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HomeMy WebLinkAbout141106P NOTICE OF THE REGULAR SESSION OF THE FOUNTAIN HILLS TOWN COUNCIL TIME: 6:30 P.M. WHEN: THURSDAY, NOVEMBER 6, 2014 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 Commission, Committee or Board members 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 Councilmember Cassie Hansen Councilmember Ginny Dickey Councilmember Henry Leger Councilmember Tait D. Elkie Vice Mayor Cecil A. Yates z:\council packets\2014\r141106\141106a.docx Last Printed: 10/30/2014 3:23 PM Page 2 of 4  CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh  INVOCATION - Senior Pastor, Justin Erickson, Harvest Bible Chapel Fountain Hills  ROLL CALL – Mayor Linda M. Kavanagh  MAYOR’S REPORT i) RECOGNITION of Vice Mayor Cecil A. Yates’ appointment to the MAG Regional Domestic Violence Council. ii) The Mayor will read a PROCLAMATION declaring November 2014 as McDowell Mountain Month in the Town of Fountain Hills.  SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS i) The Mayor may review RECENT EVENTS attended relating to economic development. ii) RECOGNITION of the businesses who participated in 6th annual Fountain Hills Make a Difference Day. iii) PRESENTATION of the Town of Fountain Hills’ Comprehensive Annual Financial Report and associated reports for the fiscal year ending June 30, 2014, by Dennis Osuch, CPA, Principal with CliftonLarsonAllen LLP. iv) RECOGNITION of Finance Director Craig Rudolphy, CPA, CPFO, CGFM, who received the CERTIFICATE OF RECOGNITION from the Government Finance Officers Association for its annual budget preparation for the fiscal year beginning July 1, 2014 and the Town of Fountain Hill’s 13th DISTINGUISHED BUDGET PRESENTATION AWARD. CALL TO THE PUBLIC Pursuant to A.R.S. §38-431-01(H), 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. z:\council packets\2014\r141106\141106a.docx Last Printed: 10/30/2014 3:23 PM Page 3 of 4 CONSENT AGENDA ITEMS All items listed on the Consent Agenda 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 include all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a Councilmember or member of the public so requests. If a Councilmember or member of the public wishes to discuss an item on the consent agenda, he/she may request so prior to the motion to accept the Consent Agenda or with notification to the Town Manager or Mayor prior to the date of the meeting for which the item was scheduled. 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 October 16, 2014. 2. CONSIDERATION of approving an AGREEMENT between the Flood Control District of Maricopa, Chaparral City Water Company, and the Town of Fountain Hills relating to the construction, construction management, and operation and maintenance of the Ashbrook Wash Project Water Line Relocations. 3. CONSIDERATION of approving the FOURTH AMENDMENT to the Hiking Agreement between the MCO Properties L.P. and the Town of Fountain Hills. REGULAR AGENDA ITEMS 4. CONSIDERATION of APPOINTING four (4) citizens to the Strategic Planning Advisory Commission, each for a 2-year term beginning November 6, 2014, and ending November 5, 2016. 5. CONSIDERATION of SPECIAL EVENT APPLICATION for the Fountain Hills Farmers Market and Art on the Avenue, presented by Dutchman’s Holdings and J. Yates Enterprise, to be held weekly from 11 a.m. – 5 p.m. on Thursdays along the Avenue of the Fountain Median, from January 8 to April 9, 2015, with an additional market date of March 17, 2015. 6. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF regarding the RENAMING the Avenue of the Fountains “Median” with final name suggestion, as submitted by public solicitation, complied by Tourism staff. 7. CONSIDERATION of RESOLUTION 2014-44, ordering the sale of, not to exceed, $8,200,000 principal amount of Town of Fountain Hills, Arizona General Obligation Bonds, Series 2014. 8. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF relating to any item included in the League of Arizona Cities and Towns weekly LEGISLATIVE BULLETIN or relating to any ACTION PROPOSED OR PENDING BEFORE THE STATE LEGISLATURE. z:\council packets\2014\r141106\141106a.docx Last Printed: 10/30/2014 3:23 PM Page 4 of 4 9. COUNCIL DISCUSSION/DIRECTION to the Town Manager. Item(s) listed below are related only to the propriety of (i) placing such item(s) on a future agenda for action or (ii) directing staff to conduct further research and report back to the Council: i.) At the request of Councilmember Dickey, the topic of a non-discrimination policy has been listed on this agenda for discussion purposes for possible placement of this topic on a future agenda for discussion and possible action. 10. SUMMARY OF COUNCIL REQUESTS and REPORT ON RECENT ACTIVITIES by the Mayor, Individual Councilmembers, and the Town Manager. 11. ADJOURNMENT. DATED this 30th day of October, 2014. 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. NOTICE OF THE REGULAR SESSION OF THE FOUNTAIN HILLS TOWN COUNCIL TIME: 6:30 P.M. WHEN: THURSDAY, NOVEMBER 6, 2014 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 Commission, Committee or Board members 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 Councilmember Cassie Hansen Councilmember Ginny Dickey Councilmember Henry Leger Councilmember Tait D. Elkie Vice Mayor Cecil A. Yates z:\council packets\2014\r141106\141106a.docx Last Printed: 10/30/2014 3:23 PM Page 2 of 4  CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh  INVOCATION - Senior Pastor, Justin Erickson, Harvest Bible Chapel Fountain Hills  ROLL CALL – Mayor Linda M. Kavanagh  MAYOR’S REPORT i) RECOGNITION of Vice Mayor Cecil A. Yates’ appointment to the MAG Regional Domestic Violence Council. ii) The Mayor will read a PROCLAMATION declaring November 2014 as McDowell Mountain Month in the Town of Fountain Hills.  SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS i) The Mayor may review RECENT EVENTS attended relating to economic development. ii) RECOGNITION of the businesses who participated in 6th annual Fountain Hills Make a Difference Day. iii) PRESENTATION of the Town of Fountain Hills’ Comprehensive Annual Financial Report and associated reports for the fiscal year ending June 30, 2014, by Dennis Osuch, CPA, Principal with CliftonLarsonAllen LLP. iv) RECOGNITION of Finance Director Craig Rudolphy, CPA, CPFO, CGFM, who received the CERTIFICATE OF RECOGNITION from the Government Finance Officers Association for its annual budget preparation for the fiscal year beginning July 1, 2014 and the Town of Fountain Hill’s 13th DISTINGUISHED BUDGET PRESENTATION AWARD. CALL TO THE PUBLIC Pursuant to A.R.S. §38-431-01(H), 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. z:\council packets\2014\r141106\141106a.docx Last Printed: 10/30/2014 3:23 PM Page 3 of 4 CONSENT AGENDA ITEMS All items listed on the Consent Agenda 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 include all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a Councilmember or member of the public so requests. If a Councilmember or member of the public wishes to discuss an item on the consent agenda, he/she may request so prior to the motion to accept the Consent Agenda or with notification to the Town Manager or Mayor prior to the date of the meeting for which the item was scheduled. 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 October 16, 2014. 2. CONSIDERATION of approving an AGREEMENT between the Flood Control District of Maricopa, Chaparral City Water Company, and the Town of Fountain Hills relating to the construction, construction management, and operation and maintenance of the Ashbrook Wash Project Water Line Relocations. 3. CONSIDERATION of approving the FOURTH AMENDMENT to the Hiking Agreement between the MCO Properties L.P. and the Town of Fountain Hills. REGULAR AGENDA ITEMS 4. CONSIDERATION of APPOINTING four (4) citizens to the Strategic Planning Advisory Commission, each for a 2-year term beginning November 6, 2014, and ending November 5, 2016. 5. CONSIDERATION of SPECIAL EVENT APPLICATION for the Fountain Hills Farmers Market and Art on the Avenue, presented by Dutchman’s Holdings and J. Yates Enterprise, to be held weekly from 11 a.m. – 5 p.m. on Thursdays along the Avenue of the Fountain Median, from January 8 to April 9, 2015, with an additional market date of March 17, 2015. 6. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF regarding the RENAMING the Avenue of the Fountains “Median” with final name suggestion, as submitted by public solicitation, complied by Tourism staff. 7. CONSIDERATION of RESOLUTION 2014-44, ordering the sale of, not to exceed, $8,200,000 principal amount of Town of Fountain Hills, Arizona General Obligation Bonds, Series 2014. 8. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF relating to any item included in the League of Arizona Cities and Towns weekly LEGISLATIVE BULLETIN or relating to any ACTION PROPOSED OR PENDING BEFORE THE STATE LEGISLATURE. z:\council packets\2014\r141106\141106a.docx Last Printed: 10/30/2014 3:23 PM Page 4 of 4 9. COUNCIL DISCUSSION/DIRECTION to the Town Manager. Item(s) listed below are related only to the propriety of (i) placing such item(s) on a future agenda for action or (ii) directing staff to conduct further research and report back to the Council: i.) At the request of Councilmember Dickey, the topic of a non-discrimination policy has been listed on this agenda for discussion purposes for possible placement of this topic on a future agenda for discussion and possible action. 10. SUMMARY OF COUNCIL REQUESTS and REPORT ON RECENT ACTIVITIES by the Mayor, Individual Councilmembers, and the Town Manager. 11. ADJOURNMENT. DATED this 30th day of October, 2014. 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 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, 2014. 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, 2014. Phoenix, Arizona October 17, 2014 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, 2014, and have issued our report thereon dated October 17, 2014. 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. No new accounting policies were adopted and the application of existing policies was not changed during 2014. 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. There were no particularly sensitive financial statement disclosures. 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. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. 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 17, 2014. 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 17, 2014. 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 17, 2014 Town Council and Senior Management Town of Fountain Hills, Arizona Page 4 Schedule of Uncorrected Misstatements Account Description Debit Credit Proposed JE # 1 G.O. Debt Service Fund 510-10-105-4001 PROPERTY TAXES 3,380.00$ -$ 510-1240 INTERGOVERNMENTAL RECEIVABLE 14,074.00 - 510-2710 DEFERRED INFLOWS OF RESOURCES - 17,454.00 Total 17,454.00$ 17,454.00$ Proposed JE # 1 for Eagle Mountain Debt Service 520-1240 INTERGOVERNMENTAL RECEIVABLE 2,503.00$ -$ 520-2710 DEFERRED INFLOWS OF RESOURCES - 1,916.00 520-30-302-4001 PROPERTY TAXES - 587.00 Total 2,503.00$ 2,503.00$ Proposed JE # 1 for Government-Wide Financial Statements 2500 DEFERRED INFLOWS OF RESOURCES 19,370.00$ -$ 4000.0002 PROPERTY TAXES - 19,370.00 Total 19,370.00$ 19,370.00$ To record deferred inflows and receivable for the GO bonds property taxes. To record deferred inflows and receivables for the Eagle Mountain debt service property taxes. To record the passed adjustment to properly state revenues for property tax deferred inflows. 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 Town of Fountain Hills, Arizona (Town) as of and for the year ended June 30, 2014, 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. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to fraud or error may occur and not be detected by such controls. However, as discussed below, we identified a deficiency in internal control that we consider to be a significant deficiency. 