Office Created. The office of the town managerTown Manager is hereby created and established. The town managerTown Manager shall be appointed by the councilCouncil on the basis of executive and administrative qualifications with special reference to actual experience in or knowledge of accepted practice in respect to the duties of office as hereinafter set forth; and he shall hold office for and at the pleasure of the councilCouncil. B. Eligibility. Residence in the town,Town at the time of appointment, shall not be required as a condition of appointment. However, within six months from the date of appointment, the town managerTown Manager must become a resident of the townTown, unless an extension of time is granted by the councilCouncil. C. Bond. The town manager shall secure a corporate surety bond to be approved by the council in such sum as may be determined by the council. The bond shall be conditioned uponUnless a blanket bond or other equivalent coverage is provided by the Town, prior to taking office, the Town Manager shall execute and file an official bond, enforceable against the principal and his sureties, conditioned on the due and faithful performance of the duties imposed on the manager as prescribed in this article. The bond fee shall be paid by the townhis official duties, payable to the Town and to and for the use and benefit of the Town or any person who may be injured or aggrieved by the wrongful act or default of such officer in his official capacity. Bonds shall be in such sum as set forth in ARIZ. REV. STAT. § 38-251 et seq., as amended, and the premium for such bonds shall be paid by the Town. D. Absence. To perform the duties of town managerThe Deputy Town Manager shall perform the duties of the Town Manager during his absence. In the event the Deputy Town Manager is unable or unavailable to perform such duties, the Town Manager may appoint such other Town Employee as he deems appropriate to serve as the acting Town Manager. If the Town Manager is unable to make such appointment to perform the duties of Town Fountain Hills Town Code 3 1996892.2 Manager during the temporary absence or disability of the permanent town managerTown Manager, the councilCouncil may designate a qualified administrative officer or a member of the council of the townto perform the Town Manager’s duties. E. Removal. The town managerTown Manager may be removed by the councilCouncil by a majority vote of its members immediately for cause or upon ninety days noticesuch notice as is set forth in the Town Manager’s employment contract without cause. As used herein and as it relates to the termination of employment of the town managerTown Manager, the term "“for cause"” shall mean malfeasance in office or willful breach or habitual neglect of duties, as such duties are described in this section orSection, illegal activity within or without the conduct of this office or any other cause set forth in the Town Manager’s employment contract. F. Resignation. The managerTown Manager shall give in writing a sixty day notice of his intention to resign before leavingsuch notice as set forth in his employment contract prior to resigning the office of town managerTown Manager. G. Compensation. The managerTown Manager shall receive such compensation as the councilCouncil shall from time to time determine, and said compensation shall be a proper charge against such funds of the townTown as the councilCouncil shall designate. The town managerTown Manager shall be reimbursed for all sums necessarily incurred or paid by him in the performance of his duties, or incurred when traveling on business pertaining to the townTown as approved by the councilCouncil; reimbursement shall be made only when a verified, itemized claim, setting forth the sums expended for which reimbursement is requested, has been presented and approved by the councilTown Finance Division. H. Powers and Duties. The town managerTown Manager shall be the administrative officer of the townTown government and shall be responsible to the councilCouncil for the proper administration of all affairs of the townTown under the specific direction and control of the councilCouncil. In addition to the general powers as the chief administrative officer and not as a limitation thereon, it shall be the manager'Town Manager’s responsibility and authority: 1. To see that all laws and ordinances of the townTown are duly enforced, and that all franchises and privileges granted by the townTown are faithfully observed. 2. To appoint and, when necessary, suspend or remove all employees of the townTown, except those officers appointed by the councilCouncil. All appointments and removals shall be based upon merit and upon the qualifications and disqualifications of such employee without regard to any political belief or affiliation. 3. To coordinate the administrative functions and operationoperations of the various departments, boards, divisions, services, boards, committees and servicescommissions of the townTown government, and on its behalf to carry out policies, rules, regulations and ordinances adopted by it, relating to the Fountain Hills Town Code 4 1996892.2 administration of the affairs of such departments, divisions, services, boards, divisionscommittees or servicescommissions. Such powers and duties to be subject to the following provisions: a. That the organizational structure under which municipal services are performed shall be specified in an organization chart approved by the councilCouncil. Fountain Hills Town Code 5 1996892.2 b. That prior to any creation, combination, consolidation or deletion of any positions of employment, written job descriptions or amendments thereto shall have been approved by the councilCouncil. 4. To attend all meetings of the councilCouncil unless excused therefrom and to attend, or designate a representativeappropriate Town Staff to attend, all board and, commission and committee meetings. 5. To recommend to the councilCouncil for adoption such measures andmatters, ordinances and resolutions as are necessary. 6. To recommend to the councilCouncil at periodic intervals changes needed in the town codeTown Code. 7. To prepare and to submit a summary of all contracts, agreements, etc. of which the town is a party for review by the council before March 1st of each year. 8. 7. To keep the councilCouncil at all times fully advised as to the financial conditions and needs of the townTown. To provide whatever reports to the councilCouncil as it may deem necessary. 9. 8. To prepare and submit to the councilCouncil a proposed annual budget for the next fiscal year and a, including financial planprojections for the subsequent four fiscal years. 10.9. To analyze the functions, duties and activities of the various departments, divisions, services, boards, committees and servicescommissions of the townTown government and of all employees thereof, and to make such recommendations to the council with reference thereto, as in his judgment will result, if made effective, inCouncil to achieve the highest degree of efficiency in the overall operation of the townTown government. 11.10. To investigate all complaints in relation to matters concerning the administration of the town, its utilities or enterprisesTown, its departments and all services provided to it by contract with another entity. 12.11. To exercise general supervision over all public buildings, public parks and other public property whichthat are under the control and jurisdiction of the councilCouncil. 13.12. To devote as much time to the duties of the office of town managerTown Manager and the interest of the townTown as necessary. 14.13. To perform such other duties and exercise such other powers as may be delegated from time to time by ordinance or, resolution or affirmative vote of the councilCouncil. I. Council to Act Through Town Manager. Except for the purpose of inquiry, the Fountain Hills Town Code 6 1996892.2 councilCouncil and its members shall deal with the administrative branch solely through the managerTown Manager, and neither the councilCouncil nor any member thereof shall give orders to any subordinate of the managerTown Manager either publicly or privately. Fountain Hills Town Code 7 1996892.2 Section 3-1-2 Town Attorney The attorneyTown Attorney shall be appointed by and serve at the pleasure of the councilCouncil and shall act as the legal counselor and advisor of the council and other town officialsCouncil and, as such, shall give his opinion in writing when requested. He shall draft or supervise the drafting of all deeds, contracts, conveyances, ordinances, resolutions and other legal instruments when required by the council. He shall approve as to form, in writing, all drafts of contracts and all official or other bonds before final approval or acceptance thereof by the council. He shall return within ten days all ordinances and resolutions submitted to him for consideration by the council, with his approval or disapproval as to form noted thereon, together with his reasons therefor. He shall prosecute and defendCouncil. He shall ensure that the Town is represented by legal counsel in the prosecution or defense of all suits, actions or causes where the townTown is a party and shall report to the councilCouncil, when required, the condition of any suit or action to which the townTown is a party. Section 3-1-3 Town Presiding Judge The town presiding judgeTown Presiding Judge shall be appointed by the councilCouncil and shall be the presiding officer of the municipal court. He shall perform those functions necessary to the maintenance of the municipal court as provided by state law and shall have the powers and duties as set forth in Chapter 5 of this Code. (Ordinance 02-03, Amended, 03/21/2002) Section 3-1-4 Town Clerk A. Records. The clerkTown Clerk shall be the Town’s custodian of records and shall keep a true and correct record of all business transacted by the councilCouncil and any other records that either pertain to the business of the townTown or that the council directs. The clerk shall plainly label and file separately in a suitable cabinet all resolutions, notices, deeds, surveys, leases, paid and unpaid vouchers, inventories, letters, orders and other documents of whatever natureCouncil directs. The Town Clerk or authorized designee shall keep such records in the manner set forth in the records retention process approved for Arizona municipalities by the Arizona State Library, Archives and Public Records Division and pursuant to any other applicable statutory requirements. B. Public Inspection of Records. The clerkTown Clerk shall keep convenient for public inspection all public records and public documents under his control, as provided by state statutelaw. C. Monthly Reports. The clerk shall prepare and collect from town o fficers and employees such monthly reports prepared in such manner and to include such information as may be directed by the council.D. Minutes. The clerkTown Clerk shall prepare or cause to be prepared all minutes of councilCouncil proceedings and ensure their correctness and accuracy. ED. Ordinances, Resolutions, Budgets and Notices. The clerkTown Clerk or authorized Fountain Hills Town Code 8 1996892.2 designee shall process, record, file, publish and, if required by state statute, post all ordinances, resolutions, budgets and notices that may be passed by the councilCouncil. FE. Election Official. The clerkTown Clerk shall be the townTown election official and perform those duties required by state statutelaw. G. Licenses. The clerk shall issue or cause to be issued all licenses that may be prescribed by state statute or this code. HF. Administrative Duties. The clerkTown Clerk shall perform those administrative responsibilities and duties that are conferred upon him by the council or the managerTown Manager in addition to those specified in this codeCode. Section 3-1-5 Town Marshal/Law Enforcement Agent The town managerTown Manager or authorized designee, shall serve as the town marshal/law enforcement agentTown Marshal/Law Enforcement Agent and shall provide for enforcement of townTown codes, ordinances or other regulations. The town managerTown shall have the authority to enter into an intergovernmental agreement or contract for the provision of law enforcement services. Enforcement will be effected by either issuance of citations or summons and complaint to persons accused of violating town ordinances. (06-14, Amended, 05/18/2006) Section 3-1-6 Department HeadsDirectors A. There are hereby created the following departments, each of which shall be under the immediate direction of a department head as set forth hereindirector or the Town Manager, as designated in the adopted organizational chart: 1. Community Development1. Administration Department 2. Parks and Recreation2. Community Services Department 3. Public Works3. Development Services Department 4. Fire Department 5. Police Department B. The head of eachEach department director shall be appointed by and report to the town manager. The town manager shall advise the council of each such appointment at the regular council meeting next following such appointment. Department headsselected by and report to the Town Manager; provided, however, that selection of the department directors for the Police and Fire Departments shall be in accordance with the contracts for those services. Department directors, except for Police and Fire, shall be subject to the merit system. Fountain Hills Town Code 9 1996892.2 (06-14, Amended, 05/18/2006) Section 3-1-7 Additional Officers The councilCouncil may appoint and remove from time to time such other officers as it may deem necessary and that are not provided for in this codeCode or state statute. Section 3-1-8 Bond The council may, at its discretion, require that any officer of the town post a bond for faithful performance with such sureties as are acceptable to the council. The bond shall be payable to the town, and the town shall pay all costs in connection therewith.Section 3-1-9 Vacancies; Deputies; Holding More Thanthan One Office A. A vacancy in any office not subject to councilCouncil appointment shall be filled by appointment of the town managerTown Manager. B. The powers and duties of any of the offices enumerated in Section 3-1-6 may be performed by a deputy upon authorization of the town managerTown Manager. Fountain Hills Town Code 10 1996892.2 C. It shall be lawful for one person to hold more than one office, but such person shall be compensated only for one office to which he has been regularly appointed, unless specified otherwise by the Council. Section 3-1-109 Additional Powers and Duties In addition to any powers and duties prescribed in this codeCode, each officer shall have such further powers, perform such further duties and hold such other offices as the councilCouncil may provide. Fountain Hills Town Code 11 1996892.2 Article 3-2 MERIT SYSTEM Sections: 3-2-1 Creation and Scope 3-2-2 Conditions of Employment; Non-discrimination 3-2-3 Rules and Regulations 3-2-4 Political Activity Section 3-2-1 Creation and Scope A. There is hereby created and adopted a merit system governing the employees of the townTown, except those enumerated in this sectionSection, for the purpose of regulating the conditions of employment and removal of employees of the townTown. B. The merit system adopted by this articleArticle shall not apply to elected officials; officers subject to appointment and removal by the councilCouncil; consultants hired on a contract basis; contract employees; part-time employees whose regular work week is nineteen hours or less; non-permanenttemporary employees; volunteer workers who receive no regular compensation from the townTown and members of boards, committees and commissions established by the councilCouncil. Section 3-2-2 Conditions of Employment; Non-discrimination The appointment, promotion and tenure of all employees identified in Section 3 -2-1 shall be conditioned solely on merit, fitness and the satisfactory performance of the duties and responsibilities assigned. No employee or applicant for employment shall be discriminated against on the basis of age, race, color, religion, gender, political affiliation or handicapped status, disability or impairment. Section 3-2-3 Rules and Regulations The councilCouncil shall adopt by ordinance or resolution written rules and regulations to give effect to this articleArticle. Section 3-2-4 Political Activity A. All employees will remain free from any political activity in a Fountain Hills municipal election: 1. No employee may solicit or attempt to solicit support for a candidate or political party involved in a Fountain Hills municipal election from any employee or appointed officialwhile on duty. Fountain Hills Town Code 12 1996892.2 2. No employee may take any part in the campaign of a candidate participating in a Fountain Hills municipal election. 3.B. An employee may exercise theirhis rights as a citizen to vote and to express opinions as an individual citizen, but not as a representative of the townTown. BC. No paid employee will seek election to public office with the townTown while still employed by the townTown. CD. No paid employee will use theirhis position to sell, solicit or distribute any campaign material during working hours or while in a uniform or with visible identification used by or identified with the townTown government. DE. No paid employee will use theirhis position to introduce, guide or recommend any candidate for public office on townTown property. Fountain Hills Town Code 13 1996892.2 Article 3-3 PURCHASING PROCUREMENT PARTS: Part I GENERAL PROVISIONS Part II ETHICS; VIOLATIONS; UNAUTHORIZED PURCHASES Part III FORMAL BIDDING PROCEDURES Part I GENERAL PROVISIONS Sections: 3-3-1 Purposes 3-3-2 Policies 3-3-3 Application; Exclusions 3-3-4 Definitions 3-3-5 Budgeting 3-3-6 Procurement Agent 3-3-7 Procurement by Dollar Value; Execution 3-3-8 On-line Bidding 3-3-9 Purchase Orders 3-3-10 (Reserved) 3-3-1 Scope of ArticleSection 3-3-1 Purposes 3-3-2 Council Approval; When Required 3-3-3 Purchasing Director; Duties 3-3-4 Emergency Purchases; Procedure 3-3-5 Purchases in General; Bids 3-3-6 Bidding Procedure 3-3-7 Lowest Responsible Bidder 3-3-8 Performance Bond 3-3-9 Exclusive Service 3-3-10 Professional and Technical Services 3-3-11 Forms 3-3-12 Purchase Orders 3-3-13 Cooperative Purchasing 3-3-14 Local Preference Section 3-3-1 Scope of Article This article shall govern the purchase of any goods or services for or on behalf of the town. Fountain Hills Town Code 14 1996892.2 Section 3-3-2 Council Approval; When Required No purchases shall be made by or on behalf of the town without first obtaining council approval in the following instances: A. Where prior approval is required by The purposes of this code;Article are to: B. Where the purchase of the item is not provided in the budget as adopted; A. Establish standard policies and practices for the Procurement of Materials and Services and permit the continued development of Procurement policies and practices. C. Where the funds for the purchase are not provided in the budget as adopted; B. Serve as an aid in providing all Materials and Services at the appropriate time, place, quantity, purpose and Price to meet the operational requirements of the Town. D. For the expenditure of funds in an amount in excess of twenty thousand dollars. (98-27, Amended, 09/03/1998) C. Ensure the fair and equitable treatment of all Persons who participate in the Procurement system of the Town and foster effective broad-based competition within the free enterprise system. Section 3-3-3 Purchasing Director; Duties A. The town manager shall serve as the purchasing director and shall have direction of all purchases of goods and services made by or on behalf of the town. The purchasing director may delegate his administrative functions. Fountain Hills Town Code 15 1996892.2 Section 3-3-2 Policies B. The purchasing director shall approve or deny all purchase requests and shall report to the council on any purchase requiring council approval. The Town shall procure all Materials and Services deemed necessary for the delivery of quality service to its residents using competitive bids, Proposals, Vendor quotations or direct purchases. A complete history of each purchase of Materials or Services will be maintained through the use of purchase requisitions, purchase orders, check requests, petty cash vouchers and any other appropriate forms as authorized by this Article and as set forth in the Procurement Policy. Every effort will be made to obtain all Materials and Services at the most economical prices available. All Procurement Contracts shall be drawn by or under the supervision of the Town Attorney. Section 3-3-4 Emergency Purchases; Procedure3 Application; Exclusions A. This Article shall apply to every expenditure of public monies by the Town, except as otherwise specified in this Article. Nothing in this Article shall prevent any Town department from complying with the terms and conditions of any grant, gift, bequest or cooperative agreement. In the event of a conflict between the terms of this Article and the terms of any federal or state grant, the terms of any such grant shall govern. B. This Article shall not apply to the following: 1. Contracts between the Town and the federal government, the State of Arizona and political subdivisions of the State of Arizona. 2. Contracts for expert services, if the purpose of such services is to provide for Professional Services relating to an existing or probable lawsuit in which the Town is or may become a party or to Contracts for special investigative Services for law enforcement or administrative investigation purposes. 3. Agreements negotiated by legal counsel representing the Town in settlement of pending litigation or threatened litigation. 4. Development agreements, as defined in ARIZ. REV. STAT. § 9-500.05, as amended. 5. Contracts for the purchase or sale of real property and ancillary services related thereto, such as title insurance, appraisals or environmental assessments to the extent that they are negotiated in connection with a Contract for purchase or sale of real property. In case of an emergency which requires immediate purchases of supplies or services and when time is of the essence, the mayor shall be empowered to authorize the purchasing director to purchase goods or services without complying with the requirements and procedures in this article. A full report of the circumstances of such emergency and the goods or services obtained shall be made to the council at its next regular meeting. Fountain Hills Town Code 16 1996892.2 Fountain Hills Town Code 17 1996892.2 Section 3-3-5 Purchases in General; Bids4 Definitions The following words, terms and phrases, when used in this Chapter, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: A. “Best Interests of the Town” means advantageous to the Town. B. “Bid” means a price-based Proposal that is submitted in response to an Invitation for Bids. C. “Bid or Proposal Guarantee” means a form of security that indemnifies the Town against a successful bidder’s failure to execute the Contract documents and proceed with performance. D. “Bid Opening” means the date and time set forth in the Solicitation for opening of sealed bids. E. “Business” means any Person authorized to do business in the State of Arizona. F. “Change Order” means a written order signed by an authorized agent of the Town that directs the Contractor to make changes that are authorized by the Town. G. “Closing Date” means the date and time set forth in a Solicitation for the receipt of Bids or Proposals by the Town, after which no Bid or Proposal shall be considered. H. “Confidential Information” means that portion of a Bid, Proposal, offer, Specification or protest that contains information that the Person submitting the information believes should be withheld, provided (i) such Person submits a written statement advising the Town of this belief at the time of the submission and (ii) the information is so identified wherever it appears. I. “Construction” means the process of building, altering, repairing, improving or demolishing any public structure or building or other public improvements of any kind to any public real property, but does not include the routine operation, routine repair or routine maintenance of existing facilities, structures, buildings or real property or demolition projects costing less than $200,000.00. J. “Contract” means all types of Town agreements, regardless of what they may be called, for the Procurement of Materials and Services, the demolition or Construction of public facilities, or the acquisition and disposal of real and personal property. K. “Contractor” means any Person having a Contract with the Town. L. “Cooperative Purchasing” means Procurement conducted by, or on behalf of, more than one public Procurement unit. M. “Data” means documented information, regardless of form or characteristic. Fountain Hills Town Code 18 1996892.2 N. “Days” shall mean calendar days unless otherwise specified. O. “Debarment” means disqualification by the Procurement Agent of a Vendor to receive the award of a Contract with the Town for a specified period of time, not to exceed three years, commensurate with the seriousness of the offense causing the disqualification, which may result from misconduct or failure or inadequacy of performance. P. “Emergency” means a threat to the public health, welfare, property or safety. Q. “Employee” means an individual drawing a wage or a salary through the payroll process of the Town, whether elected or not. R. “Interested Party” means an actual or prospective bidder or Offeror whose economic interest may be affected substantially and directly by the issuance of a Solicitation, the award of a Contract, or by the failure to award a Contract. Whether an actual or prospective bidder or Offeror has an economic interest will depend upon the circumstances of each case. S. “Invitation for Bids” means all documents including those attached or incorporated by reference, utilized for soliciting bids in accordance with Section 3-3-20 below. T. “Materials” means all personal property, including equipment, supplies, printing, insurance and leases of personal property. U. “Offeror” or “Respondent” means any Person that responds to an Invitation for Bids, Request for Proposals, Solicitation, offer, or any other invitation or request by which the Town invites a Person to participate. V. “Open Market Purchase” means procedures used for Procurement of Materials and Services readily available to the general public on the open market which, by their nature, are subject to competition from multiple competing Vendors. W. “Payment Bond” means a form of security required to be provided by a Contractor for the protection of claimants supplying labor and/or Materials to the Contractor or its Subcontractors. X. “Performance Bond” means a form of security provided by a Contractor that secures the Contractor’s obligation to properly complete its work in accordance with the Contract. Y. “Person” means any individual, corporation, partnership, sole proprietorship, joint stock company, joint venture, limited liability company or any other private legal entity, governmental entity, union, committee, club, other organization or group of individuals. It includes a trustee, receiver or similar representative. Z. “Price” means the total expenditure for a defined quantity of a Material or Service. Fountain Hills Town Code 19 1996892.2 AA. “Procurement” means the purchasing, renting, leasing or otherwise obtaining any Material or Service. The term includes all functions that pertain to the obtaining of any Material or Service, including description of requirements, selection and Solicitation of sources, preparation and award of Contract, and all phases of Contract administration. BB. “Procurement Agent” means the Town Manager or authorized designee. CC. “Procurement Policy” means the administrative policy created by the Town Manager to assist with the implementation of this Article. DD. “Professional Services” means those services requiring specialized knowledge, education, skill or expertise and where the qualifications of the Person(s) rendering the services are of primary importance. Professional Services shall include, but not be limited to, services provided by architects, attorneys, accountants, clergy, construction and project managers, dentists, design professionals, engineers, geologists, physicians, nurses, psychologists, teachers, veterinarians and health care providers, that provide a combination of professional and paraprofessional services or any other professions and services defined as Professional Services by state law. EE. “Proposal” means a written offer, solicited or unsolicited, for consideration as a basis for awarding or modifying a Contract. FF. “Request for Proposal” means all documents, including those attached or incorporated by reference, utilized for soliciting Proposals in accordance with Section 3-3-21 below. GG. “Request for Qualifications” means all documents, including those attached or incorporated by reference, utilized for soliciting qualifications-based Proposals in accordance with Section 3-3-23 below. HH. “Responsible Bidder” or “Responsible Offeror” means a bidder or Offeror who has (i) the capability to fully perform the Contract requirements and (ii) the reliability that will ensure good faith performance. II. “Responsive Bidder” or “Responsive Offeror” means a bidder or Offeror who has submitted a bid or Proposal that conforms in all material aspects to the Solicitation. JJ. “Service” means the furnishing of labor, time or effort by a Contractor, not involving the delivery of a specific end product other than reports that are merely incidental to the required performance. This term does not include “Professional Services” provided by those persons as defined in this Section. KK. “Solicitation” means an Invitation for Bids, a Request for Proposals, a Request for Qualifications or any other invitation or request by which the Town invites a Person to participate in a Procurement. Fountain Hills Town Code 20 1996892.2 LL. “Specification” means any description of the physical characteristics, functional characteristics, or the nature of a Material or Service item. The term may include a description of any requirements for inspecting, testing, or preparing a Material or Service item for delivery. MM. “Subcontractor” means a Person that contracts to perform work or render Services to a Contractor or to another Subcontractor as a part of a Contract with the Town. NN. “Suspension” means an action taken by the Procurement Agent disqualifying a Person or entity from participation in Town Procurement. OO. “Town” means the Town of Fountain Hills, an Arizona municipal corporation. PP. “Vendor” means any Person operating a Business that has, or proposes to, provide a Material or Service to the Town. A. Purchases under $2,000. Whenever the contemplated purchase or contract for services is for a sum of less than $2,000, the purchasing director may obtain the goods or services without further formality. B. $2,000 to $5,000 Inclusive. Whenever any contemplated purchase or contract for services is for the sum of at least $2,000 but not more than $5,000, the purchasing director shall obtain at least three verbal quotes therefore, if possible. He may solicit quotes or advertise for quotes using the procedure provided in this article. Upon review of the quotes, he shall award the purchase or contract to the lowest responsible bidder. Section 3-3-5 Budgeting C. $5,000 to $20,000 Inclusive. Whenever any contemplated purchase or contract for services is for the sum of at least $5,000 but not more than $20,000, the purchasing director shall obtain at least three verbal quotes therefore, if possible. He may solicit quotes or advertise for quotes using the procedure provided in this article. Upon review of the quotes, he shall award the purchase or contract to the lowest responsible bidder. A. Procurements shall be contracted for or made only where sufficient funds have been budgeted in the year in which funds have been appropriated. D. In Excess of $20,000. No purchase or contract in an amount in excess of $20,000 shall be awarded without prior council approval. The purchasing director shall present the bids obtained to the council and shall report to them on the need for the goods or service and the advantages or disadvantages of the contract and bid proposals. (98-27, Amended, 09/03/1998) B. Budgeted line items specifically identifying one-time operational or recurring Materials or Services that have been approved by the Council in the review and adoption of the annual Town budget, and for which an award is within the allocated expenditure set forth in the budget, may be approved by the Procurement Agent without further Council approval. Awards that exceed the allocated expenditure or deviate from the identified description and/or scope shall require Council approval. Fountain Hills Town Code 21 1996892.2 Section 3-3-6 Bidding Procedure Procurement Agent The Procurement Agent shall (i) serve as the Contract administrator for the Town and as such shall supervise the execution and completion of all Contracts entered into by or on behalf of the Town and (ii) have general supervision, responsibility and authority to: A. Procure, contract for and execute agreements in any amount less than $30,000.00 for Materials and Services, including rentals, Service agreements, and leases needed by any Town department, in accordance with this Article. B. Approve and sign Change Orders to Contracts authorized by the Council in an amount equal to the lesser of 10% of the Contract amount or $30,000.00. C. Establish and amend all policies, regulations, forms, procedures and rules necessary and proper to implement the provisions of this Article. D. Have the authority to suspend or debar Vendors. E. Centralize Procurement, consistent with this Article, by which Materials and Services for all Town departments are purchased. F. Inform Town Employees and contractors of the ethical standards for public contracting. G. Designate another representative of the Town to have the authority to perform any or all of the above tasks. Section 3-3-7 Procurement by Dollar Value; Execution A. Any purchase not exceeding $30,000.00 may be made by the Procurement Agent in accordance with this Article and the Procurement Policy adopted pursuant to this Article. Contract requirements shall not be artificially divided so as to create multiple purchases of lesser amounts. Except as set forth in Subsections 3-3-5(B) and 3-3-6(B) above, any purchase exceeding $30,000.00 shall be authorized by the Council. When it is advantageous to the Town, annual Contracts should be initiated for Services and Materials regularly purchased. B. The Procurement Agent may sign Contracts (1) for purchases not exceeding $30,000.00 without Council approval and (2) in any amount after such Contract has been approved by the Council either as part of the annual budget or as a separate item. The Mayor may sign any Contracts of any amount as long as such Contracts have been approved by the Council. Section 3-3-8 On-line Bidding A. If the Procurement Agent determines that electronic, on-line bidding is in the Best Interests Fountain Hills Town Code 22 1996892.2 of the Town and the competitive Procurement process is facilitated thereby, the Procurement Agent may use on-line bidding to obtain bids electronically for the purchase of Materials and Services. B. An on-line bidding Solicitation must designate an opening date and time. C. The Closing Date and time for an on-line Solicitation may be fixed or remain open depending on the structure of the item being bid on-line. Information regarding the Closing Date and time must be included in the Solicitation. At the opening date and time, the Procurement Agent must begin accepting on-line bids and must continue accepting bids until the bid is officially closed. D. All on-line bids must be posted electronically and updated on a real-time basis. Fountain Hills Town Code 23 1996892.2 E. The Procurement Agent may: 1. Require bidders to register before the opening date and time and, as part of that registration, require bidders to agree to any terms, conditions or other requirements of the Solicitation. 2. Prequalify bidders and allow only those bidders who are prequalified to submit bids on-line. F. All bids submitted electronically through an on-line bidding process are public information and are subject to the same public disclosure laws and timelines that govern bids received through the sealed bid process. G. All remedies available to the Town and to bidders through the sealed bid process under this Article are also available to the Town and to bidders in an on-line bidding process. Section 3-3-9 Purchase Orders The Procurement Agent shall provide forms of purchase orders that shall be used for the purchase of all Materials and Services for or on behalf of the Town. Open purchase orders may be utilized for the routine purchase of regularly-supplied items, provided that an open purchase order shall be limited to a single source and shall not be valid for more than $10,000 in the aggregate. Section 3-3-10 (Reserved) Fountain Hills Town Code 24 1996892.2 Part II ETHICS; VIOLATIONS; UNAUTHORIZED PURCHASES Sections: 3-3-11 Ethical Standards 3-3-12 Ethical Violations 3-3-13 Unauthorized Purchases; Violation, Liability, Enforcement 3-3-14 (Reserved) 3-3-15 (Reserved) Section 3-3-11 Ethical Standards It is the policy of the Town for Employees to maintain high standards of honesty, integrity, impartiality, courtesy and conduct. These standards apply to Town Employees internally as well as when interacting with citizens and Vendors. Such policy is implemented by prescribing essential standards of ethical conduct without creating unnecessary obstacles to providing the Town with Materials or Services. To further this policy, the Town has promulgated ethical standards as set forth below. The Procurement Agent is authorized to take steps to ensure compliance with the following standards: A. It is an affirmative obligation for Town Employees to perform their responsibilities in such a manner to ensure fair competitive access to governmental Procurement by responsible Vendors. B. No Employee of the Town shall engage in acts that, in the reasonable judgment of the Procurement Agent, would result in a loss of confidence in the integrity of the Town’s Procurement operation. Such acts include, but are not limited to (1) receipt of gifts or services of more than a nominal value from a prospective Vendor, (2) statements to a Vendor that it will be awarded the Contract based on personal knowledge or relationships with Town Employees without an evaluation of its submittal, (3) failure of a Town Employee sitting on a review committee to disclose any prior or current business or financial relationship with a proposed Vendor, (4) criticism of one Vendor to another Vendor who is competing for the same Procurement prior to bid or Proposal award or (5) any acts similar to those outlined in clauses (1) through (4) of this Subsection. For purposes of this Article, “nominal value” is defined as $25.00 or less from any single party during any single calendar year. C. Town Employees responsible for participation in Procurement by virtue of their positions shall take reasonable efforts to ensure that Contractors doing business with the Town are expected to observe these same ethical standards. Violation of these standards shall constitute grounds for termination of a Contract with the Town and Debarment of the Contractor from doing any further business with the Town. Fountain Hills Town Code 25 1996892.2 Section 3-3-12 Ethical Violations A. In addition to any applicable state laws, it is a violation of this Article: 1. For any Person to attempt to or influence any Town Employee to violate the provisions of ethical conduct set forth in this Article. 2. For any Person preparing Specifications or plans pursuant to this Article or any policy or procedure of the Town to receive any direct pecuniary benefit from the utilization of such plans or Specifications, other than compensation owed for preparation of the Specifications or plans. 3. For any Employee or agent acting on behalf of the Town to directly or indirectly participate in or benefit or receive any pecuniary benefit from a Procurement in violation of state or federal law. 4. For any Person to offer, give or agree to give any Employee or former Employee of the Town or for any Employee or former Employee of the Town to solicit, demand, accept, or agree to accept from another Person, any valuable thing or valuable benefit that would not accrue in the performance of his official duties or an offer of employment in connection with any decision, approval, disapproval, recommendation, preparation of any part of a program requirement or a purchase request, influencing content of any Specification or Procurement standard, rendering of advice, investigation, auditing or in any advisory capacity in any proceeding or application request for ruling, determination, claim or controversy, or other particular matter, pertaining to any program requirement of a Contract or subcontract, or to any Solicitation or Proposal therefore. No action taken for violations of this Subsection shall be construed to preclude criminal prosecution of an Employee or former Employee or any other Person under the provisions of state or federal law. 5. For any payment, gratuity or offer of employment to be made by or on behalf of a Subcontractor under a Contract to the prime Contractor or higher tier Subcontractor or any Person associated therewith, as an inducement for the award of a subcontract or order. Violation of this standard shall constitute grounds for termination of a Contract with the Town and Debarment of the Vendor from doing any further business with the Town. This information shall be included as a term and condition of all Town Contracts. 6. For a Person to be retained, or to retain a Person, to solicit or secure a Town Contract upon an agreement or understanding for a commission, percentage, brokerage or contingent fee, except for retention of bona fide established sales and brokerage agencies for the purpose of securing business. Fountain Hills Town Code 26 1996892.2 7. For any Employee who is participating directly or indirectly in a Procurement process to become the Employee of any Person under Contract with the Town concerning any matters that the Employee participated in during the same Procurement process for a period of twelve months following his employment with the Town. 8. For any Employee or former Employee of the Town to disclose or use Confidential Information acquired by the Employee in the performance of his official duties for the actual or anticipated pecuniary benefit of any Person. B. It is no defense to a violation of this Section that the Employee to whom a benefit or offer of employment was made, or agree to be made, was not qualified to act in the desired manner. C. An Employee or Person may violate this Section by intentionally or knowingly engaging in a violation or by recklessly or negligently engaging in a violation. The Person ’s state of mind shall only be considered in imposing the penalty for such violation. Section 3-3-13 Unauthorized Purchases; Violation, Liability, Enforcement A. Except as provided in this Article, it shall be improper for any Town Employee to order the purchase of Materials or Services or to attempt to enter into Contracts within the purview of this Article other than through the Procurement Agent. Purchase Orders or Contracts made contrary to the provisions hereof shall not be approved by the Procurement Agent and the Town shall not be bound thereby. Further, the Procurement Agent may impose discipline on Employees who violate this Article in accordance with the Town’s codes and personnel administrative regulations. B. A Person who knowingly contracts for or purchases any Materials, Services or Construction in a manner contrary to the requirements of this Article violates the ethical standards contained in this Article shall be personally liable for the recovery of all public monies paid, together with legal interest and all costs, attorney’s fees and damages arising out of the violation. Further, the Procurement Agent may impose discipline on Employees who (1) contracted for or purchased any Materials, Services of Construction in a manner contrary to the requirements of this Article or (2) engaged in violations of the provisions set forth in Sections 3-3-11 and 3-3-12 above in accordance with the Town’s codes and personnel administrative regulations. C. The Town Attorney shall assist the Procurement Agent or authorized designee in enforcing the provisions of this Article. Sections 3-3-14 – 3-3-15 (Reserved) Fountain Hills Town Code 27 1996892.2 Part III FORMAL BIDDING PROCEDURES Sections: 3-3-16 Applicability 3-3-17 Public Notice 3-3-18 Bid or Proposal Guarantee 3-3-19 Confidential Information 3-3-20 Invitation for Bids 3-3-21 Request for Proposals 3-3-22 Withdrawal or Cancellation of Bids or Proposals 3-3-23 Retention of Professional Services; Requests for Qualifications 3-3-24 Construction Contracts 3-3-25 Emergency Procurements 3-3-26 Sole Source Procurement 3-3-27 Cooperative Purchasing 3-3-28 Protests; Informal and Formal 3-3-29 Debarments and Suspensions 3-3-30 Acceptance of Work Completed 3-3-31 Attestation of Contracts by Town Clerk Section 3-3-16 Applicability The formal bidding process set forth in this Part shall be utilized for all purchases not designated as eligible for purchases under petty cash, Open Market Purchase or small purchase in the Procurement