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. Significant deficiency A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiency in the Town’s internal control to be a significant deficiency: Building Permit Fees During our audit, we noted a lack of internal controls over the review of the building permit information entered into the computerized building permit software as compared to the manual building permit. Building permits are approved and reviewed on manual permit files. Subsequent to approving the manual building permit, the building permit fees are entered into a computerized system. There was no internal control procedure to have an employee review all the permit fee calculations in the computerized system and reconcile them to the manual building permit file. We tested 25 building permit files and found three files where the fees in the computerized system did not agree with the manual building permit file. Additionally, other pertinent information was missing from the computerized system that was included on the approved manual building permit. We recommend the Town develop internal control procedures that require an employee to reconcile the manual building permit file to the computerized system to ensure accuracy of the calculations and to determine all required information is included in the computerized records. Town Council and Senior Management Town of Fountain Hills, Arizona Page 2 Management agrees with this recommendation. The Town will institute a weekly review of all new construction permits issued for single family, multi-family and commercial properties. This process will include a review of the manual permit to the computer system, including any supporting documentation such as the permit application, and a written indication of that review. The identified significant deficiency is not considered to be a material weakness. We will review the status of this comment during our next audit engagement. We have already discussed this comment and suggestion with various Town personnel, and we will be pleased to discuss this in further detail at your convenience, to perform any additional study of this matter, or to assist you in implementing the recommendation. * * * This communication is intended solely for the information and use of senior management and the Town Council 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 17, 2014 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT YEAR ENDED JUNE 30, 2014 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS YEAR ENDED JUNE 30, 2014 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, 2014. 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 17, 2014 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT - PART I YEAR ENDED JUNE 30, 2014 See accompanying notes to report. (2) 1. Economic Estimates Commission expenditure limitation 26,097,167$ 2. Voter approved alternative expenditure limitation (Approved for fiscal year 2009-2010.)- 3. Enter applicable amount from Line 1 or Line 2 26,097,167$ 4. Amount subject to the expenditure limitation (total amount from Part II, Line C) 16,084,729 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 16,084,729 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 16,084,729 11. Amount under (in excess of) the expenditure limitation (If excess expenditures are reported, provide an explanation.) 10,012,438$ 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 Finance Director:____________________________________________ Name and Title: Craig Rudolphy, Finance Director Telephone Number: (480) 816-5162 Date: October 17, 2014 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT - PART II YEAR ENDED JUNE 30, 2014 See accompanying notes to report. (3) DescriptionGovernmental Funds Enterprise Funds Internal Service Funds Fiduciary Funds Total A.Amounts reported on the Reconciliation Line D 18,629,198$ -$ -$ -$ 18,629,198$ B.Less exclusions claimed:1Bond proceeds - - - - - Debt service requirements on bonded indebtedness 1,014,000 - - - 1,014,000 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 105,115 - - - 105,115 7- - - - - 8- - - - - 9Highway user revenues in excess FY 1979-80 1,425,354 - - - 1,425,354 10Contracts with other political subdivisions - - - - - 11Refunds, reimbursements and other recoveries - - - - - 12Voter approved exclusions not identified above - - - - - 13Prior years carryforward - - - - - 14Total exclusions claimed 2,544,469 - - - 2,544,469 C.Amounts subject to the expenditure limitation 16,084,729$ -$ -$ -$ 16,084,729$ 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, 2014 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 20,506,560$ -$ -$ -$ 20,506,560$ 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 1,877,362 - - - 1,877,362 3Present value of net minimum capital leases - - - - - 4Charges for services paid to Internal Service Funds - - - - - 5Involuntary court judgments - - - - - 6Total subtractions 1,877,362 - - - 1,877,362 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 A18,629,198$ -$ -$ -$ 18,629,198$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT JUNE 30, 2014 (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 Maintenance 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, interest and fiscal charge expenses. NOTE 4 AMOUNTS RECEIVED FROM STATE Amounts received from the State consist of the following: LTAF II 31,667$ Proposition 202 30,000 Miscellaneous State Grants 43,448 105,115$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT JUNE 30, 2014 (6) NOTE 5 HIGHWAY USER REVENUE IN EXCESS OF 1979-80 Highway user revenues (HURF) in excess of in-lieu fees expended: HURF Fund Intergovernmental Revenue 2,069,039$ Less: Vehicle License Tax (800,475) Excludable Revenue 1,268,564$ HURF Fund Expenditures 3,073,746$ (833,188) (994,000) 178,796 Amount Excluded 1,425,354$ Plus: Amounts Transferred to Capital Projects Fund for Eligible HURF Expenditures Less: Amounts Transferred from Capital Projects Fund Less: Expenditures of Vehicle License Tax and Non-Excludable Revenue The exclusion exceeded current year revenue due to the use of unspent prior year carryover. An independent member of Nexia International INDEPENDENT ACCOUNTANTS' REPORT ON MINIMUM ACCOUNTING STANDARDS FOR ARIZONA COURTS Town Council Town of Fountain Hills, Arizona Municipal Court Fountain Hills, Arizona We have performed the procedures enumerated in the Guide for External Reviews by Auditors issued by the Arizona Supreme Court, which were agreed to by the Town of Fountain Hills, Arizona Municipal Court and the Arizona Supreme Court, to the accounting records of the Town of Fountain Hills, Arizona Municipal Court as of and for the year ended June 30, 2014. The Town of Fountain Hills, Arizona Municipal Court’s management is responsible for compliance with the Minimum Accounting Standards issued by the Arizona Supreme Court. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures we performed are enumerated in the Guide for External Review by Auditors issued by the Arizona Supreme Court. Our Procedures disclosed a finding of noncompliance with Minimum Accounting Standards as listed in the following scheduled as items 2014-001. We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the Town of Fountain Hills, Arizona Municipal Court’s compliance with Minimum Accounting Standards issued by the Arizona Supreme Court. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Town of Fountain Hills, Arizona Municipal Court and the Arizona Supreme Court and is not intended to be and should not be used by anyone other than these specified parties. a Phoenix, Arizona October 17, 2014 Town Council Town of Fountain Hills, Arizona Page 2 Schedule of Findings 2014-001 Disbursements Minimum Accounting Standards state restitution payments be disbursed to victims within the time requirement of ACJA § 5-204. Four of ten restitution payments tested were not disbursed to victims within the requirement of ACJA § 5-204. We recommend the Court disburse restitution payments to victims within the time requirement of ACJA § 5-204 in order to comply with the Arizona Supreme Court’s Minimum Accounting Standards Town of FOUNTAIN HILLS MUNICIPAL COURT Robert E.Melton Presiding Judge October 22,2014 CliftonLarsonAllen LLP 20 East Thomas Road,Suite 2300 Phoenix,Arizona 85012 To Whom It May Concern: Fountain Hills Municipal Court is in receipt of the Independent Accountants'Report on Minimum Accounting Standards for Arizona Courts for Fountain Hills Municipal Court.In this report, CliftonLarsonAllen LLP enclosed a Schedule of Findings which stated: Minimum Accounting Standards state restitution payments be disbursed to victims within the time requirement of ACJA §5-204.Four often restitution payments tested were not disbursed to victims within the requirement of ACJA §5-204.We recommend the Court disburse restitution payments to victims within the time requirement of ACJA §5-204 in order to comply with the Arizona Supreme Court's Minimum Accounting Standards. During the inspection period,Fountain Hills Municipal Court was without a magistrate with signature authority for court disbursements for a period of six months.The court was limited to disbursing funds when an alternate authorized signer was available.Thus,the court was unable to make some restitution disbursements pursuant to ACJA §5-204.This has been rectified with my appointment and all restitution disbursements are being made in accordance with ACJA §5-204. Robert E.Melton Presiding Judge Fountain Hills Municipal Court 16705 East Avenue of the Fountains Fountain Hills,Arizona 85268 P -480-816-5103 F -480-837-8256 For the Fiscal Year Ended June 30, 2014 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, 2014 THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FISCAL YEAR ENDED JUNE 30, 2014 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 14  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 THE BASIC FINANCIAL STATEMENTS 36  COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES  NONMAJOR GOVERNMENTAL FUNDS  COMBINING BALANCE SHEET 57  COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES 59  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – CAPITAL PROJECTS FUND 61  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL OBLIGATION DEBT SERVICE FUND 62  TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2014 FINANCIAL SECTION CONTINUED)  COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED)  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – MUNICIPAL PROPERTY CORPORATION DEBT SERVICE FUND 63  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – DEVELOPMENT FEES FUND 64  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – LOCAL COURT ENHANCEMENT FUND 65  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GRANTS FUND 66  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – DOWNTOWN STRATEGY FUND 67  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – ECONOMIC DEVELOPMENT FUND 68  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – COTTONWOODS MAINTENANCE FUND 69  SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – EAGLE MOUNTAIN DEBT SERVICE FUND 70  STATISTICAL SECTION (UNAUDITED)  FINANCIAL TRENDS  NET POSITION BY COMPONENT 71  CHANGES IN NET POSITION 73  FUND BALANCES OF GOVERNMENTAL FUNDS 77  STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS 79  REVENUE CAPACITY  GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE 81  ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY 82  PRINCIPAL PROPERTY TAXPAYERS 83  PROPERTY TAX LEVIES AND COLLECTIONS 84  TAXABLE SALES BY CATEGORY 85  DIRECT AND OVERLAPPING SALES TAX RATES 87  TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2014 STATISTICAL SECTION (CONTINUED)  DEBT CAPACITY  RATIOS OF OUTSTANDING DEBT BY TYPE 88  RATIOS OF GENERAL BONDED DEBT OUTSTANDING 89  DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 90  LEGAL DEBT MARGIN INFORMATION 91  CALCULATION OF LEGAL DEBT MARGIN 93  REVENUE BOND COVERAGE 94  DEMOGRAPHIC AND ECONOMIC INFORMATION  DEMOGRAPHIC AND ECONOMIC STATISTICS 95  PRINCIPAL EMPLOYERS 97  OPERATING INFORMATION  AUTHORIZED FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION 98  OPERATING INDICATORS BY FUNCTION 99  CAPITAL ASSETS STATISTICS BY FUNCTION 101  THIS PAGE BLANK INTRODUCTORY SECTION THIS PAGE BLANK Town of FOUNTAIN HILLS (1) 16705 E. Avenue of the Fountains – Fountain Hills, Arizona 85268 – (480) 816-5100 - Fax (480) 837-3145 October 17, 2014 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 accordance with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States 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, 2014. 