Policy; provided, however, that the formal bidding process set forth in this Part may be supplemented by the Procurement Policy. Informal purchases (petty cash, Open Market Purchase and small purchases) shall be governed by the Procurement Policy. Section 3-3-17 Public Notice A. Public notice of Invitations for Bids, Requests for Proposals or Requests for Qualifications shall be in a manner that is reasonable in the judgment of Procurement Agent given the commercial context of the Solicitation. The advertisement shall specifically state the character of the Town purchase contemplated. Notice may be given in any publication that is reasonably available to prospective bidders in the judgment of Procurement Agent. For purposes of this Article, reasonable notice shall be defined as (1) not less than five business days for an Invitation for Bids and (2) not less than 21 calendar Days for a Request for Proposals or a Request for Qualifications. B. Public notice shall also be provided in a manner that is reasonable in the judgment of the Procurement Agent in publications of limited circulation, with the intent to encourage participation of as many qualified Businesses as reasonably possible, including disadvantaged business enterprise firms. Fountain Hills Town Code 28 1996892.2 Section 3-3-18 Bid or Proposal Guarantee The Procurement Agent may require a Bid or Proposal Guarantee be submitted with any and all Bids or Proposals, and Performance Bonds and Payment Bonds be submitted prior to execution of any Contract. The Procurement Agent may waive the Bid or Proposal Guarantee requirement if he finds that the requirement will have a significant negative impact on the ability of disadvantaged business enterprises to compete for Town purchases or if he determines, in his reasonable discretion, that such waiver is in the Best Interests of the Town. Section 3-3-19 Confidential Information A. If a Person believes that a Bid, Proposal, Offer, or Specification contains information that should be withheld from public disclosure, a statement advising the Procurement Agent of this belief and the basis for exemption from such disclosure shall accompany this submission and the information shall be specifically identified wherever it appears. B. The Procurement Agent shall make a determination whether the information shall be subject to public disclosure and shall advise in writing the party submitting the information of the final determination. C. All information contained in the Proposals shall be deemed as temporarily exempt from public disclosure based on the Town’s need to avoid disclosure of contents prejudicial to competing Offerors during the process of negotiation. The Proposals shall not be open for public inspection until after Contract award. Except to the extent the Offeror designates, and the Town concurs, trade secrets or other proprietary Data contained in the Proposal shall remain exempt from public disclosure only to the extent permitted by law. Section 3-3-20 Invitation for Bids A. All Contracts of the Town shall be awarded by competitive sealed bidding except as otherwise provided in this Article or the Procurement Policy. B. An Invitation for Bids shall be issued and shall include Specifications and all contractual terms and conditions applicable to the Procurement. C. Bids shall be by sealed Proposals only and under such regulations as may be prescribed by the Procurement Agent. The Procurement Agent shall have the power to reject any or all bids, and to advertise for bids again. Fountain Hills Town Code 29 1996892.2 D. Bids shall be opened publicly in the presence of one or more witnesses at the time and place designated in the Invitation for Bids. The amount of each Bid, and such other relevant information as the Procurement Agent deems appropriate, together with the name of each bidder, shall be recorded; the record of Bids shall be open to public inspection immediately, but individual Bids shall be open to public inspection only after the Contract is awarded. E. Bids shall be unconditionally accepted without alteration or correction, except as authorized by this Article. Bids shall be evaluated based upon the requirements set forth in the Invitation for Bids, which may include criteria to determine acceptability such as inspection, testing quality, workmanship, delivery and suitability for a particular purpose. Those criteria that will affect the Bid Price and be considered in evaluation for award shall be objectively measurable, such as discounts, transportation costs and total or life cycle costs. The Invitation for Bids shall set forth the evaluation criteria to be used. No criteria may be used in Bid evaluation that is not set forth in the Invitation for Bids, this Article or the Procurement Policy. F. Correction or withdrawal of inadvertently erroneous bids before or after Bid Opening, or cancellation of awards or Contracts based on such bid mistakes, may be permitted where appropriate at the Town’s sole discretion. After Bid Opening, no changes in Bid Prices or other provisions of bids prejudicial to the interest of the Town or fair competition shall be permitted. In lieu of bid correction, a low bidder alleging a material mistake of fact may be permitted to withdraw its bid in the sole discretion of the Town and only if one of the following occurs: 1. The mistake is clearly evident on the face of the bid document but the intended correction bid is not similarly evident. 2. The bidder submits evidence that clearly and convincingly demonstrates that a mistake was made. All decisions to permit the correction or withdrawal of bids, or to cancel award or Contracts based on bid mistakes, shall be supported by a written determination made by the Procurement Agent. G. The Contract shall be awarded to the Offeror that is determined to be a Responsive Bidder and a Responsible Bidder and whose bid (1) is the lowest cost and (2) meets the requirements and criteria set forth in the Invitation for Bids. The amount of applicable transaction privilege or use tax of the Town shall be included in the bid prices and shall not be a factor in determining the net lowest bid. In the event the low est responsive and responsible Bid for a Construction project exceeds available funds as certified by the Procurement Agent, and such bid does not exceed such funds by more than five percent, the Procurement Agent is authorized, when time or economic considerations preclude re-solicitation of work of a reduced scope, to negotiate an adjustment of the Bid Price with the low Responsive Bidder and Responsible Bidder in order to bring the bid within the amount of available funds. Any such negotiated adjustment shall be based only upon eliminating independent deductive items specified in the Invitation for Bids. Fountain Hills Town Code 30 1996892.2 H. When it is considered impractical to initially prepare a purchase description to support an award based on Price, an Invitation for Bids may be issued requesting the submission of unpriced offers to be followed by an Invitation for Bids limited to those bidders whose offers have been determined to be technically acceptable under the criteria set forth in the first Solicitation. I. All Vendors and contractors must be in compliance, at the time set for opening the bid, with all applicable (1) state, federal and county laws, rules and regulations and (2) Town codes, ordinances and regulations. Except as provided in Sections 3-3-9, 3-3-10 and 3-3-13, the purchasing director shall follow the procedure set forth in this section for all purchases and contracts subject to the bidding process: Section 3-3-21 Request for Proposals A. A notice or solicitation for bids shall state the date, time and place of opening, and the place and time period within which bids shall be submitted.When the Procurement Agent determines that the use of competitive sealed bidding is either not practicable or not advantageous to the Town, a Contract may be entered into by use of the competitive sealed Proposals or ot her approved methods that are defined as a Request for Proposals. B. The notice shall state with particularity the goods or services required and shall state the place where specifications may be examined.Proposals shall be solicited through a written Request for Proposals. C. Proposals shall be submitted at the time and place designated in the Request for Proposals. D. As provided in the Request for Proposals, discussions may be conducted with Responsible Offerors who submit Proposals determined to be reasonably susceptible to being selected for award for the purpose of clarification to ensure full understanding of, and responsiveness to, the Solicitation requirements. Offerors shall be accorded fair treatment with respect to any opportunity for discussion and revision of Proposals and such revisions may be permitted after submissions and before the award for the purpose of obtaining best and final offers. In conducting discussions, there shall be no disclosure of any information derived from Proposals submitted by competing proposers. E. The award shall be made to the Offeror that is determined to be a Responsible Offeror and a Responsive Offeror whose Proposal is determined, in writing, to be the most advantageous to the Town and best meets the overall needs of the Town taking into consideration only the evaluation factors set forth in the Request for Proposals. The Request for Proposals shall state the relative importance of Price and other evaluation factors; specific numerical weighing is not required. The amount of applicable transaction privilege or use tax of the Town shall be included in the bid prices and shall not be a factor in determining the net lowest bid. F. The Contract file shall contain the basis upon which the award is made. Fountain Hills Town Code 31 1996892.2 G. All Vendors and Contractors must be in compliance, at the time set for opening the Proposal, with all applicable (1) state, federal and county laws, rules and regulations and (2) Town codes, ordinances and regulations. Section 3-3-22 Withdrawal or Cancellation of Bids or Proposals A. Prior to opening of the bids or Proposals, the Invitation for Bids or the Request for Proposals may be delayed or canceled, or any or all bids or Proposals may be rejected, in whole or in part, by the Procurement Agent, when determined to be in the Best Interests of the Town. B. After opening of the bids or Proposals, the Procurement Agent may reject all bids or Proposals. C. A bidder or proposer may withdraw its bid at any time prior to Bid Opening or the deadline for receipt of the bid or Proposal by delivering written notice to the Procurement Agent. Section 3-3-23 Retention of Professional Services; Requests for Qualifications A. Technical Registrants. The Town shall procure Professional Services from technical registrants in the manner prescribed in ARIZ. REV. STAT., Title 34, Chapter 6, as amended. For purposes of this Article, the term “technical registrant” means a Person who provides any of the Professional Services listed in ARIZ. REV. STAT., Title 32, Chapter 1, as amended, and includes, but is not limited to, architects, assayers, engineers, geologists, land surveyors and landscape architects. B. Professional Legal Services. Legal counsel services may be procured by direct selection, Request for Proposals or Requests for Qualifications processes. If defense counsel is not assigned by the Town’s risk carrier, the Town Attorney shall recommend to the Council such persons or firms to provide direct defense of any claim made against the Town. Such legal counsel services shall be procured by direct selection. C. Other Professional Services. The Town may procure Professional Services by soliciting statements of qualifications for providing such services. The Town may procure such Professional Services by direct selection pursuant to the administrative regulations promulgated by the Procurement Agent, subject to the limitations in ARIZ. REV. STAT., Title 34, as amended. Contracts for Professional Services not exceeding $30,000.00 shall be approved by the Procurement Agent. Contracts for Professional Services exceeding $30,000.00 shall be approved by the Council. If determined by the Procurement Agent to be inappropriate for direct selection, Professional Services shall be procured through the use of statements of qualifications as follows: 1. The Procurement Agent shall give adequate notice of the need for such services through a Request for Qualifications. The request shall describe the services Fountain Hills Town Code 32 1996892.2 required, list the types of information and Data required of each Offeror and state the relative importance of particular qualifications. Fountain Hills Town Code 33 1996892.2 2. Persons engaged in providing the designated types of Professional Services may submit statements of qualifications in providing such Professional Services. 3. The Procurement Agent may appoint a committee to review qualifications. If appointed, the committee shall consist of the Procurement Agent and one or more professionals licensed, registered or admitted to the profession that is the subject of the Procurement. Discussions with Offerors who submit Proposals may be conducted to determine qualifications for further consideration. Award shall be made to the Offeror determined, in writing, to be the best qualified. Compensation shall be negotiated after an award is made. 4. The Procurement Agent shall conduct negotiations with the Offeror determined to be the most qualified to establish fair and reasonable compensation. If compensation cannot be agreed upon with the best qualified Offeror, then negotiations will be formally terminated with the selected Offeror. If Proposals were submitted by one or more other Offerors determined to be qualified, negotiations may be conducted with such other Offeror or Offerors, in the order of their respective qualification ranking, and the Contract may be awarded to the Offeror then ranked best qualified if the amount of compensation is determined to be fair and reasonable. 5. The Contract award shall be made to the Offeror determined in writing by the Procurement Agent or authorized designee to be best qualified based upon (a) the evaluation factors set forth in the Request for Qualifications and (b) agreement between the Town and the Offeror as to fair and reasonable compensation. Section 3-3-24 Construction Contracts All Construction Contracts for public improvement projects shall be awarded in accordance with ARIZ. REV. STAT., Title 34, as amended. If public competitive bidding is not required pursuant to ARIZ. REV. STAT. § 34-201(C) or (D), as amended, then the requirements of this Article shall apply. In the event of a conflict between this Chapter and ARIZ. REV. STAT., Title 34, as amended, the provisions of Title 34 shall govern. Section 3-3-25 Emergency Procurements A. Notwithstanding any other provisions of this Article, upon declaration of an Emergency in the manner provided by law, the Procurement Agent may make or authorize Emergency Procurements based upon a threat to the public health, welfare, property or safety. Such Emergency Procurements shall be made with such competition as is practicable under the circumstances. The written determination for the Emergency and the selection of the Contractor shall be included in the Contract file. Fountain Hills Town Code 34 1996892.2 B. The Town department seeking an Emergency Procurement shall prepare a written requisition documenting the existence of an Emergency condition and explaining the Procurement need. The requisition shall be signed by the department director. C. Bids shall be submitted in a sealed envelope clearly identified as a bid on the front of the envelope. Any bid not received within the time period allowed shall be rejected.An Emergency Procurement shall be limited to those Materials, Services or Construction reasonably necessary to satisfy the Emergency need. D. All bids shall be opened in public at the time and place specified, and a tabulation of all bids received shall be posted in town hall for public inspection.Emergency Procurements shall be approved by the Procurement Agent, unless submitted with a copy of the resolution adopted by the Council declaring an Emergency and authorizing the Emergency Procurements. E. The purchasing director and the council shall have the right to reject any and all bids and parts of bids and to readvertise or resolicit for bids.Procurement Agent has the authority to enter into Emergency Procurement Contracts that are not more than $30,000.00 and based upon the Best Interests of the Town, taking into account factors such as need, availability and other relevant Town requirements. The Council shall have the authority to authorize the Mayor or Procurement Agent to execute Emergency Procurement Contracts in excess of $30,000.00. Such Emergency Procurement shall be exempt from the competitive requirements of this Article. Section 3-3-26 Sole Source Procurement A Procurement may be made or Contract awarded by the Procurement Agent without competition when the requesting department director determines in writing, after conducting a good faith review of available sources, that there is only one reasonable and practicable source for the required Materials or Service. The requesting department shall provide written evidence to support a sole source determination, which shall be approved or denied by t he Procurement Agent in his sole discretion. The Procurement Agent will participate with the requesting department in conducting negotiations, as appropriate, relating to Price, delivery and terms. Sole source Procurement shall be avoided, except when no reasonable alternative sources exist. A record of sole source procurements shall be maintained as a public record. Section 3-3-27 Cooperative Purchasing A. The Procurement Agent shall have the authority to (1) participate with a state, other political subdivisions of a state and the federal government for the Procurement of Materials or Services with Cooperative Purchasing agreements including through on-line Procurement processes such as “Buy Hub” and (2) directly enter into agreements with Vendors who have been awarded Contracts with other governmental entities for Materials Fountain Hills Town Code 35 1996892.2 and Services, provided the Procurement methods of the other party comply with the intent of this Article. Fountain Hills Town Code 36 1996892.2 B. If a Procurement under this Section involves the expenditure of state or federal assistance or Contract monies, the Procurement Agent shall comply with state or federal law and regulations which are mandatory and which are not reflected in this Article or guidelines adopted by the Town. It shall be the responsibility of the requesting department to provide the Procurement Agent with the applicable acquisition requirements concurrent with its requisition. Section 3-3-7 Lowest Responsible Bidder Unless the council or the purchasing director, as appropriate, shall exercise the right of rejection, all goods and services in an amount in excess of $20,000 shall be awarded to the lowest responsible bidder, except as provided in Sections 3-3-9, 3-3-10, 3-3-13 and 3-3-14. In determining the lowest responsible bidder, the council or the purchasing director shall consider: Section 3-3-28 Protests; Informal and Formal A. The ability, capacity and skill of the bidder to perform the contract or provide the service required in a timely manner.Any Interested Party to a Contract may protest (1) a Solicitation issued by the Town, (2) a proposed award of a Town Contract, (3) the rejection of a request for changes, including a Change Order or (4) Debarment from the Procurement process of the Town, by filing an informal protest. B. The quality of performance in previous contracts with the town together with previous and existing compliance with the ordinances of the town.Protests shall be filed with the Procurement Agent within five Days from the time the alleged instance occurred. The Procurement Agent will make the initial contact in an attempt to resolve the matter. C. The financial resources and ability of the bidder.Procurement Agent shall render a decision in writing within 15 Days from the date the informal protest is filed. Copies of the decision shall be furnished to all interested parties by first class mail at the last address on file with the Town. If the Procurement Agent fails to render a decision within the required period, the informal protest shall be deemed denied and a formal protest may be filed. D. The quality, availability and adaptability of the goods or service.After conclusion of the informal protest process, any Interested Party to a Contract may file a formal appeal protesting (1) a Solicitation issued by the Town, (2) a proposed award of a Town Contract, (3) the rejection of a request for changes, including a Change Order, (4) Debarment from the Procurement process of the Town or (5) denial of an informal protest, by filing a formal protest in the manner provided by this Section. (98-27, Amended, 09/03/1998) E. A formal protest shall be in writing signed by an authorized party, containing their name, address and telephone number, identification of the Contract, a detailed statement of the legal and factual grounds of the protest, including copies of all relevant documents and the specific relief requested. F. The formal protest shall be filed within five business days following (1) the decision of the Fountain Hills Town Code 37 1996892.2 Procurement Agent on an informal protest or (2) the end of the 15-Day informal protest process, if no decision was issued. G. The formal protest shall be heard by a hearing officer appointed by the Procurement Agent for such purposes within ten business days after filing of the formal protest, unless extended by the hearing officer. Section 3-3-8 Performance Bond Fountain Hills Town Code 38 1996892.2 H. The hearing officer (i) may (a) reject the protest in whole or in part or (b) sustain the protest in whole or in part and (ii) shall provide for an appropriate remedy as follows: The purchasing director shall have the authority to require a performance bond, in such amount as he may deem sufficient to secure the execution of a contract. 1. In determining an appropriate remedy, the hearing officer shall consider the circumstances surrounding the Procurement or proposed Procurement including, but not limited to the seriousness of the Procurement deficiency, the degree of prejudice to other interested parties or to the integrity of the Procurement system, the good faith of the parties, the extent of performance, costs to the Town, the urgency of the Procurement and the impact of the relief upon the Town. 2. An appropriate remedy may include one or more of the following: Section 3-3-9 Exclusive Service a. Decline to exercise an option to renew under the Contract. In the event that there is only one person or entity capable of providing a particular commodity or service, the requirement of this article concerning bidding procedures shall not be applicable. b. Direct the Town to terminate the Contract award. c. Direct the Town to reissue the Solicitation. Section 3-3-10 Professional and Technical Services d. Direct the Town to issue a new Solicitation. A. The provisions of this article shall not apply to professional or technical services, but the purchasing director shall determine the scope of the services required and may, at his option, require the submission of proposals prior to engaging such services. e. Direct the Town to award a Contract consistent with Town codes and policies. B. No person or firm practicing in a professional or technical field for which a license is required by state law shall be engaged by the town unless possessing a current license in good standing. f. Such other relief as is determined necessary to ensure compliance with this Article. C. Upon engagement the town shall enter into a written agreement or memorandum of understanding for the performance of the services for which engaged, setting forth the scope of services and the unit or total price therefore. Section 3-3-29 Debarments and Suspensions Section 3-3-11 Forms The Procurement Agent has the sole authority to debar or suspend a Vendor from participating in a Town Procurement. The Vendor may be suspended or debarred based upon the following factors: Fountain Hills Town Code 39 1996892.2 The purchasing director shall provide such forms as may be necessary for the proper administration of this article, including but not limited to the following: A. The Vendor does not have sufficient financial ability, equipment or personnel to perform the Contract. A. Bid Specification Form. The bid specification form shall state the specifications for the goods or service required and shall be available for inspection by prospective bidders as of the first publication of the notice of bid. B. The Vendor has repeatedly breached contractual obligations to public or private agencies. B. Notice to Bidders. The notice to bidders shall set forth the goods or services sought, the day, time and place when bids will be opened, the dates and times within which bids will be received, when specifications may be reviewed and where available and such other information as may be required to secure the most advantageous bids. C. The Vendor fails to comply with the requests of a background investigation. Section 3-3-12 Purchase Orders A. In General. The purchasing director shall provide forms of purchase order which shall be used for the purchase of all goods and services for or on behalf of the town. Fountain Hills Town Code 40 1996892.2 Section 3-3-30 Acceptance of Work Completed B. Open Purchase Orders. Open purchase orders may be provided by the purchasing director for the routine purchase of regularly supplied items. An open purchase order shall be limited to a single source and shall not be valid for more than $5,000 in the aggregate. All open purchase orders shall expire at the end of the fiscal year of issuance and the expiration date shall be plainly stated on the face thereof. (98-27, Amended, 09/03/1998) A. Notice of Acceptance. When a contracting party providing Materials or Services to the Town makes a request for acceptance by the Town of work as completed, the Procurement Agent shall indicate acceptance on behalf of the Town on a certificate of final completion or other form designated for that purpose. Until the notice of acceptance is issued, no public work completed on behalf of the Town shall be considered as the property of the Town, and the Town shall assume no responsibility therefore. B. Release of Retainage; Conditions. The Town shall not release any funds due but which are held as retainage until the Contract administrator is satisfied that the work has been completed in accordance with the Specifications of the Contract. Section 3-3-13 Cooperative Purchasing This article shall not apply to purchases made by, through or with the State of Arizona or its political subdivisions. The town may make purchases or award contracts for services without a formal bidding process whenever other governmental units have done so for the same item or service if, in the opinion of the purchasing director, a separate bidding process is not l ikely to result in a lower price for such items or services. Section 3-3-31 Attestation of Contracts by Town Clerk All Contracts entered into by the Town shall be attested to by the Town Clerk and shall not be binding on the Town until so attested. The Town Clerk shall retain the original of all Contracts and agreements according to the retention schedule adopted by the Council and shall provide to the Procurement Agent such documents as are necessary for orderly administration of the Town’s business. Section 3-3-14 Local Preference In awarding contracts for supplies, equipment and contractual services of an estimated value less than ten thousand dollars, the contract shall be awarded to bidders who have had both a place of business located within the municipal limits of the town and a business license issued by the town for a period of not less than twelve months prior to the date of award of the contract in preference to a competing bidder whenever the bid of the competing bidder of equivalent quality and suitability is less than five percent lower. This preference shall not be used where state law or any applicable federal law or regulation forbids the granting of such preference or requires another method for competitive bidding. This section shall not apply to contracts for professional services pursuant to this article, nor to purchases made pursuant to Sections 3-3-9, 3-3-10, and 3-3-13 of this article. Fountain Hills Town Code 41 1996892.2 Article 3-4 DISPOSITION OF PROPERTY Sections: 3-4-1 In General 3-4-2 Definitions 3-4-3 Property Administrator 3-4-4 Disposition ofSale, Lease or Disposal of Surplus or Obsolete Town or Personal Property 3-4-5 Unclaimed Personal Property 3-4-6 Disposition of Real Property Section 3-4-1 In General No property belonging to the townTown shall be disposed of except in accordance with this codeCode and such rules as the councilCouncil may adopt pursuant to this codeCode. Section 3-4-2 Definitions In this article, unless this code or state statutes provide otherwise:The following words, terms and phrases, when used in this Article, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: A. "Contract" means an agreement, oral or written, respecting the transfer of property, real or personal, to or from the town.B. "“Disposition"” means the sale, lease or other means of divestiture of title or the right to possession of any property belonging to the town.C. "Personal property"Town. B. “Personal Property” means property which is tangible and movable without damage, but may include fixtures attached to real propertyReal Property. C. “Property Administrator” means the Town Manager or designee assigned as custodian of all property belonging to the Town. D. "Property administrator" means the town manager or designee assigned as custodian of all property belonging to the town.E. "Real property"“Real Property” means property consisting of land or structures affixed to land. Section 3-4-3 Property Administrator The town managerTown Manager shall serve as the property administratorProperty Administrator for Fountain Hills Town Code 42 1996892.2 the townTown and shall have custody of all property, real or personal, belonging to the townTown. The town managerTown Manager may designate some other employee of the town as property administratorTown as Property Administrator, and such designee shall report to the town managerTown Manager. The property administratorProperty Administrator shall maintain a complete inventory of the property of the town and shall report the same t o the council annually. The report shall include a current inventory together with a list of additions and deletions or other dispositions for the preceding fiscal yearand current inventory of the property of the Town, which inventory shall be available for public review. Section 3-4-4 Disposition ofSale, Lease or Disposal of Surplus or Obsolete Town or Personal Property Personal property shall be disposed of in the following manner:The Town shall have the right to sell, lease, exchange, donate or otherwise dispose of Town property in the Best Interests of the Town. The disposal of surplus or obsolete property shall be done in as competitive a manner as the Town Manager or authorized designee determines to be practicable. Section 3-4-5 Unclaimed Personal Property A. Personal property belonging to the town may be declared surplus by the property administrator and may be sold after a notice of invitation for bids is published in a ne wspaper of general circulation in the town for two consecutive weeks if in a weekly paper and four times if published in a daily. In addition, the property administrator shall have posted notices of the invitation for bids in three or more public places.Property shall be deemed abandoned if the owner thereof fails to make satisfactory claim and proof of ownership within 30 days after the giving of notice as provided below. B. The Town Manager or authorized designee having in his possession Personal Property shall from time to time prepare a notice in writing containing the following information: 1. Contact information for the Town Employee responsible for the property. 2. A description of the Personal Property that has come into the possession of the Town since giving of the last periodic notice. 3. A demand that all owners of the property described in the notice make claim and proof of ownership satisfactory to the Town Manager or authorized designee within 30 days from the date of the notice. 4. A statement that any of the described Personal Property not claimed within such 30-Day period shall be deemed to be abandoned, and that the same may be sold at public auction or otherwise disposed of in accordance with this Article. Fountain Hills Town Code 43 1996892.2 5. The notice shall be published in a newspaper of general circulation in the Town at least once each week for two consecutive weeks and copies thereof shall be posted in three public places within the corporate limits of the Town, including the Town’s website, and a copy of such notice shall be mailed to the owner, if known, at his/her last known mailing address. B. Any property in the possession of the town which is contraband as defined by state law shall be disposed of in accordance with the applicable state statutes. C. Notwithstanding any of the above, any personal property, other than contraband, lawfully in the possession of the town, may be offered for sale at public auction, either individually or grouped in lots as may be deemed appropriate by the property administrator.Claim and proof of ownership. 1. Except as provided in this Article, if the Personal Property described in the notice in Subsection 3-4-5(B) above remains in the possession of the Town Manager or authorized designee without any person making satisfactory claim and proof of ownership therefor for a period of 30 days from the date of the notice provided as set forth in Subsection 3-4-5(B), the Personal Property shall be deemed to be abandoned, and title thereof shall be deemed to be in the Town by rea son of abandonment by the owner and possession by the Town. 2. When dealing with property that is lost, found by a person not the owner (hereinafter referred to as the “finder”) and then turned over to the Town, the finder shall be deemed to have made satisfactory claim and proof of ownership to be entitled to possession of the Personal Property at the end of 30 Days from the date of the notice in Subsection 3-4-5(B). However, the finder’s claim and proof of ownership under this Subsection shall be inferior to and subject to a satisfactory claim and proof of ownership by any owner of the Personal Property. 3. Upon delivery of the property to the finder as provided in this Section, the Town shall have no further interest in, or obligations with respect to, the property. The Town shall, however, provide the name and address of the finder and the location of the property, if known, to any person making a satisfactory claim and proof of ownership subsequent to the delivery of the property to the finder. D. The town may donate lost and found or unclaimed personal property in its custody for at least ninety days to nonprofit charitable organizations.Any abandoned Personal Property may, at the election of the Town, be (i) donated to a non-profit charitable entity or other governmental entity or (ii) sold at public auction (which may include an on-line auction) to the highest bidder after ten days’ notice given in the same manner as provided in Subsection 3-4-5(B) above, which notice shall contain the following information: 1. Contact information for the Town Employee responsible for the property. 2. A description of the property to be sold. 3. The date, time, place of the sale and the person to conduct the same. Fountain Hills Town Code 44 1996892.2 4. A statement that the described Personal Property is deemed to be abandoned and that the same will be sold at public sale to the highest cash bidder. E. The sale provided for herein shall be at public auction (which may include an on-line auction) to the highest bidder for cash, but in no event shall any item be sold for less than the cost of advertising and selling. The Town reserves the right to reject any and all bids. F. The Town Manager or authorized designee conducting the sale shall maintain a complete and accurate record of the sale which shall include the description of the Personal Property sold, the name and address of the purchasers, the sale price of each item sold and the costs of the sale. G. The Town Manager or authorized designee conducting the sale shall execute and deliver or cause to be delivered a certificate of sale to the purchaser of each item of Personal Property, which certificate shall describe the item in the same manner as the notice of sale and shall recite the purchase price paid, the name and address of the purchaser and the date of the purchase. Such certificate shall pass the title to the item to the purchaser. Fountain Hills Town Code 45 1996892.2 H. All moneys received from sales of Personal Property as provided for in this Article shall be immediately paid over to the Town finance division and retained in a separate account for at least six months. Upon the expiration of such time, unless sooner claimed as herein provided, such moneys shall be paid into the general fund of the Town. I. Should any person within six months from the date of the public sale of any item of Personal Property make a valid claim thereto and establish ownership, the sum of money for which the item sold shall be paid over to such person, less the costs of advertising and selling. In no event shall any claim be considered unless it shall be presented to the Town Manager in writing under oath and before the expiration of six months from the date of the sale of the item claimed. Once such amounts are paid by the Town, the Town shall have no further obligation relating to the property. J. Items for which no bids are received may be deemed to be of no intrinsic or monetary value and may be disposed of in any manner deemed appropriate by the Town Manager. K. Items useful or necessary to the Town may be retained by the Town for its use. L. Each person performing any action provided for in this article shall make affidavit thereof which shall be prima facie evidence of the facts alleged in the affidavit. Section 3-4-56 Disposition of Real Property A. Limitations. No sale or other dispositionDisposition of real propertyReal Property belonging to the townTown shall be final until approved by a majority vote of the councilCouncil and all documents pertaining thereto shall be executed by the mayorMayor or Town Manager and attested by the town clerkTown Clerk. If the value of the property exceeds one hundred thousand dollars, thenthe amount set forth in ARIZ. REV. STAT. § 9-403(A), as amended, the sale shall first be authorized at an election held pursuant to A.R.SARIZ. REV. STAT. § 9-403. B. Advertisement; Bids. No real propertyReal Property belonging to the townTown shall be sold or otherwise disposed of except at public auction. The date, time and place of the public auction shall be posted not less than three weeks in advance of the date at town hall, on the site of the real property to be disposed of and in at least one other public place. In addition, the notice of sale shall be published in a paper having general circulation in the town once each week for two consecutive weeks if in a weekly paper or four times if in a daily paper preceding the sale, with the last such publication not less than three days before the sale. The notice shall include a legal description of the property, a common address and a location map. The townas provided in ARIZ. REV. STAT. § 9-402 et seq., as amended. The Town shall have the right to reject any and all bids, to withdraw the property from sale prior to sale and to readvertise for sale. C. Appraisal Prior to Sale. Prior to the sale of any real propertyReal Property, the townTown shall obtain one or more appraisals of value from one or more disinterested parties. Such appraisal(s) shall form the basis for valuation of the property to be sold. Fountain Hills Town Code 46 1996892.2 D. Sale; Lease; Exchange. The townTown may exchange or sell real property to, sell or lease Real Property to the federal government or another political subdivision pursuant to the procedures specified in A.R.SARIZ. REV. STAT. § 9-407.405 and § 9-407, as amended. Fountain Hills Town Code 47 1996892.2 Article 3-5 CONTRACT ADMINISTRATION Sections: 3-5-1 Contract Administrator 3-5-2 Change Orders and Amendments 3-5-3 Acceptance of Work Completed 3-5-4 Attestation of Contracts by Town Clerk Section 3-5-1 Contract Administrator The town manager shall serve as the contract administrator for the town and as such shall supervise the execution and completion of all contracts entered into by or on behalf of the town. Section 3-5-2 Change Orders and Amendments A. No change order shall be approved nor shall any amendment or alteration of any executory contract become effective without the express approval of the contract administrator. Such approval shall be in the form of a rider or written amendment executed by the parties and attached to the original contract. B. The contract administrator shall have the authority to approve a change order in an amount which is the lesser of $20,000 or ten percent of the total contract value without prior approval of the council. C. Any change order, amendment or alteration greater than the lessor of $20,000 or ten percent of the total contract value shall be furnished to the council for its prior approval. (98-27, Amended, 09/03/1998) Section 3-5-3 Acceptance of Work Completed A. Notice of Acceptance. When a contracting party providing goods or services to the town makes a request for acceptance by the town of work as completed, the contract administrator shall indicate acceptance on behalf of the town on a form designated for that purpose and shall notify the council of such acceptance. Until the notice of acceptance is issued, no public work completed on behalf of the town shall be considered as the property of the town, and the town shall assume no responsibility therefore. B. Release of Retainage; Conditions. The town shall not release any funds due but which are held as retainage until the contract administrator is satisfied that the work has been completed in accordance with the specifications of the contract. (98-27, Amended, 09/03/1998; 98-27, Renumbered, 09/03/1998) Section 3-5-4 Attestation of Contracts by Town Clerk All contracts entered into by the town shall be attested by the town clerk and shall not be binding on the town until so attested. The town clerk shall retain the original of all contracts and agreements and sh all provide to the contract administrator such documents as are necessary for orderly administration of the town's business. (98-27, Renumbered, 09/03/1998) Fountain Hills Town Code 48 1996892.2 Fountain Hills Town Code 49 1996892.2 Article 3-6 CIVIL PREPAREDNESS AND DISASTER Sections: 3-65-1 Purposes 3-65-2 Definitions 3-65-3 Civil Preparedness Organization 3-65-4 Powers and Duties 3-65-5 Mutual Aid 3-65-6 Immunity of Town and Representatives Thereof 3-65-7 Violations Section 3-65-1 Purposes The purposes of this articleArticle are to: A. Reduce vulnerability of people and the community to damage, injury and loss of life and property resulting from natural or man-made catastrophes, riots or hostile military or paramilitary action. B. Prepare for prompt and efficient rescue, care and treatment of persons victimized or threatened by disasterDisaster. C. Provide a setting conducive to the rapid and orderly start of restoration and rehabilitation of persons and property affected by disastersDisasters. D. Clarify and strengthen the roles of the mayor, council, managerMayor, Council, Town Manager and townTown agencies in prevention of, preparation for and response to and recovery from disastersDisasters. E. Authorize and provide for cooperation in disasterDisaster prevention, preparedness, response and recovery. F. Authorize and provide for coordination of activities relating to disasterDisaster prevention, preparedness, response and recovery by agencies and officers of this townTown, agencies of the private sector and similar activities in which the federal government, the state and its political subdivisions may participate. G. Provide a disasterDisaster management system embodying all aspects of pre-disaster preparedness and post-disaster response. Fountain Hills Town Code 50 1996892.2 Section 3-65-2 Definitions In this article unless the context otherwise requires:The following words, terms and phrases, when used in this Article, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: A. "“Civil preparedness"Preparedness” means the organization, administration, trained manpower, facilities, equipment, material, supplies, programs, emergencyEmergency plans, ability to execute emergencyEmergency plans and all other measures necessary and incidental thereto relating to disasterDisaster prevention preparedness response and recovery by all governmental and private sector agencies to protect or save health, life or property. B. "“Director"” means the Director of Civil PreparednessTown Manager or authorized designee. C. "“Disaster"” means the occurrence or imminent threat of widespread or severe damage, injury or loss of life or property or extreme peril to the safety of persons or property, resulting from any natural or manmade causes, including but not limited to fire, flood, earthquake, wind, storm, blight, drought, famine, infestation, air contamination, epidemic, explosion, riot or other acts of civil disobedience which endanger life or property, or hostile military or paramilitary action. D. "“Emergency"” means the existence of a disasterDisaster within the townTown limits requiring immediate action by the emergency forcesEmergency Forces of the townTown. E. "“Emergency forces"Forces” means all townTown governmental and private sector agencies, volunteers, facilities, equipment, trained manpower and other resources required to perform civil preparednessCivil Preparedness functions. F. "“Local emergency"Emergency” means the existence of a disasterDisaster within the townTown limits, and the situation is or is likely to be beyond the capability and resources of the townTown as determined by the mayorMayor and which requires the combined efforts of other political subdivisions. G. "“Regulations"” means the orders, rules and emergencyEmergency procedures deemed essential for civil preparednessCivil Preparedness. H. "“State of emergency"Emergency” means the duly proclaimed existence of a disasterDisaster within the state except a disasterDisaster resulting in a stateState of war emergencyWar Emergency which is or is likely to be beyond the capabilities and resources of any single county, city or town and requires the combined efforts of the state and the political subdivision. I. "“State of war emergency"War Emergency” means the situation which exists immediately whenever this nation is attacked or upon receipt by this state of a warning from the federal government indicating that such an attack is imminent. Local emergency"Emergency” Fountain Hills Town Code 51 1996892.2 means the existence of a disasterDisaster within the townTown limits, and the situation is or is likely to be beyond the capability and resources of the townTown as determined by the mayorMayor and which requires the combined efforts of other political subdivisions. Fountain Hills Town Code 52 1996892.2 Section 3-65-3 Civil Preparedness Organization The town managerTown Manager is hereby authorized and directed to create a civil preparednessCivil Preparedness organization. The director of civil preparedness shall be appointed by the mayor. and shall serve as the Director of the organization until he appoints a qualified professional to act in this capacity. Section 3-65-4 Powers and Duties A. The councilCouncil: 1. Shall have the power to make, amend and rescind regulationsRegulations, not inconsistent with regulationsRegulations promulgated by the governorGovernor, necessary for civil preparednessCivil Preparedness, which regulationsRegulations shall have the full effect of this articleArticle when a copy is filed in the office of the clerkTown Clerk. Existing ordinances and regulations, or ordinances and regulations issued under authority of A.R.S.ARIZ. REV. STAT., Title 26, Chapter 2, in conflict therewith, are suspended during the time and to the extent that they are in conflict. 