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 accordance with accounting principles generally accepted in the United States of America. 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 CliftonLarsonAllen 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, 2014, 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, 2014, are fairly presented in accordance with accounting principles generally accepted in the United States of America. The independent auditors’ report is presented as the first component of the financial section of this report. Accounting principles generally accepted in the United States of America 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 master planned 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 the community 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 and Scottsdale on the west, the Fort McDowell Yavapai Nation on the east, the Salt River Pima-Maricopa Indian Community on the south and by the McDowell Mountain Regional Park on the north. The 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 years, Fountain Hills has grown from 10,190 residents to a town of 22,489 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 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 wide range of living accommodations, from small condominiums to large custom homes. Fountain Hills also offers recreational, cultural and retirement programs that address the needs and lifestyles of active families as well as older 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 preserved as open space and 51.3% is residential. The Town’s Mission Statement 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, 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, 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 51 FTE employees. The Presiding 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); development services (code enforcement, planning, building inspection, zoning and public works); construction and maintenance of streets and infrastructure, municipal court, recreational activities, community center, senior services 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, the Eagle Mountain Community Facilities District and the 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 a resolution and is prepared by fund and department. The resolution 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 recovery is indicated by the local sales tax receipts in the construction category. The construction activity has jumped 39% 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 had been a third significant category in prior years). The chart below is a look at the past six years’ significant 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 2% increase over the prior year; restaurant/bar revenues have exceeded any prior year and an increase of 1.6% from FY12-13. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and increased 39% over the prior year; recent building permit activity indicates that construction sales tax is likely to increase over the next years. Transportation /communication tax revenues posted a slight decrease of 2%. Construction activity provides revenue to the Town through local sales tax, the proceeds of which are utilized for general operations and 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 89% of total General Fund revenue for fiscal year 2013-14. 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 0.45%). 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 9% in FY13-14 and is anticipated to increase another 8.5% for FY14-15. After a 16% decrease in State sales tax from FY08-09 through FY11-12, this revenue has recovered with a 6% increase in FY13-14 and anticipated to increase another 4.6% in FY14-15. 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 – over 70% 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 2013-14 (7/1/2013 – 6/30/2014): Three Concept Plans were approved by the Planning & Zoning Commission during the period: Prevco Subsea Housings Tractor Supply Company Mods for Rods, Inc. Three Special Use Permits were granted: Tractor Supply Company – outdoor storage & display Verizon Cell Tower – Eagle Mountain Propane Tank Installation – 17251 E Shea Blvd. Two Temporary Use Permits were issued during the period: Eagles Nest Ranch House Group Home – Jacklin Drive Thirty-two new Single-Family Residential Building Permits were issued. There were no new Commercial Building Permits issued. There were nineteen commercial tenant improvement permits issued during the last fiscal year. Fiscal year SFR DUP MULTI Dwelling Units T.I. & Comm Pools & Fences Add Ons (Not Garages Garages & Carports Other MONTH TOTAL Bldgs. Total Units Bldgs. Total Units JULY 5 0 0 0 0 0 0 2 5 0 21 33 AUGUST 3 0 0 0 0 0 1 6 5 0 31 46 SEPTEMBER 1 0 0 0 0 0 2 7 1 0 13 24 OCTOBER 3 0 0 0 3 0 3 11 4 1 15 40 NOVEMBER 1 0 0 0 0 0 1 3 3 0 18 26 DECEMBER 2 0 0 0 3 0 0 5 3 0 16 29 JANUARY 0 0 0 0 0 0 2 9 1 1 27 40 FEBRUARY 3 0 0 0 0 0 3 6 1 1 20 34 MARCH 3 0 0 0 0 8 0 9 2 2 27 51 APRIL 2 0 0 0 0 0 3 8 2 1 21 37 MAY 8 0 0 0 0 0 2 7 4 0 23 44 JUNE 1 1 2 0 0 0 2 11 6 0 22 45 YEARLY TOTAL 32 1 2 0 6 8 19 84 37 6 254 449 (6) 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. 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 was 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 capital assets. In Fountain Hills this classification would apply to our fuel inventory, capital assets, 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, Downtown Strategy Fund, and Economic Development Fund. (7) 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 Fund as well as a portion of the General Fund. 