2. May appropriate and expend funds, make contracts, obtain and distribute equipment, materials and supplies for civil preparednessCivil Preparedness purposes. 3. In the absence of specific authority in state emergency plans and procedures, the councilCouncil shall take emergency measures as deemed necessary to carry out the provisions of A.R.S.ARIZ. REV. STAT., Title 26, Chapter 2. 4. In a stateState of war emergencyWar Emergency the councilCouncil may waive procedures and formalities required by law pertaining to the performance of public work, entering into contracts, incurring obligations, employing permanent and temporary workers, utilizing volunteer workers, renting equipment, purchasing and distributing supplies, materials and facilities and appropriating and expending public funds when the councilCouncil determines and declares that strict compliance with such procedures and formalities may prevent, hinder or delay mitigation of the effects of the stateState of war emergencyWar Emergency. The townTown shall be exempt during such emergencyEmergency from budget limitations prescribed by Article IX, Section 20 of the State Constitution. B. The mayorMayor: 1. In addition to the powers granted by other provisions of the law or townTown ordinance, the mayorMayor may, by proclamation, declare an emergencyEmergency or a local emergencyLocal Emergency to exist. The proclamation may be rescinded by a majority of the councilCouncil after twenty-four hours. Fountain Hills Town Code 53 1996892.2 Fountain Hills Town Code 54 1996892.2 2. During an emergency or local emergencyEmergency or Local Emergency, the mayorMayor shall govern by proclamation and shall have the authority to impose all necessary regulationsRegulations to preserve the peace and order of the townTown including, but not limited to: a. Imposition of curfews in all or in a portion of the town;Town. b. Ordering the closing of any business;. c. Denying public access to any public building, street or other public place;. d. Calling upon regular or auxiliary law enforcement agencies and organizations within or without the townTown for assistance. C. The directorDirector: 1. The directorDirector is responsible in non-emergency periods to act on behalf of the mayorMayor and councilCouncil to develop a readiness plan for the town's civil preparednessTown’s Civil Preparedness and for coordinated operations in disasterDisaster situations. 2. During emergencies, the directorDirector shall act as the principal advisor or aide to the mayorMayor on emergencyEmergency operations. His major responsibility is to assure coordination among emergency forcesEmergency Forces and with higher and adjacent governments, by assuring that the emergencyEmergency operation center functions effectively. He shall assist the mayorMayor in the execution of operations, plans and procedures required by the emergencyEmergency. 3. The directorDirector shall prepare a comprehensive disasterDisaster basic plan which shall be adopted and maintained by resolution of the councilCouncil upon the recommendations of the directorDirector. In the preparation of this plan as it pertains to townTown organization, it is the intent that the services, equipment, facilities and personnel of all existing departments and agencies be used to the fullest extent. 4. The disasterDisaster plan shall be considered supplementary to this articleArticle and have the effect of law whenever emergencies, as defined in this articleArticle, have been proclaimed. Section 3-65-5 Mutual Aid In periods of local emergencyLocal Emergency, as declared pursuant to this articleArticle, the townTown is hereby granted full power to provide mutual aid to any affected area in accordance Fountain Hills Town Code 55 1996892.2 with local ordinances, resolutions, emergency plans or agreements therefore. The townTown may request from state agencies mutual aid including personnel, equipment and other available resources to assist the townTown during the local emergencyLocal Emergency in accordance with emergency plans or at the direction of the governorGovernor. Fountain Hills Town Code 56 1996892.2 Section 3-65-6 Immunity of Town and Representatives Thereof A. The townTown shall not be liable for any claim based upon the exercise or performance, or the failure to exercise or perform a discretionary function or duty on the part of the townTown or any employee of the townTown, except willful misconduct, gross negligence or bad faith of any such employee, in carrying out the provisions of A.R.S.ARIZ. REV. STAT., Title 26, Chapter 2. B. The immunities from liability, exemptions from laws, ordinances and rules, all pensions, relief, disability workmen'’s compensation and other benefits which apply to the activity of officers, agents or employees of the townTown when performing their respective functions within the limits of the townTown shall apply to them to the same degree and extent while engaged in the performance of any of their functions and duties extraterritorially under the provisions of this articleArticle, excepting willful misconduct, gross negligence or bad faith. C. Volunteers duly enrolled or registered for services in a local emergencyLocal Emergency, a stateState of emergencyEmergency or a stateState of war emergencyWar Emergency in carrying out, complying with or attempting to comply with, any regulationsRegulations issued pursuant to A.R.S.ARIZ. REV. STAT., Title 26, Chapter 2 or any local ordinance, or performing any of their authorized functions or duties, or training for the performance of their authorized functions or duties, shall have the same degree of responsibility for their actions and enjoy immunities as officers and employees of the state and its political subdivisions performing similar work. Section 3-65-7 Violations It is unlawful for any person to violate any provision of this articleArticle or to refuse or willfully neglect to obey any lawful regulation or order issued as provided in this articleArticle. This provision, however, does not apply to the refusal of any private organization or members thereof to participate in an emergency, local emergency or stateEmergency, Local Emergency or State of emergencyEmergency as defined by this articleArticle. Document comparison by Workshare Compare on Tuesday, November 12, 2013 2:18:30 PM Input: Document 1 ID interwovenSite://GRPHX_SQL/Phoenix/2074186/1 Description #2074186v1<Phoenix> - CODE - CH 3 current code as of 11-12-13 Document 2 ID interwovenSite://GRPHX_SQL/Phoenix/1996892/2 Description #1996892v2<Phoenix> - Code - Town Code Procurement Chapter 3 v2 (AJM 10.24.13) Rendering set Standard Legend: Insertion Deletion Moved from Moved to Style change Format change Moved deletion Inserted cell Deleted cell Moved cell Split/Merged cell Padding cell Statistics: Count Insertions 698 Deletions 488 Moved from 15 Moved to 15 Style change 0 Format changed 0 Total changes 1216 1996892.2 Amendments to Chapter 3 of the Town Code November 21, 2013 Fountain Hills Town Code 1996892.2 Chapter 3 ADMINISTRATION Articles: 3-1 OFFICERS IN GENERAL 3-2 MERIT SYSTEM 3-3 PROCUREMENT 3-4 DISPOSITION OF PROPERTY 3-5 CIVIL PREPAREDNESS AND DISASTER Fountain Hills Town Code 2 1996892.2 Article 3-1 OFFICERS IN GENERAL Sections: 3-1-1 Town Manager 3-1-2 Town Attorney 3-1-3 Town Presiding Judge 3-1-4 Town Clerk 3-1-5 Town Marshal/Law Enforcement Agent 3-1-6 Department Directors 3-1-7 Additional Officers 3-1-8 Vacancies; Deputies; Holding More than One Office 3-1-9 Additional Powers and Duties Section 3-1-1 Town Manager A. Office Created. The office of the Town Manager is hereby created and established. The Town Manager shall be appointed by the Council on the basis of executive and administrative qualifications with special reference to actual experience in or knowledge of accepted practice in respect to the duties of office as hereinafter set forth; and he shall hold office for and at the pleasure of the Council. B. Eligibility. Residence in the Town at the time of appointment shall not be required as a condition of appointment. However, within six months from the date of appointment, the Town Manager must become a resident of the Town, unless an extension of time is granted by the Council. C. Bond. Unless a blanket bond or other equivalent coverage is provided by the Town, prior to taking office, the Town Manager shall execute and file an official bond, enforceable against the principal and his sureties, conditioned on the due and faithful performance of his official duties, payable to the Town and to and for the use and benefit of the Town or any person who may be injured or aggrieved by the wrongful act or default of such officer in his official capacity. Bonds shall be in such sum as set forth in ARIZ. REV. STAT. § 38-251 et seq., as amended, and the premium for such bonds shall be paid by the Town. D. Absence. The Deputy Town Manager shall perform the duties of the Town Manager during his absence. In the event the Deputy Town Manager is unable or unavailable to perform such duties, the Town Manager may appoint such other Town Employee as he deems appropriate to serve as the acting Town Manager. If the Town Manager is unable to make such appointment to perform the duties of Town Manager during the temporary absence or disability of the permanent Town Manager, the Council may designate a qualified administrative officer to perform the Town Manager’s duties. Fountain Hills Town Code 3 1996892.2 E. Removal. The Town Manager may be removed by the Council by a majority vote of its members immediately for cause or upon such notice as is set forth in the Town Manager’s employment contract without cause. As used herein and as it relates to the termination of employment of the Town Manager, the term “for cause” shall mean malfeasance in office or willful breach or habitual neglect of duties, as such duties are described in this Section, illegal activity within or without the conduct of this office or any other cause set forth in the Town Manager’s employment contract. F. Resignation. The Town Manager shall give such notice as set forth in his employment contract prior to resigning the office of Town Manager. G. Compensation. The Town Manager shall receive such compensation as the Council shall from time to time determine, and said compensation shall be a proper charge against such funds of the Town as the Council shall designate. The Town Manager shall be reimbursed for all sums necessarily incurred or paid by him in the performance of his duties, or incurred when traveling on business pertaining to the Town as approved by the Council; reimbursement shall be made only when a verified, itemized claim, setting forth the sums expended for which reimbursement is requested, has been presented and approved by the Town Finance Division. H. Powers and Duties. The Town Manager shall be the administrative officer of the Town government and shall be responsible to the Council for the proper administration of all affairs of the Town under the specific direction and control of the Council. In addition to the general powers as the chief administrative officer and not as a limitation thereon, it shall be the Town Manager’s responsibility and authority: 1. To see that all laws and ordinances of the Town are duly enforced, and that all franchises and privileges granted by the Town are faithfully observed. 2. To appoint and, when necessary, suspend or remove all employees of the Town, except those officers appointed by the Council. All appointments and removals shall be based upon merit and upon the qualifications and disqualifications of such employee without regard to any political belief or affiliation. 3. To coordinate the administrative functions and operations of the various departments, divisions, services, boards, committees and commissions of the Town government, and on its behalf to carry out policies, rules, regulations and ordinances adopted by it, relating to the administration of the affairs of such departments, divisions, services, boards, committees or commissions. Such powers and duties to be subject to the following provisions: a. That the organizational structure under which municipal services are performed shall be specified in an organization chart approved by the Council. Fountain Hills Town Code 4 1996892.2 b. That prior to any creation, combination, consolidation or deletion of any positions of employment, written job descriptions or amendments thereto shall have been approved by the Council. 4. To attend all meetings of the Council unless excused therefrom and to attend, or designate appropriate Town Staff to attend all board, commission and committee meetings. 5. To recommend to the Council for adoption such matters, ordinances and resolutions as are necessary. 6. To recommend to the Council at periodic intervals changes needed in the Town Code. 7. To keep the Council at all times fully advised as to the financial conditions and needs of the Town. To provide whatever reports to the Council as it may deem necessary. 8. To prepare and submit to the Council a proposed annual budget for the next fiscal year, including financial projections for the subsequent four fiscal years. 9. To analyze the functions, duties and activities of the various departments, divisions, services, boards, committees and commissions of the Town government and of all employees thereof, and to make such recommendations to the Council to achieve the highest degree of efficiency in the overall operation of the Town government. 10. To investigate all complaints in relation to matters concerning the administration of the Town, its departments and all services provided to it by contract with another entity. 11. To exercise general supervision over all public buildings, public parks and other public property that are under the control and jurisdiction of the Council. 12. To devote as much time to the duties of the office of Town Manager and the interest of the Town as necessary. 13. To perform such other duties and exercise such other powers as may be delegated from time to time by ordinance, resolution or affirmative vote of the Council. I. Council to Act Through Town Manager. Except for the purpose of inquiry, the Council and its members shall deal with the administrative branch solely through the Town Manager, and neither the Council nor any member thereof shall give orders to any subordinate of the Town Manager either publicly or privately. Fountain Hills Town Code 5 1996892.2 Section 3-1-2 Town Attorney The Town Attorney shall be appointed by and serve at the pleasure of the Council and shall act as the legal counselor and advisor of the Council and, as such, shall give his opinion in writing when requested. He shall draft or supervise the drafting of all deeds, contracts, conveyances, ordinances, resolutions and other legal instruments before final approval or acceptance thereof by the Council. He shall ensure that the Town is represented by legal counsel in the prosecution or defense of all suits, actions or causes where the Town is a party and shall report to the Council, when required, the condition of any suit or action to which the Town is a party. Section 3-1-3 Town Presiding Judge The Town Presiding Judge shall be appointed by the Council and shall be the presiding officer of the municipal court. He shall perform those functions necessary to the maintenance of the municipal court as provided by state law and shall have the powers and duties as set forth in Chapter 5 of this Code. Section 3-1-4 Town Clerk A. Records. The Town Clerk shall be the Town’s custodian of records and shall keep a true and correct record of all business transacted by the Council and any other records that either pertain to the business of the Town or that the Council directs. The Town Clerk or authorized designee shall keep such records in the manner set forth in the records retention process approved for Arizona municipalities by the Arizona State Library, Archives and Public Records Division and pursuant to any other applicable statutory requirements. B. Public Inspection of Records. The Town Clerk shall keep convenient for public inspection all public records and public documents under his control, as provided by state law. C. Minutes. The Town Clerk shall prepare or cause to be prepared all minutes of Council proceedings and ensure their correctness and accuracy. D. Ordinances, Resolutions, Budgets and Notices. The Town Clerk or authorized designee shall process, record, file, publish and, if required by state statute, post all ordinances, resolutions, budgets and notices that may be passed by the Council. E. Election Official. The Town Clerk shall be the Town election official and perform those duties required by state law. F. Administrative Duties. The Town Clerk shall perform those administrative responsibilities and duties that are conferred upon him by the Town Manager in addition to those specified in this Code. Fountain Hills Town Code 6 1996892.2 Section 3-1-5 Town Marshal/Law Enforcement Agent The Town Manager or authorized designee shall serve as the Town Marshal/Law Enforcement Agent and shall provide for enforcement of Town codes, ordinances or other regulations. The Town shall have the authority to enter into an intergovernmental agreement or contract for the provision of law enforcement services. Section 3-1-6 Department Directors A. There are hereby created the following departments, each of which shall be under the immediate direction of a department director or the Town Manager, as designated in the adopted organizational chart: 1. Administration Department 2. Community Services Department 3. Development Services Department 4. Fire Department 5. Police Department B. Each department director shall be selected by and report to the Town Manager; provided, however, that selection of the department directors for the Police and Fire Departments shall be in accordance with the contracts for those services. Department directors, except for Police and Fire, shall be subject to the merit system. Section 3-1-7 Additional Officers The Council may appoint and remove from time to time such other officers as it may deem necessary and that are not provided for in this Code or state statute. Section 3-1-8 Vacancies; Deputies; Holding More than One Office A. A vacancy in any office not subject to Council appointment shall be filled by the Town Manager. B. The powers and duties of any of the offices enumerated in Section 3-1-6 may be performed by a deputy upon authorization of the Town Manager. Fountain Hills Town Code 7 1996892.2 C. It shall be lawful for one person to hold more than one office, but such person shall be compensated only for one office to which he has been regularly appointed, unless specified otherwise by the Council. Section 3-1-9 Additional Powers and Duties In addition to any powers and duties prescribed in this Code, each officer shall have such further powers, perform such further duties and hold such other offices as the Council may provide. Fountain Hills Town Code 8 1996892.2 Article 3-2 MERIT SYSTEM Sections: 3-2-1 Creation and Scope 3-2-2 Conditions of Employment; Non-discrimination 3-2-3 Rules and Regulations 3-2-4 Political Activity Section 3-2-1 Creation and Scope A. There is hereby created and adopted a merit system governing the employees of the Town, except those enumerated in this Section, for the purpose of regulating the conditions of employment and removal of employees of the Town. B. The merit system adopted by this Article shall not apply to elected officials; officers subject to appointment and removal by the Council; consultants hired on a contract basis; contract employees; temporary employees; volunteer workers who receive no regular compensation from the Town and members of boards, committees and commissions established by the Council. Section 3-2-2 Conditions of Employment; Non-discrimination The appointment, promotion and tenure of all employees identified in Section 3-2-1 shall be conditioned solely on merit, fitness and the satisfactory performance of the duties and responsibilities assigned. No employee or applicant for employment shall be discriminated against on the basis of age, race, color, religion, gender, political affiliation, disability or impairment. Section 3-2-3 Rules and Regulations The Council shall adopt by ordinance or resolution written rules and regulations to give effect to this Article. Section 3-2-4 Political Activity A. All employees will remain free from any political activity while on duty. B. An employee may exercise his rights as a citizen to vote and to express opinions as an individual citizen, but not as a representative of the Town. Fountain Hills Town Code 9 1996892.2 C. No paid employee will seek election to public office with the Town while still employed by the Town. D. No paid employee will use his position to sell, solicit or distribute any campaign material during working hours or while in a uniform or with visible identification used by or identified with the Town government. E. No paid employee will use his position to introduce, guide or recommend any candidate for public office on Town property. Fountain Hills Town Code 10 1996892.2 Article 3-3 PROCUREMENT PARTS: Part I GENERAL PROVISIONS Part II ETHICS; VIOLATIONS; UNAUTHORIZED PURCHASES Part III FORMAL BIDDING PROCEDURES Part I GENERAL PROVISIONS Sections: 3-3-1 Purposes 3-3-2 Policies 3-3-3 Application; Exclusions 3-3-4 Definitions 3-3-5 Budgeting 3-3-6 Procurement Agent 3-3-7 Procurement by Dollar Value; Execution 3-3-8 On-line Bidding 3-3-9 Purchase Orders 3-3-10 (Reserved) Section 3-3-1 Purposes The purposes of this Article are to: A. Establish standard policies and practices for the Procurement of Materials and Services and permit the continued development of Procurement policies and practices. B. Serve as an aid in providing all Materials and Services at the appropriate time, place, quantity, purpose and Price to meet the operational requirements of the Town. C. Ensure the fair and equitable treatment of all Persons who participate in the Procurement system of the Town and foster effective broad-based competition within the free enterprise system. Fountain Hills Town Code 11 1996892.2 Section 3-3-2 Policies The Town shall procure all Materials and Services deemed necessary for the delivery of quality service to its residents using competitive bids, Proposals, Vendor quotations or direct purchases. A complete history of each purchase of Materials or Services will be maintained through the use of purchase requisitions, purchase orders, check requests, petty cash vouchers and any other appropriate forms as authorized by this Article and as set forth in the Procurement Policy. Every effort will be made to obtain all Materials and Services at the most economical prices available. All Procurement Contracts shall be drawn by or under the supervision of the Town Attorney. Section 3-3-3 Application; Exclusions A. This Article shall apply to every expenditure of public monies by the Town, except as otherwise specified in this Article. Nothing in this Article shall prevent any Town department from complying with the terms and conditions of any grant, gift, bequest or cooperative agreement. In the event of a conflict between the terms of this Article and the terms of any federal or state grant, the terms of any such grant shall govern. B. This Article shall not apply to the following: 1. Contracts between the Town and the federal government, the State of Arizona and political subdivisions of the State of Arizona. 2. Contracts for expert services, if the purpose of such services is to provide for Professional Services relating to an existing or probable lawsuit in which the Town is or may become a party or to Contracts for special investigative Services for law enforcement or administrative investigation purposes. 3. Agreements negotiated by legal counsel representing the Town in settlement of pending litigation or threatened litigation. 4. Development agreements, as defined in ARIZ. REV. STAT. § 9-500.05, as amended. 5. Contracts for the purchase or sale of real property and ancillary services related thereto, such as title insurance, appraisals or environmental assessments to the extent that they are negotiated in connection with a Contract for purchase or sale of real property. Fountain Hills Town Code 12 1996892.2 Section 3-3-4 Definitions The following words, terms and phrases, when used in this Chapter, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: A. “Best Interests of the Town” means advantageous to the Town. B. “Bid” means a price-based Proposal that is submitted in response to an Invitation for Bids. C. “Bid or Proposal Guarantee” means a form of security that indemnifies the Town against a successful bidder’s failure to execute the Contract documents and proceed with performance. D. “Bid Opening” means the date and time set forth in the Solicitation for opening of sealed bids. E. “Business” means any Person authorized to do business in the State of Arizona. F. “Change Order” means a written order signed by an authorized agent of the Town that directs the Contractor to make changes that are authorized by the Town. G. “Closing Date” means the date and time set forth in a Solicitation for the receipt of Bids or Proposals by the Town, after which no Bid or Proposal shall be considered. H. “Confidential Information” means that portion of a Bid, Proposal, offer, Specification or protest that contains information that the Person submitting the information believes should be withheld, provided (i) such Person submits a written statement advising the Town of this belief at the time of the submission and (ii) the information is so identified wherever it appears. I. “Construction” means the process of building, altering, repairing, improving or demolishing any public structure or building or other public improvements of any kind to any public real property, but does not include the routine operation, routine repair or routine maintenance of existing facilities, structures, buildings or real property or demolition projects costing less than $200,000.00. J. “Contract” means all types of Town agreements, regardless of what they may be called, for the Procurement of Materials and Services, the demolition or Construction of public facilities, or the acquisition and disposal of real and personal property. K. “Contractor” means any Person having a Contract with the Town. L. “Cooperative Purchasing” means Procurement conducted by, or on behalf of, more than one public Procurement unit. M. “Data” means documented information, regardless of form or characteristic. Fountain Hills Town Code 13 1996892.2 N. “Days” shall mean calendar days unless otherwise specified. O. “Debarment” means disqualification by the Procurement Agent of a Vendor to receive the award of a Contract with the Town for a specified period of time, not to exceed three years, commensurate with the seriousness of the offense causing the disqualification, which may result from misconduct or failure or inadequacy of performance. P. “Emergency” means a threat to the public health, welfare, property or safety. Q. “Employee” means an individual drawing a wage or a salary through the payroll process of the Town, whether elected or not. R. “Interested Party” means an actual or prospective bidder or Offeror whose economic interest may be affected substantially and directly by the issuance of a Solicitation, the award of a Contract, or by the failure to award a Contract. Whether an actual or prospective bidder or Offeror has an economic interest will depend upon the circumstances of each case. S. “Invitation for Bids” means all documents including those attached or incorporated by reference, utilized for soliciting bids in accordance with Section 3-3-20 below. T. “Materials” means all personal property, including equipment, supplies, printing, insurance and leases of personal property. U. “Offeror” or “Respondent” means any Person that responds to an Invitation for Bids, Request for Proposals, Solicitation, offer, or any other invitation or request by which the Town invites a Person to participate. V. “Open Market Purchase” means procedures used for Procurement of Materials and Services readily available to the general public on the open market which, by their nature, are subject to competition from multiple competing Vendors. W. “Payment Bond” means a form of security required to be provided by a Contractor for the protection of claimants supplying labor and/or Materials to the Contractor or its Subcontractors. X. “Performance Bond” means a form of security provided by a Contractor that secures the Contractor’s obligation to properly complete its work in accordance with the Contract. Y. “Person” means any individual, corporation, partnership, sole proprietorship, joint stock company, joint venture, limited liability company or any other private legal entity, governmental entity, union, committee, club, other organization or group of individuals. It includes a trustee, receiver or similar representative. Z. “Price” means the total expenditure for a defined quantity of a Material or Service. Fountain Hills Town Code 14 1996892.2 AA. “Procurement” means the purchasing, renting, leasing or otherwise obtaining any Material or Service. The term includes all functions that pertain to the obtaining of any Material or Service, including description of requirements, selection and Solicitation of sources, preparation and award of Contract, and all phases of Contract administration. BB. “Procurement Agent” means the Town Manager or authorized designee. CC. “Procurement Policy” means the administrative policy created by the Town Manager to assist with the implementation of this Article. DD. “Professional Services” means those services requiring specialized knowledge, education, skill or expertise and where the qualifications of the Person(s) rendering the services are of primary importance. Professional Services shall include, but not be limited to, services provided by architects, attorneys, accountants, clergy, construction and project managers, dentists, design professionals, engineers, geologists, physicians, nurses, psychologists, teachers, veterinarians and health care providers, that provide a combination of professional and paraprofessional services or any other professions and services defined as Professional Services by state law. EE. “Proposal” means a written offer, solicited or unsolicited, for consideration as a basis for awarding or modifying a Contract. FF. “Request for Proposal” means all documents, including those attached or incorporated by reference, utilized for soliciting Proposals in accordance with Section 3-3-21 below. GG. “Request for Qualifications” means all documents, including those attached or incorporated by reference, utilized for soliciting qualifications-based Proposals in accordance with Section 3-3-23 below. HH. “Responsible Bidder” or “Responsible Offeror” means a bidder or Offeror who has (i) the capability to fully perform the Contract requirements and (ii) the reliability that will ensure good faith performance. II. “Responsive Bidder” or “Responsive Offeror” means a bidder or Offeror who has submitted a bid or Proposal that conforms in all material aspects to the Solicitation. JJ. “Service” means the furnishing of labor, time or effort by a Contractor, not involving the delivery of a specific end product other than reports that are merely incidental to the required performance. This term does not include “Professional Services” provided by those persons as defined in this Section. KK. “Solicitation” means an Invitation for Bids, a Request for Proposals, a Request for Qualifications or any other invitation or request by which the Town invites a Person to participate in a Procurement. Fountain Hills Town Code 15 1996892.2 LL. “Specification” means any description of the physical characteristics, functional characteristics, or the nature of a Material or Service item. The term may include a description of any requirements for inspecting, testing, or preparing a Material or Service item for delivery. MM. “Subcontractor” means a Person that contracts to perform work or render Services to a Contractor or to another Subcontractor as a part of a Contract with the Town. NN. “Suspension” means an action taken by the Procurement Agent disqualifying a Person or entity from participation in Town Procurement. OO. “Town” means the Town of Fountain Hills, an Arizona municipal corporation. PP. “Vendor” means any Person operating a Business that has, or proposes to, provide a Material or Service to the Town. Section 3-3-5 Budgeting A. Procurements shall be contracted for or made only where sufficient funds have been budgeted in the year in which funds have been appropriated. B. Budgeted line items specifically identifying one-time operational or recurring Materials or Services that have been approved by the Council in the review and adoption of the annual Town budget, and for which an award is within the allocated expenditure set forth in the budget, may be approved by the Procurement Agent without further Council approval. Awards that exceed the allocated expenditure or deviate from the identified description and/or scope shall require Council approval. Section 3-3-6 Procurement Agent The Procurement Agent shall (i) serve as the Contract administrator for the Town and as such shall supervise the execution and completion of all Contracts entered into by or on behalf of the Town and (ii) have general supervision, responsibility and authority to: A. Procure, contract for and execute agreements in any amount less than $30,000.00 for Materials and Services, including rentals, Service agreements, and leases needed by any Town department, in accordance with this Article. B. Approve and sign Change Orders to Contracts authorized by the Council in an amount equal to the lesser of 10% of the Contract amount or $30,000.00. C. Establish and amend all policies, regulations, forms, procedures and rules necessary and proper to implement the provisions of this Article. Fountain Hills Town Code 16 1996892.2 D. Have the authority to suspend or debar Vendors. E. Centralize Procurement, consistent with this Article, by which Materials and Services for all Town departments are purchased. F. Inform Town Employees and contractors of the ethical standards for public contracting. G. Designate another representative of the Town to have the authority to perform any or all of the above tasks. Section 3-3-7 Procurement by Dollar Value; Execution A. Any purchase not exceeding $30,000.00 may be made by the Procurement Agent in accordance with this Article and the Procurement Policy adopted pursuant to this Article. Contract requirements shall not be artificially divided so as to create multiple purchases of lesser amounts. Except as set forth in Subsections 3-3-5(B) and 3-3-6(B) above, any purchase exceeding $30,000.00 shall be authorized by the Council. When it is advantageous to the Town, annual Contracts should be initiated for Services and Materials regularly purchased. B. The Procurement Agent may sign Contracts (1) for purchases not exceeding $30,000.00 without Council approval and (2) in any amount after such Contract has been approved by the Council either as part of the annual budget or as a separate item. The Mayor may sign any Contracts of any amount as long as such Contracts have been approved by the Council. Section 3-3-8 On-line Bidding A. If the Procurement Agent determines that electronic, on-line bidding is in the Best Interests of the Town and the competitive Procurement process is facilitated thereby, the Procurement Agent may use on-line bidding to obtain bids electronically for the purchase of Materials and Services. B. An on-line bidding Solicitation must designate an opening date and time. C. The Closing Date and time for an on-line Solicitation may be fixed or remain open depending on the structure of the item being bid on-line. Information regarding the Closing Date and time must be included in the Solicitation. At the opening date and time, the Procurement Agent must begin accepting on-line bids and must continue accepting bids until the bid is officially closed. D. All on-line bids must be posted electronically and updated on a real-time basis. Fountain Hills Town Code 17 1996892.2 E. The Procurement Agent may: 1. Require bidders to register before the opening date and time and, as part of that registration, require bidders to agree to any terms, conditions or other requirements of the Solicitation. 2. Prequalify bidders and allow only those bidders who are prequalified to submit bids on-line. F. All bids submitted electronically through an on-line bidding process are public information and are subject to the same public disclosure laws and timelines that govern bids received through the sealed bid process. G. All remedies available to the Town and to bidders through the sealed bid process under this Article are also available to the Town and to bidders in an on-line bidding process. Section 3-3-9 Purchase Orders The Procurement Agent shall provide forms of purchase orders that shall be used for the purchase of all Materials and Services for or on behalf of the Town. Open purchase orders may be utilized for the routine purchase of regularly-supplied items, provided that an open purchase order shall be limited to a single source and shall not be valid for more than $10,000 in the aggregate. Section 3-3-10 (Reserved) Fountain Hills Town Code 18 1996892.2 Part II ETHICS; VIOLATIONS; UNAUTHORIZED PURCHASES Sections: 3-3-11 Ethical Standards 3-3-12 Ethical Violations 3-3-13 Unauthorized Purchases; Violation, Liability, Enforcement 3-3-14 (Reserved) 3-3-15 (Reserved) Section 3-3-11 Ethical Standards It is the policy of the Town for Employees to maintain high standards of honesty, integrity, impartiality, courtesy and conduct. These standards apply to Town Employees internally as well as when interacting with citizens and Vendors. Such policy is implemented by prescribing essential standards of ethical conduct without creating unnecessary obstacles to providing the Town with Materials or Services. To further this policy, the Town has promulgated ethical standards as set forth below. The Procurement Agent is authorized to take steps to ensure compliance with the following standards: A. It is an affirmative obligation for Town Employees to perform their responsibilities in such a manner to ensure fair competitive access to governmental Procurement by responsible Vendors. B. No Employee of the Town shall engage in acts that, in the reasonable judgment of the Procurement Agent, would result in a loss of confidence in the integrity of the Town’s Procurement operation. Such acts include, but are not limited to (1) receipt of gifts or services of more than a nominal value from a prospective Vendor, (2) statements to a Vendor that it will be awarded the Contract based on personal knowledge or relationships with Town Employees without an evaluation of its submittal, (3) failure of a Town Employee sitting on a review committee to disclose any prior or current business or financial relationship with a proposed Vendor, (4) criticism of one Vendor to another Vendor who is competing for the same Procurement prior to bid or Proposal award or (5) any acts similar to those outlined in clauses (1) through (4) of this Subsection. For purposes of this Article, “nominal value” is defined as $25.00 or less from any single party during any single calendar year. C. Town Employees responsible for participation in Procurement by virtue of their positions shall take reasonable efforts to ensure that Contractors doing business with the Town are expected to observe these same ethical standards. Violation of these standards shall constitute grounds for termination of a Contract with the Town and Debarment of the Contractor from doing any further business with the Town. Fountain Hills Town Code 19 1996892.2 Section 3-3-12 Ethical Violations A. In addition to any applicable state laws, it is a violation of this Article: 1. For any Person to attempt to or influence any Town Employee to violate the provisions of ethical conduct set forth in this Article. 2. For any Person preparing Specifications or plans pursuant to this Article or any policy or procedure of the Town to receive any direct pecuniary benefit from the utilization of such plans or Specifications, other than compensation owed for preparation of the Specifications or plans. 3. For any Employee or agent acting on behalf of the Town to directly or indirectly participate in or benefit or receive any pecuniary benefit from a Procurement in violation of state or federal law. 4. For any Person to offer, give or agree to give any Employee or former Employee of the Town or for any Employee or former Employee of the Town to solicit, demand, accept, or agree to accept from another Person, any valuable thing or valuable benefit that would not accrue in the performance of his official duties or an offer of employment in connection with any decision, approval, disapproval, recommendation, preparation of any part of a program requirement or a purchase request, influencing content of any Specification or Procurement standard, rendering of advice, investigation, auditing or in any advisory capacity in any proceeding or application request for ruling, determination, claim or controversy, or other particular matter, pertaining to any program requirement of a Contract or subcontract, or to any Solicitation or Proposal therefore. No action taken for violations of this Subsection shall be construed to preclude criminal prosecution of an Employee or former Employee or any other Person under the provisions of state or federal law. 5. For any payment, gratuity or offer of employment to be made by or on behalf of a Subcontractor under a Contract to the prime Contractor or higher tier Subcontractor or any Person associated therewith, as an inducement for the award of a subcontract or order. Violation of this standard shall constitute grounds for termination of a Contract with the Town and Debarment of the Vendor from doing any further business with the Town. This information shall be included as a term and condition of all Town Contracts. 