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 a portion of the construction sales tax, 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 FY 09-10 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 FY13-14 budget reflected the continued recession in the local economy, which is also somewhat 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 reduction was accomplished by a thorough assessment of all existing and proposed programs and workload; as a result, Town staffing was reduced from 81 to 51 FTE’s (full time equivalents) over the last five years. The Town Council established priorities for FY13-14 of which the top two are Economic Development and Pavement Management. In order to implement 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, 2013. This was the eighteenth 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 Generally Accepted Accounting Principles (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) For the second year, The Town was also given the Award for Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended June 30, 2013. In addition, the government received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 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 Division 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, 2014 (9) ELECTED OFFICIALS Mayor Ms. Linda M. Kavanagh Vice-Mayor Mr. Cecil A. Yates Councilmember Mr. Dennis Brown Councilmember Ms. Ginny Dickey Councilmember Mr. Tait D. Elkie Councilmember Ms. Cassie Hansen Councilmember Mr. Henry Leger DEPARTMENT DIRECTORS Town Manager Finance Director Ken Buchanan Craig Rudolphy Presiding Judge Robert Melton Community Services Director Mark Mayer Development Services Director Paul Mood Fire Chief Randy Roberts Rural Metro Corporation District Commander Captain David Letourneau Maricopa County Sheriff’s Office Town Prosecutor Mark Iacovino The Law Office of Mark Iacovino Town Attorney Andrew McGuire Gust Rosenfeld, P.L.C. TOWN OF FOUNTAIN HILLS, ARIZONA ORGANIZATIONAL CHART JUNE 30, 2014 (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 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, 2014, 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, 2014, 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis on pages 14 - 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 are 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 are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 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 17, 2014 REQUIRED SUPPLEMENTARY INFORMATION THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (14) 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, 2014. 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 2013-14 and fiscal year 2012-13 by $114.4 million and $116.1 million, respectively. Of these amounts, $19.2 million and $20.6 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors.  Governmental activities program revenues increased overall by $224,165 (8.5%) over the previous year. The majority of the increase was attributable to an increase in Fees, Fines and Charges for Services. Fees, Fines and Charges for Services increased by 15.5% indicating an improving economy, particularly in building permits and development fees.  At June 30, 2014, total fund balance of the governmental funds was $22.7 million. The decrease of $1.8 million from the prior year was mainly the result of an increase in capital outlay. Of the total fund balance, $5.0 million is unassigned in the General Fund, while the remainder is classified as nonspendable, restricted, committed, and assigned.  The major governmental funds, which include the General Fund, total $17.5 million in revenues, consisting primarily of local taxes, intergovernmental revenues, charges for services and licenses and permits. The total expenditures of the General Fund were $12.5 million and the fund balance increased from $7.7 million to $8.0 million including the Rainy Day, Public Art, and Vehicle Replacement Funds. The Highway User Revenue Fund (HURF) revenues were $2.1 million with expenditures of $3.1 million. The non-major governmental funds revenues were $1.2 million with the majority from local sales taxes (Downtown Strategy and Economic Development Funds) 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 $1.8 million (1.5%) from the prior fiscal year. Revenues increased 6.1% with higher fee revenue; expenditures for long term debt were reduced but increased in Highways and Streets due to continuation of the program for pavement maintenance.  General revenues accounted for $15.9 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 $2.9 million or 15% of total current fiscal year revenues.  The Town had approximately $20.5 million in expenses related to governmental activities, an increase of 4.0% over the prior fiscal year, attributed to the pavement management program.  Per local policy, residual unassigned General Fund revenues may be transferred to the Rainy Day fund, to 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 fund and Vehicle Replacement funds in the amount of $3.0 million. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (15) 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., 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 balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (16) 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), Capital Projects Fund, General Obligation Debt Service Fund, and Municipal Property Corporation Debt Service 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, 2014 (17) 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 $114.4 million at the current fiscal year end. The following table presents a summary of the Town’s net position for the fiscal years ended June 30, 2014 and June 30, 2013. 2014 2013 Percent Change ASSETS Current and Other Assets 26,489,337$ 28,460,597$ (6.9)% Capital Assets: Non-depreciable 27,334,347 26,223,288 4.2 % Depreciable (net) 73,728,913 77,222,272 (4.5)% Total Assets 127,552,597 131,906,157 (3.3)% LIABILITIES Other Liabilities 3,717,336 3,820,104 (2.7)% Long-Term Liabilities: Due W ithin One Year 2,164,879 2,449,599 (11.6)% Due in More Than One Year 7,289,432 9,501,392 (23.3)% Total Liabilities 13,171,647 15,771,095 (16.5)% NET POSITION Net Investment in Capital Assets 89,713,260 89,800,560 (0.1)% Restricted 5,480,867 5,721,744 (4.2)% Unrestricted 19,186,823 20,612,758 (6.9)% Total Net Position 114,380,950$ 116,135,062$ (1.5)% Town of Fountain Hills, Arizona Statement of Net Position The largest portion of the Town’s net position (78%) reflects its investment in capital assets (e.g., land, infrastructure, buildings, improvements, 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, 2014 (18) Analysis of Changes in Net Position The Town’s total net position decreased by $1.8 million during the fiscal year. The decrease was primarily a result of the pavement management program. Total governmental revenues increased over the prior year with a net increase of $1.1 million (6%); primarily due to building permits and related construction and intergovernmental revenues. The Town also saw an increase in local sales taxes of $0.5 million (6%) as well as revenues shared with cities/towns by the State (income tax, state sales tax and vehicle license taxes – increase of 7%) reflecting improvements in the economy. The Town’s total revenues for the current fiscal year were $18.7 million. The total cost of all programs and services was $20.5 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2014 and June 30, 2013. 2014 2013 Percent Change REVENUES Program Revenues: Fees, Fines and Charges for Services 1,412,797$ 1,223,499$ 15.5 % Operating Grants and Contributions 1,307,738 1,266,906 3.2 % Capital Grants and Contributions 144,570 150,535 (4.0)% General Revenues: Sales Taxes 8,459,267 7,957,163 6.3 % Property Taxes 1,449,646 1,385,147 4.7 % Franchise Taxes 349,414 334,668 4.4 % State Shared Revenues 4,525,857 4,226,234 7.1 % Vehicle License Taxes 800,475 752,949 6.3 % Investment Earnings 123,311 69,998 76.2 % Miscellaneous 166,115 300,899 (44.8)% Total Revenues 18,739,190 17,667,998 6.1 % EXPENSES General Government 2,432,965 2,909,443 (16.4)% Public Safety 6,958,056 6,100,131 14.1 % Highways and Streets 6,630,875 5,712,817 16.1 % Culture and Recreation 2,760,690 2,779,294 (0.7)% Development Services 1,237,717 1,633,361 (24.2)% Interest on Long-Term Debt 472,999 567,043 (16.6)% Total Expenses 20,493,302 19,702,089 4.0 % CHANGE IN NET POSITION (1,754,112) (2,034,091) (13.8)% Net Position - Beginning of Year 116,135,062 118,169,153 (1.7)% NET POSITION - END OF YEAR 114,380,950$ 116,135,062$ (1.5)% TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (19) 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%), fees, fines and charges for services (7%), and vehicle license tax (4%). The charts below compare the governmental expenses from fiscal years 2013-14 and 2012-13. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (20) The following items are significant current year transactions that had an impact on the Statement of Net Position and Statement of Activities:  Depreciable assets declined 4.5% ($3,493,359) with the Town’s depreciation of capital assets.  Overall revenues increased by 6% compared to the prior year, largely due to an increase in sales tax. Additionally, state shared revenues increased 7% 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.  Fees, Fines and Charges for Services revenue increased 15.5% compared to the prior year due in large part to an increase in building permits.  Sales tax revenues in Fountain Hills are derived primarily from retail and transportation/communications/utilities activity. An increase in these revenues reflects an improving economy.  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 $299,623.  Investment income increased in the current year 76.2% over the prior year. This increase was due to realized gains on the Town’s investment portfolio.  The decrease in miscellaneous revenues is primarily attributable to a decline in forfeitures in the retirement plan. In the prior year, there was also a recovery from the State Treasurer’s investment pool which did not occur in the current year.  Overall expenses increased 4.0% due to primarily to increases in public safety contracts and expenditures for the pavement management program.  General Government expenses were less than prior year due to decreases in attorney fees and contracted services.  Public Safety costs include contracts for police and fire; those contracts are multi-year with automatic increases.  Increase in Highways and Streets expenses was due to the pavement management program. 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, Highway Users Revenue Fund, Capital Projects Fund, General Obligation Debt Service Fund, and the Municipal Property Corporation Debt Service Fund. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (21) 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 $22.7 million, a decrease of $1.8 million. Increase (Decrease) Fund Balance From FY 2012-13 General Fund 7,997,952$ 301,130$ HURF Fund 701,391 (156,790) Capital Projects Fund 7,147,586 (1,857,690) General Obligation Debt Service Fund 76,834 15,606 Municipal Property Corporation Debt Service Fund 1,973,067 (370,119) Nonmajor Governmental Funds 4,817,723 244,720 22,714,553$ (1,823,143)$ 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 $8.0 million, while total fund balance of all funds reached $22.7 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 111 percent of total expenditures. The fund balance of the Town of Fountain Hills’ General Fund, which includes the Vehicle Replacement Fund, balance increased by $0.3 million. Any residual balance will be transferred to the Capital Projects Fund per the Town Council policy. Expenditures within the General Fund increased 4% over the prior year – the primary reason for the increase is the purchase of a