6. For a Person to be retained, or to retain a Person, to solicit or secure a Town Contract upon an agreement or understanding for a commission, percentage, brokerage or contingent fee, except for retention of bona fide established sales and brokerage agencies for the purpose of securing business. Fountain Hills Town Code 20 1996892.2 7. For any Employee who is participating directly or indirectly in a Procurement process to become the Employee of any Person under Contract with the Town concerning any matters that the Employee participated in during the same Procurement process for a period of twelve months following his employment with the Town. 8. For any Employee or former Employee of the Town to disclose or use Confidential Information acquired by the Employee in the performance of his official duties for the actual or anticipated pecuniary benefit of any Person. B. It is no defense to a violation of this Section that the Employee to whom a benefit or offer of employment was made, or agree to be made, was not qualified to act in the desired manner. C. An Employee or Person may violate this Section by intentionally or knowingly engaging in a violation or by recklessly or negligently engaging in a violation. The Person’s state of mind shall only be considered in imposing the penalty for such violation. Section 3-3-13 Unauthorized Purchases; Violation, Liability, Enforcement A. Except as provided in this Article, it shall be improper for any Town Employee to order the purchase of Materials or Services or to attempt to enter into Contracts within the purview of this Article other than through the Procurement Agent. Purchase Orders or Contracts made contrary to the provisions hereof shall not be approved by the Procurement Agent and the Town shall not be bound thereby. Further, the Procurement Agent may impose discipline on Employees who violate this Article in accordance with the Town’s codes and personnel administrative regulations. B. A Person who knowingly contracts for or purchases any Materials, Services or Construction in a manner contrary to the requirements of this Article violates the ethical standards contained in this Article shall be personally liable for the recovery of all public monies paid, together with legal interest and all costs, attorney’s fees and damages arising out of the violation. Further, the Procurement Agent may impose discipline on Employees who (1) contracted for or purchased any Materials, Services of Construction in a manner contrary to the requirements of this Article or (2) engaged in violations of the provisions set forth in Sections 3-3-11 and 3-3-12 above in accordance with the Town’s codes and personnel administrative regulations. C. The Town Attorney shall assist the Procurement Agent or authorized designee in enforcing the provisions of this Article. Sections 3-3-14 – 3-3-15 (Reserved) Fountain Hills Town Code 21 1996892.2 Part III FORMAL BIDDING PROCEDURES Sections: 3-3-16 Applicability 3-3-17 Public Notice 3-3-18 Bid or Proposal Guarantee 3-3-19 Confidential Information 3-3-20 Invitation for Bids 3-3-21 Request for Proposals 3-3-22 Withdrawal or Cancellation of Bids or Proposals 3-3-23 Retention of Professional Services; Requests for Qualifications 3-3-24 Construction Contracts 3-3-25 Emergency Procurements 3-3-26 Sole Source Procurement 3-3-27 Cooperative Purchasing 3-3-28 Protests; Informal and Formal 3-3-29 Debarments and Suspensions 3-3-30 Acceptance of Work Completed 3-3-31 Attestation of Contracts by Town Clerk Section 3-3-16 Applicability The formal bidding process set forth in this Part shall be utilized for all purchases not designated as eligible for purchases under petty cash, Open Market Purchase or small purchase in the Procurement Policy; provided, however, that the formal bidding process set forth in this Part may be supplemented by the Procurement Policy. Informal purchases (petty cash, Open Market Purchase and small purchases) shall be governed by the Procurement Policy. Section 3-3-17 Public Notice A. Public notice of Invitations for Bids, Requests for Proposals or Requests for Qualifications shall be in a manner that is reasonable in the judgment of Procurement Agent given the commercial context of the Solicitation. The advertisement shall specifically state the character of the Town purchase contemplated. Notice may be given in any publication that is reasonably available to prospective bidders in the judgment of Procurement Agent. For purposes of this Article, reasonable notice shall be defined as (1) not less than five business days for an Invitation for Bids and (2) not less than 21 calendar Days for a Request for Proposals or a Request for Qualifications. B. Public notice shall also be provided in a manner that is reasonable in the judgment of the Procurement Agent in publications of limited circulation, with the intent to encourage participation of as many qualified Businesses as reasonably possible, including disadvantaged business enterprise firms. Fountain Hills Town Code 22 1996892.2 Section 3-3-18 Bid or Proposal Guarantee The Procurement Agent may require a Bid or Proposal Guarantee be submitted with any and all Bids or Proposals, and Performance Bonds and Payment Bonds be submitted prior to execution of any Contract. The Procurement Agent may waive the Bid or Proposal Guarantee requirement if he finds that the requirement will have a significant negative impact on the ability of disadvantaged business enterprises to compete for Town purchases or if he determines, in his reasonable discretion, that such waiver is in the Best Interests of the Town. Section 3-3-19 Confidential Information A. If a Person believes that a Bid, Proposal, Offer, or Specification contains information that should be withheld from public disclosure, a statement advising the Procurement Agent of this belief and the basis for exemption from such disclosure shall accompany this submission and the information shall be specifically identified wherever it appears. B. The Procurement Agent shall make a determination whether the information shall be subject to public disclosure and shall advise in writing the party submitting the information of the final determination. C. All information contained in the Proposals shall be deemed as temporarily exempt from public disclosure based on the Town’s need to avoid disclosure of contents prejudicial to competing Offerors during the process of negotiation. The Proposals shall not be open for public inspection until after Contract award. Except to the extent the Offeror designates, and the Town concurs, trade secrets or other proprietary Data contained in the Proposal shall remain exempt from public disclosure only to the extent permitted by law. Section 3-3-20 Invitation for Bids A. All Contracts of the Town shall be awarded by competitive sealed bidding except as otherwise provided in this Article or the Procurement Policy. B. An Invitation for Bids shall be issued and shall include Specifications and all contractual terms and conditions applicable to the Procurement. C. Bids shall be by sealed Proposals only and under such regulations as may be prescribed by the Procurement Agent. The Procurement Agent shall have the power to reject any or all bids, and to advertise for bids again. Fountain Hills Town Code 23 1996892.2 D. Bids shall be opened publicly in the presence of one or more witnesses at the time and place designated in the Invitation for Bids. The amount of each Bid, and such other relevant information as the Procurement Agent deems appropriate, together with the name of each bidder, shall be recorded; the record of Bids shall be open to public inspection immediately, but individual Bids shall be open to public inspection only after the Contract is awarded. E. Bids shall be unconditionally accepted without alteration or correction, except as authorized by this Article. Bids shall be evaluated based upon the requirements set forth in the Invitation for Bids, which may include criteria to determine acceptability such as inspection, testing quality, workmanship, delivery and suitability for a particular purpose. Those criteria that will affect the Bid Price and be considered in evaluation for award shall be objectively measurable, such as discounts, transportation costs and total or life cycle costs. The Invitation for Bids shall set forth the evaluation criteria to be used. No criteria may be used in Bid evaluation that is not set forth in the Invitation for Bids, this Article or the Procurement Policy. F. Correction or withdrawal of inadvertently erroneous bids before or after Bid Opening, or cancellation of awards or Contracts based on such bid mistakes, may be permitted where appropriate at the Town’s sole discretion. After Bid Opening, no changes in Bid Prices or other provisions of bids prejudicial to the interest of the Town or fair competition shall be permitted. In lieu of bid correction, a low bidder alleging a material mistake of fact may be permitted to withdraw its bid in the sole discretion of the Town and only if one of the following occurs: 1. The mistake is clearly evident on the face of the bid document but the intended correction bid is not similarly evident. 2. The bidder submits evidence that clearly and convincingly demonstrates that a mistake was made. All decisions to permit the correction or withdrawal of bids, or to cancel award or Contracts based on bid mistakes, shall be supported by a written determination made by the Procurement Agent. G. The Contract shall be awarded to the Offeror that is determined to be a Responsive Bidder and a Responsible Bidder and whose bid (1) is the lowest cost and (2) meets the requirements and criteria set forth in the Invitation for Bids. The amount of applicable transaction privilege or use tax of the Town shall be included in the bid prices and shall not be a factor in determining the net lowest bid. In the event the lowest responsive and responsible Bid for a Construction project exceeds available funds as certified by the Procurement Agent, and such bid does not exceed such funds by more than five percent, the Procurement Agent is authorized, when time or economic considerations preclude re-solicitation of work of a reduced scope, to negotiate an adjustment of the Bid Price with the low Responsive Bidder and Responsible Bidder in order to bring the bid within the amount of available funds. Any such negotiated adjustment shall be based only upon eliminating independent deductive items specified in the Invitation for Bids. Fountain Hills Town Code 24 1996892.2 H. When it is considered impractical to initially prepare a purchase description to support an award based on Price, an Invitation for Bids may be issued requesting the submission of unpriced offers to be followed by an Invitation for Bids limited to those bidders whose offers have been determined to be technically acceptable under the criteria set forth in the first Solicitation. I. All Vendors and contractors must be in compliance, at the time set for opening the bid, with all applicable (1) state, federal and county laws, rules and regulations and (2) Town codes, ordinances and regulations. Section 3-3-21 Request for Proposals A. When the Procurement Agent determines that the use of competitive sealed bidding is either not practicable or not advantageous to the Town, a Contract may be entered into by use of the competitive sealed Proposals or other approved methods that are defined as a Request for Proposals. B. Proposals shall be solicited through a written Request for Proposals. C. Proposals shall be submitted at the time and place designated in the Request for Proposals. D. As provided in the Request for Proposals, discussions may be conducted with Responsible Offerors who submit Proposals determined to be reasonably susceptible to being selected for award for the purpose of clarification to ensure full understanding of, and responsiveness to, the Solicitation requirements. Offerors shall be accorded fair treatment with respect to any opportunity for discussion and revision of Proposals and such revisions may be permitted after submissions and before the award for the purpose of obtaining best and final offers. In conducting discussions, there shall be no disclosure of any information derived from Proposals submitted by competing proposers. E. The award shall be made to the Offeror that is determined to be a Responsible Offeror and a Responsive Offeror whose Proposal is determined, in writing, to be the most advantageous to the Town and best meets the overall needs of the Town taking into consideration only the evaluation factors set forth in the Request for Proposals. The Request for Proposals shall state the relative importance of Price and other evaluation factors; specific numerical weighing is not required. The amount of applicable transaction privilege or use tax of the Town shall be included in the bid prices and shall not be a factor in determining the net lowest bid. F. The Contract file shall contain the basis upon which the award is made. G. All Vendors and Contractors must be in compliance, at the time set for opening the Proposal, with all applicable (1) state, federal and county laws, rules and regulations and (2) Town codes, ordinances and regulations. Fountain Hills Town Code 25 1996892.2 Section 3-3-22 Withdrawal or Cancellation of Bids or Proposals A. Prior to opening of the bids or Proposals, the Invitation for Bids or the Request for Proposals may be delayed or canceled, or any or all bids or Proposals may be rejected, in whole or in part, by the Procurement Agent, when determined to be in the Best Interests of the Town. B. After opening of the bids or Proposals, the Procurement Agent may reject all bids or Proposals. C. A bidder or proposer may withdraw its bid at any time prior to Bid Opening or the deadline for receipt of the bid or Proposal by delivering written notice to the Procurement Agent. Section 3-3-23 Retention of Professional Services; Requests for Qualifications A. Technical Registrants. The Town shall procure Professional Services from technical registrants in the manner prescribed in ARIZ. REV. STAT., Title 34, Chapter 6, as amended. For purposes of this Article, the term “technical registrant” means a Person who provides any of the Professional Services listed in ARIZ. REV. STAT., Title 32, Chapter 1, as amended, and includes, but is not limited to, architects, assayers, engineers, geologists, land surveyors and landscape architects. B. Professional Legal Services. Legal counsel services may be procured by direct selection, Request for Proposals or Requests for Qualifications processes. If defense counsel is not assigned by the Town’s risk carrier, the Town Attorney shall recommend to the Council such persons or firms to provide direct defense of any claim made against the Town. Such legal counsel services shall be procured by direct selection. C. Other Professional Services. The Town may procure Professional Services by soliciting statements of qualifications for providing such services. The Town may procure such Professional Services by direct selection pursuant to the administrative regulations promulgated by the Procurement Agent, subject to the limitations in ARIZ. REV. STAT., Title 34, as amended. Contracts for Professional Services not exceeding $30,000.00 shall be approved by the Procurement Agent. Contracts for Professional Services exceeding $30,000.00 shall be approved by the Council. If determined by the Procurement Agent to be inappropriate for direct selection, Professional Services shall be procured through the use of statements of qualifications as follows: 1. The Procurement Agent shall give adequate notice of the need for such services through a Request for Qualifications. The request shall describe the services required, list the types of information and Data required of each Offeror and state the relative importance of particular qualifications. Fountain Hills Town Code 26 1996892.2 2. Persons engaged in providing the designated types of Professional Services may submit statements of qualifications in providing such Professional Services. 3. The Procurement Agent may appoint a committee to review qualifications. If appointed, the committee shall consist of the Procurement Agent and one or more professionals licensed, registered or admitted to the profession that is the subject of the Procurement. Discussions with Offerors who submit Proposals may be conducted to determine qualifications for further consideration. Award shall be made to the Offeror determined, in writing, to be the best qualified. Compensation shall be negotiated after an award is made. 4. The Procurement Agent shall conduct negotiations with the Offeror determined to be the most qualified to establish fair and reasonable compensation. If compensation cannot be agreed upon with the best qualified Offeror, then negotiations will be formally terminated with the selected Offeror. If Proposals were submitted by one or more other Offerors determined to be qualified, negotiations may be conducted with such other Offeror or Offerors, in the order of their respective qualification ranking, and the Contract may be awarded to the Offeror then ranked best qualified if the amount of compensation is determined to be fair and reasonable. 5. The Contract award shall be made to the Offeror determined in writing by the Procurement Agent or authorized designee to be best qualified based upon (a) the evaluation factors set forth in the Request for Qualifications and (b) agreement between the Town and the Offeror as to fair and reasonable compensation. Section 3-3-24 Construction Contracts All Construction Contracts for public improvement projects shall be awarded in accordance with ARIZ. REV. STAT., Title 34, as amended. If public competitive bidding is not required pursuant to ARIZ. REV. STAT. § 34-201(C) or (D), as amended, then the requirements of this Article shall apply. In the event of a conflict between this Chapter and ARIZ. REV. STAT., Title 34, as amended, the provisions of Title 34 shall govern. Section 3-3-25 Emergency Procurements A. Notwithstanding any other provisions of this Article, upon declaration of an Emergency in the manner provided by law, the Procurement Agent may make or authorize Emergency Procurements based upon a threat to the public health, welfare, property or safety. Such Emergency Procurements shall be made with such competition as is practicable under the circumstances. The written determination for the Emergency and the selection of the Contractor shall be included in the Contract file. Fountain Hills Town Code 27 1996892.2 B. The Town department seeking an Emergency Procurement shall prepare a written requisition documenting the existence of an Emergency condition and explaining the Procurement need. The requisition shall be signed by the department director. C. An Emergency Procurement shall be limited to those Materials, Services or Construction reasonably necessary to satisfy the Emergency need. D. All Emergency Procurements shall be approved by the Procurement Agent, unless submitted with a copy of the resolution adopted by the Council declaring an Emergency and authorizing the Emergency Procurements. E. The Procurement Agent has the authority to enter into Emergency Procurement Contracts that are not more than $30,000.00 and based upon the Best Interests of the Town, taking into account factors such as need, availability and other relevant Town requirements. The Council shall have the authority to authorize the Mayor or Procurement Agent to execute Emergency Procurement Contracts in excess of $30,000.00. Such Emergency Procurement shall be exempt from the competitive requirements of this Article. Section 3-3-26 Sole Source Procurement A Procurement may be made or Contract awarded by the Procurement Agent without competition when the requesting department director determines in writing, after conducting a good faith review of available sources, that there is only one reasonable and practicable source for the required Materials or Service. The requesting department shall provide written evidence to support a sole source determination, which shall be approved or denied by the Procurement Agent in his sole discretion. The Procurement Agent will participate with the requesting department in conducting negotiations, as appropriate, relating to Price, delivery and terms. Sole source Procurement shall be avoided, except when no reasonable alternative sources exist. A record of sole source procurements shall be maintained as a public record. Section 3-3-27 Cooperative Purchasing A. The Procurement Agent shall have the authority to (1) participate with a state, other political subdivisions of a state and the federal government for the Procurement of Materials or Services with Cooperative Purchasing agreements including through on-line Procurement processes such as “Buy Hub” and (2) directly enter into agreements with Vendors who have been awarded Contracts with other governmental entities for Materials and Services, provided the Procurement methods of the other party comply with the intent of this Article. Fountain Hills Town Code 28 1996892.2 B. If a Procurement under this Section involves the expenditure of state or federal assistance or Contract monies, the Procurement Agent shall comply with state or federal law and regulations which are mandatory and which are not reflected in this Article or guidelines adopted by the Town. It shall be the responsibility of the requesting department to provide the Procurement Agent with the applicable acquisition requirements concurrent with its requisition. Section 3-3-28 Protests; Informal and Formal A. Any Interested Party to a Contract may protest (1) a Solicitation issued by the Town, (2) a proposed award of a Town Contract, (3) the rejection of a request for changes, including a Change Order or (4) Debarment from the Procurement process of the Town, by filing an informal protest. B. Protests shall be filed with the Procurement Agent within five Days from the time the alleged instance occurred. The Procurement Agent will make the initial contact in an attempt to resolve the matter. C. The Procurement Agent shall render a decision in writing within 15 Days from the date the informal protest is filed. Copies of the decision shall be furnished to all interested parties by first class mail at the last address on file with the Town. If the Procurement Agent fails to render a decision within the required period, the informal protest shall be deemed denied and a formal protest may be filed. D. After conclusion of the informal protest process, any Interested Party to a Contract may file a formal appeal protesting (1) a Solicitation issued by the Town, (2) a proposed award of a Town Contract, (3) the rejection of a request for changes, including a Change Order, (4) Debarment from the Procurement process of the Town or (5) denial of an informal protest, by filing a formal protest in the manner provided by this Section. E. A formal protest shall be in writing signed by an authorized party, containing their name, address and telephone number, identification of the Contract, a detailed statement of the legal and factual grounds of the protest, including copies of all relevant documents and the specific relief requested. F. The formal protest shall be filed within five business days following (1) the decision of the Procurement Agent on an informal protest or (2) the end of the 15-Day informal protest process, if no decision was issued. G. The formal protest shall be heard by a hearing officer appointed by the Procurement Agent for such purposes within ten business days after filing of the formal protest, unless extended by the hearing officer. Fountain Hills Town Code 29 1996892.2 H. The hearing officer (i) may (a) reject the protest in whole or in part or (b) sustain the protest in whole or in part and (ii) shall provide for an appropriate remedy as follows: 1. In determining an appropriate remedy, the hearing officer shall consider the circumstances surrounding the Procurement or proposed Procurement including, but not limited to the seriousness of the Procurement deficiency, the degree of prejudice to other interested parties or to the integrity of the Procurement system, the good faith of the parties, the extent of performance, costs to the Town, the urgency of the Procurement and the impact of the relief upon the Town. 2. An appropriate remedy may include one or more of the following: a. Decline to exercise an option to renew under the Contract. b. Direct the Town to terminate the Contract award. c. Direct the Town to reissue the Solicitation. d. Direct the Town to issue a new Solicitation. e. Direct the Town to award a Contract consistent with Town codes and policies. f. Such other relief as is determined necessary to ensure compliance with this Article. Section 3-3-29 Debarments and Suspensions The Procurement Agent has the sole authority to debar or suspend a Vendor from participating in a Town Procurement. The Vendor may be suspended or debarred based upon the following factors: A. The Vendor does not have sufficient financial ability, equipment or personnel to perform the Contract. B. The Vendor has repeatedly breached contractual obligations to public or private agencies. C. The Vendor fails to comply with the requests of a background investigation. Fountain Hills Town Code 30 1996892.2 Section 3-3-30 Acceptance of Work Completed A. Notice of Acceptance. When a contracting party providing Materials or Services to the Town makes a request for acceptance by the Town of work as completed, the Procurement Agent shall indicate acceptance on behalf of the Town on a certificate of final completion or other form designated for that purpose. Until the notice of acceptance is issued, no public work completed on behalf of the Town shall be considered as the property of the Town, and the Town shall assume no responsibility therefore. B. Release of Retainage; Conditions. The Town shall not release any funds due but which are held as retainage until the Contract administrator is satisfied that the work has been completed in accordance with the Specifications of the Contract. Section 3-3-31 Attestation of Contracts by Town Clerk All Contracts entered into by the Town shall be attested to by the Town Clerk and shall not be binding on the Town until so attested. The Town Clerk shall retain the original of all Contracts and agreements according to the retention schedule adopted by the Council and shall provide to the Procurement Agent such documents as are necessary for orderly administration of the Town’s business. Fountain Hills Town Code 31 1996892.2 Article 3-4 DISPOSITION OF PROPERTY Sections: 3-4-1 In General 3-4-2 Definitions 3-4-3 Property Administrator 3-4-4 Sale, Lease or Disposal of Surplus or Obsolete Town or Personal Property 3-4-5 Unclaimed Personal Property 3-4-6 Disposition of Real Property Section 3-4-1 In General No property belonging to the Town shall be disposed of except in accordance with this Code and such rules as the Council may adopt pursuant to this Code. Section 3-4-2 Definitions The following words, terms and phrases, when used in this Article, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: A. “Disposition” means the sale, lease or other means of divestiture of title or the right to possession of any property belonging to the Town. B. “Personal Property” means property which is tangible and movable without damage, but may include fixtures attached to Real Property. C. “Property Administrator” means the Town Manager or designee assigned as custodian of all property belonging to the Town. D. “Real Property” means property consisting of land or structures affixed to land. Section 3-4-3 Property Administrator The Town Manager shall serve as the Property Administrator for the Town and shall have custody of all property, real or personal, belonging to the Town. The Town Manager may designate some other employee of the Town as Property Administrator, and such designee shall report to the Town Manager. The Property Administrator shall maintain a complete and current inventory of the property of the Town, which inventory shall be available for public review. Fountain Hills Town Code 32 1996892.2 Section 3-4-4 Sale, Lease or Disposal of Surplus or Obsolete Town or Personal Property The Town shall have the right to sell, lease, exchange, donate or otherwise dispose of Town property in the Best Interests of the Town. The disposal of surplus or obsolete property shall be done in as competitive a manner as the Town Manager or authorized designee determines to be practicable. Section 3-4-5 Unclaimed Personal Property A. Personal Property shall be deemed abandoned if the owner thereof fails to make satisfactory claim and proof of ownership within 30 days after the giving of notice as provided below. B. The Town Manager or authorized designee having in his possession Personal Property shall from time to time prepare a notice in writing containing the following information: 1. Contact information for the Town Employee responsible for the property. 2. A description of the Personal Property that has come into the possession of the Town since giving of the last periodic notice. 3. A demand that all owners of the property described in the notice make claim and proof of ownership satisfactory to the Town Manager or authorized designee within 30 days from the date of the notice. 4. A statement that any of the described Personal Property not claimed within such 30-Day period shall be deemed to be abandoned, and that the same may be sold at public auction or otherwise disposed of in accordance with this Article. 5. The notice shall be published in a newspaper of general circulation in the Town at least once each week for two consecutive weeks and copies thereof shall be posted in three public places within the corporate limits of the Town, including the Town’s website, and a copy of such notice shall be mailed to the owner, if known, at his/her last known mailing address. C. Claim and proof of ownership. 1. Except as provided in this Article, if the Personal Property described in the notice in Subsection 3-4-5(B) above remains in the possession of the Town Manager or authorized designee without any person making satisfactory claim and proof of ownership therefor for a period of 30 days from the date of the notice provided as set forth in Subsection 3-4-5(B), the Personal Property shall be deemed to be abandoned, and title thereof shall be deemed to be in the Town by reason of abandonment by the owner and possession by the Town. Fountain Hills Town Code 33 1996892.2 2. When dealing with property that is lost, found by a person not the owner (hereinafter referred to as the “finder”) and then turned over to the Town, the finder shall be deemed to have made satisfactory claim and proof of ownership to be entitled to possession of the Personal Property at the end of 30 Days from the date of the notice in Subsection 3-4-5(B). However, the finder’s claim and proof of ownership under this Subsection shall be inferior to and subject to a satisfactory claim and proof of ownership by any owner of the Personal Property. 3. Upon delivery of the property to the finder as provided in this Section, the Town shall have no further interest in, or obligations with respect to, the property. The Town shall, however, provide the name and address of the finder and the location of the property, if known, to any person making a satisfactory claim and proof of ownership subsequent to the delivery of the property to the finder. D. Any abandoned Personal Property may, at the election of the Town, be (i) donated to a non-profit charitable entity or other governmental entity or (ii) sold at public auction (which may include an on-line auction) to the highest bidder after ten days’ notice given in the same manner as provided in Subsection 3-4-5(B) above, which notice shall contain the following information: 1. Contact information for the Town Employee responsible for the property. 2. A description of the property to be sold. 3. The date, time, place of the sale and the person to conduct the same. 4. A statement that the described Personal Property is deemed to be abandoned and that the same will be sold at public sale to the highest cash bidder. E. The sale provided for herein shall be at public auction (which may include an on-line auction) to the highest bidder for cash, but in no event shall any item be sold for less than the cost of advertising and selling. The Town reserves the right to reject any and all bids. F. The Town Manager or authorized designee conducting the sale shall maintain a complete and accurate record of the sale which shall include the description of the Personal Property sold, the name and address of the purchasers, the sale price of each item sold and the costs of the sale. G. The Town Manager or authorized designee conducting the sale shall execute and deliver or cause to be delivered a certificate of sale to the purchaser of each item of Personal Property, which certificate shall describe the item in the same manner as the notice of sale and shall recite the purchase price paid, the name and address of the purchaser and the date of the purchase. Such certificate shall pass the title to the item to the purchaser. Fountain Hills Town Code 34 1996892.2 H. All moneys received from sales of Personal Property as provided for in this Article shall be immediately paid over to the Town finance division and retained in a separate account for at least six months. Upon the expiration of such time, unless sooner claimed as herein provided, such moneys shall be paid into the general fund of the Town. I. Should any person within six months from the date of the public sale of any item of Personal Property make a valid claim thereto and establish ownership, the sum of money for which the item sold shall be paid over to such person, less the costs of advertising and selling. In no event shall any claim be considered unless it shall be presented to the Town Manager in writing under oath and before the expiration of six months from the date of the sale of the item claimed. Once such amounts are paid by the Town, the Town shall have no further obligation relating to the property. J. Items for which no bids are received may be deemed to be of no intrinsic or monetary value and may be disposed of in any manner deemed appropriate by the Town Manager. K. Items useful or necessary to the Town may be retained by the Town for its use. L. Each person performing any action provided for in this article shall make affidavit thereof which shall be prima facie evidence of the facts alleged in the affidavit. Section 3-4-6 Disposition of Real Property A. Limitations. No sale or other Disposition of Real Property belonging to the Town shall be final until approved by a majority vote of the Council and all documents pertaining thereto shall be executed by the Mayor or Town Manager and attested by the Town Clerk. If the value of the property exceeds the amount set forth in ARIZ. REV. STAT. § 9-403(A), as amended, the sale shall first be authorized at an election held pursuant to ARIZ. REV. STAT. § 9-403. B. Advertisement; Bids. No Real Property belonging to the Town shall be sold or otherwise disposed of except as provided in ARIZ. REV. STAT. § 9-402 et seq., as amended. The Town shall have the right to reject any and all bids, to withdraw the property from sale prior to sale and to readvertise for sale. C. Appraisal Prior to Sale. Prior to the sale of any Real Property, the Town shall obtain one or more appraisals of value from one or more disinterested parties. Such appraisal(s) shall form the basis for valuation of the property to be sold. D. Sale; Lease; Exchange. The Town may exchange, sell or lease Real Property to the federal government or another political subdivision pursuant to the procedures specified in ARIZ. REV. STAT. § 9-405 and § 9-407, as amended. Fountain Hills Town Code 35 1996892.2 Article 3-5 CIVIL PREPAREDNESS AND DISASTER Sections: 3-5-1 Purposes 3-5-2 Definitions 3-5-3 Civil Preparedness Organization 3-5-4 Powers and Duties 3-5-5 Mutual Aid 3-5-6 Immunity of Town and Representatives Thereof 3-5-7 Violations Section 3-5-1 Purposes The purposes of this Article are to: A. Reduce vulnerability of people and the community to damage, injury and loss of life and property resulting from natural or man-made catastrophes, riots or hostile military or paramilitary action. B. Prepare for prompt and efficient rescue, care and treatment of persons victimized or threatened by Disaster. C. Provide a setting conducive to the rapid and orderly start of restoration and rehabilitation of persons and property affected by Disasters. D. Clarify and strengthen the roles of the Mayor, Council, Town Manager and Town agencies in prevention of, preparation for and response to and recovery from Disasters. E. Authorize and provide for cooperation in Disaster prevention, preparedness, response and recovery. F. Authorize and provide for coordination of activities relating to Disaster prevention, preparedness, response and recovery by agencies and officers of this Town, agencies of the private sector and similar activities in which the federal government, the state and its political subdivisions may participate. G. Provide a Disaster management system embodying all aspects of pre-disaster preparedness and post-disaster response. Fountain Hills Town Code 36 1996892.2 Section 3-5-2 Definitions The following words, terms and phrases, when used in this Article, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: A. “Civil Preparedness” means the organization, administration, trained manpower, facilities, equipment, material, supplies, programs, Emergency plans, ability to execute Emergency plans and all other measures necessary and incidental thereto relating to Disaster prevention preparedness response and recovery by all governmental and private sector agencies to protect or save health, life or property. B. “Director” means the Town Manager or authorized designee. C. “Disaster” means the occurrence or imminent threat of widespread or severe damage, injury or loss of life or property or extreme peril to the safety of persons or property, resulting from any natural or manmade causes, including but not limited to fire, flood, earthquake, wind, storm, blight, drought, famine, infestation, air contamination, epidemic, explosion, riot or other acts of civil disobedience which endanger life or property, or hostile military or paramilitary action. D. “Emergency” means the existence of a Disaster within the Town limits requiring immediate action by the Emergency Forces of the Town. E. “Emergency Forces” means all Town governmental and private sector agencies, volunteers, facilities, equipment, trained manpower and other resources required to perform Civil Preparedness functions. F. “Local Emergency” means the existence of a Disaster within the Town limits, and the situation is or is likely to be beyond the capability and resources of the Town as determined by the Mayor and which requires the combined efforts of other political subdivisions. G. “Regulations” means the orders, rules and Emergency procedures deemed essential for Civil Preparedness. H. “State of Emergency” means the duly proclaimed existence of a Disaster within the state except a Disaster resulting in a State of War Emergency which is or is likely to be beyond the capabilities and resources of any single county, city or town and requires the combined efforts of the state and the political subdivision. I. “State of War Emergency” means the situation which exists immediately whenever this nation is attacked or upon receipt by this state of a warning from the federal government indicating that such an attack is imminent. Local Emergency” means the existence of a Disaster within the Town limits, and the situation is or is likely to be beyond the capability and resources of the Town as determined by the Mayor and which requires the combined efforts of other political subdivisions. Fountain Hills Town Code 37 1996892.2 Section 3-5-3 Civil Preparedness Organization The Town Manager is hereby authorized and directed to create a Civil Preparedness organization and shall serve as the Director of the organization until he appoints a qualified professional to act in this capacity. Section 3-5-4 Powers and Duties A. The Council: 1. Shall have the power to make, amend and rescind Regulations, not inconsistent with Regulations promulgated by the Governor, necessary for Civil Preparedness, which Regulations shall have the full effect of this Article when a copy is filed in the office of the Town Clerk. Existing ordinances and regulations, or ordinances and regulations issued under authority of ARIZ. REV. STAT., Title 26, Chapter 2, in conflict therewith, are suspended during the time and to the extent that they are in conflict. 2. May appropriate and expend funds, make contracts, obtain and distribute equipment, materials and supplies for Civil Preparedness purposes. 3. In the absence of specific authority in state emergency plans and procedures, the Council shall take emergency measures as deemed necessary to carry out the provisions of ARIZ. REV. STAT., Title 26, Chapter 2. 4. In a State of War Emergency the Council may waive procedures and formalities required by law pertaining to the performance of public work, entering into contracts, incurring obligations, employing permanent and temporary workers, utilizing volunteer workers, renting equipment, purchasing and distributing supplies, materials and facilities and appropriating and expending public funds when the Council determines and declares that strict compliance with such procedures and formalities may prevent, hinder or delay mitigation of the effects of the State of War Emergency. The Town shall be exempt during such Emergency from budget limitations prescribed by Article IX, Section 20 of the State Constitution. B. The Mayor: 1. In addition to the powers granted by other provisions of the law or Town ordinance, the Mayor may, by proclamation, declare an Emergency or a Local Emergency to exist. The proclamation may be rescinded by a majority of the Council after twenty-four hours. Fountain Hills Town Code 38 1996892.2 2. During an Emergency or Local Emergency, the Mayor shall govern by proclamation and shall have the authority to impose all necessary Regulations to preserve the peace and order of the Town including, but not limited to: a. Imposition of curfews in all or in a portion of the Town. b. Ordering the closing of any business. c. Denying public access to any public building, street or other public place. d. Calling upon regular or auxiliary law enforcement agencies and organizations within or without the Town for assistance. C. The Director: 1. The Director is responsible in non-emergency periods to act on behalf of the Mayor and Council to develop a readiness plan for the Town’s Civil Preparedness and for coordinated operations in Disaster situations. 2. During emergencies, the Director shall act as the principal advisor or aide to the Mayor on Emergency operations. His major responsibility is to assure coordination among Emergency Forces and with higher and adjacent governments, by assuring that the Emergency operation center functions effectively. He shall assist the Mayor in the execution of operations, plans and procedures required by the Emergency. 3. The Director shall prepare a comprehensive Disaster basic plan which shall be adopted and maintained by resolution of the Council upon the recommendations of the Director. In the preparation of this plan as it pertains to Town organization, it is the intent that the services, equipment, facilities and personnel of all existing departments and agencies be used to the fullest extent. 4. The Disaster plan shall be considered supplementary to this Article and have the effect of law whenever emergencies, as defined in this Article, have been proclaimed. Section 3-5-5 Mutual Aid In periods of Local Emergency, as declared pursuant to this Article, the Town is hereby granted full power to provide mutual aid to any affected area in accordance with local ordinances, resolutions, emergency plans or agreements therefore. The Town may request from state agencies mutual aid including personnel, equipment and other available resources to assist the Town during the Local Emergency in accordance with emergency plans or at the direction of the Governor. Fountain Hills Town Code 39 1996892.2 Section 3-5-6 Immunity of Town and Representatives Thereof A. The Town shall not be liable for any claim based upon the exercise or performance, or the failure to exercise or perform a discretionary function or duty on the part of the Town or any employee of the Town, except willful misconduct, gross negligence or bad faith of any such employee, in carrying out the provisions of ARIZ. REV. STAT., Title 26, Chapter 2. B. The immunities from liability, exemptions from laws, ordinances and rules, all pensions, relief, disability workmen’s compensation and other benefits which apply to the activity of officers, agents or employees of the Town when performing their respective functions within the limits of the Town shall apply to them to the same degree and extent while engaged in the performance of any of their functions and duties extraterritorially under the provisions of this Article, excepting willful misconduct, gross negligence or bad faith. C. Volunteers duly enrolled or registered for services in a Local Emergency, a State of Emergency or a State of War Emergency in carrying out, complying with or attempting to comply with, any Regulations issued pursuant to ARIZ. REV. STAT., Title 26, Chapter 2 or any local ordinance, or performing any of their authorized functions or duties, or training for the performance of their authorized functions or duties, shall have the same degree of responsibility for their actions and enjoy immunities as officers and employees of the state and its political subdivisions performing similar work. Section 3-5-7 Violations It is unlawful for any person to violate any provision of this Article or to refuse or willfully neglect to obey any lawful regulation or order issued as provided in this Article. This provision, however, does not apply to the refusal of any private organization or members thereof to participate in an Emergency, Local Emergency or State of Emergency as defined by this Article.