new fire truck. The General Fund comprises 35 percent of the total fund balance. Approximately $5.0 million or 62 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 a net change in fund balance of $0.3 million. The fund balance of the HURF Fund decreased $0.2 million. The decrease was due primarily to expenditures for the pavement management program. The fund balance of the Capital Project’s Fund decreased $1.9 million during the current fiscal year. The decrease was primarily due to the new street yard building, Fire Station #1 renovations and the Avenue of the Fountains median improvements. The fund balance of the General Obligation Debt Service Fund increased $15,606 during the current fiscal year. The increase was largely due to lower debt service payments. The fund balance of the Municipal Property Corporation (MPC) Debt Service Fund decreased $0.4 million 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 insufficient reserves to pay annual debt service. Reserves from this fund contributed to the early retirement of Town Hall bonds in a prior year. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (22) All non-major governmental funds of the Town are combined into one column on the governmental fund statements. The non-major governmental funds reported a $0.2 million increase in fund balance mainly due to the allocation of local sales tax for economic development and revenues from development fees. 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 favorable revenue variance of $83,503 in sales taxes is due to higher than expected tax revenue, mostly attributable to the improved economy. The favorable revenue variance of $46,414 in franchise taxes is due to higher than expected franchise payments from services operating in the Town, mostly attributable to the improved economy. The unfavorable variance in intergovernmental revenues of $52,285 was a result of the state’s actual collections of fire insurance premium taxes being less than projected, which affects the distribution to cities and towns. The unfavorable revenue variance of $92,396 in fines and forfeiture reflects decreased court activity related to decreased traffic citations within Town borders. The unfavorable revenue variance of $48,090 in licenses and permits reflects the lower activity than anticipated in the current year largely attributable to less construction activity toward the end of the year. The favorable expenditure variance of $1,428,037 includes all departments. Development Services noticed lower than anticipated repairs and maintenance and utilities for Town-owned facilities. The Municipal Court also reduced staffing with a part-time judge. The general government Administration variance is due primarily to the appropriation of approximately $168,400 in the event the economy worsened during the fiscal year; this contingency was not required. The remainder of the general government Administration variance was due to an employee going from full-time to part-time and less than anticipated information technology improvements. The change of $114,019 between the original and final budget was not significant during the fiscal year. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2014, the Town had invested $101.1 million in capital assets, including buildings, vehicles, computers, equipment, infrastructure and artwork net of accumulated depreciation. This amount represents a net decrease from the prior fiscal year of $2.4 million. Total depreciation expense for the current fiscal year was $4.8 million, which accounted for most of the decrease. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (23) Major capital asset events during the current fiscal year included the following:  Avenue of the Fountains median improvements  Fire Station #1 remodel  Street maintenance building  ERV star pumper fire truck The schedule below presents a summary of capital asset balances for the fiscal years ended June 30, 2014 and June 30, 2013. 2014 2013 Percent Change Land 23,571,668$ 23,571,668$ 0.0% Artwork 1,967,500 1,886,500 4.3% Construction in Progress 1,795,179 765,120 134.6% Infrastructure 51,559,773 55,215,185 -6.6% Buildings 14,027,400 14,189,682 -1.1% Improvements 6,907,205 7,148,597 -3.4% Vehicles, Machinery and Equipment 1,234,535 668,808 84.6% Total Capital Assets 101,063,260$ 103,445,560$ -2.3% 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 $9.2 million in bonds outstanding, $2.0 million due within one year; this amount represents a net decrease of $2.4 million. The chart below is a summary of the Town’s outstanding debt as of year-end: 2014 2013 General Obligation Bonds 4,495,000$ 5,700,000$ Revenue Bonds 4,695,000 5,905,000 Total Outstanding Debt 9,190,000$ 11,605,000$ 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 purpose municipal bonds (up to 6% of the total secondary assessed valuation). The current total debt limitation for the Town is $93.2 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 Note 3.C. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (24) 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 a major credit rating agency. 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 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 a recession (major retail activity consists of three grocery stores and one shopping center with a major retailer). 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 2014-15 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 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, 2014, the Town had set aside $7.1 million in the capital improvement fund. The Town had been successful in obtaining a contract with ADOT to fund a major road improvement along Shea Boulevard that was completed in fiscal year 2011-2012. The Town completed a second construction project for another major road improvement on Shea Boulevard with further funding from ADOT in fiscal year 2012-2013. The widening of Shea Boulevard, funded primarily by a grant, will begin in fiscal year 2014-2015 as well as the reconstruction of Saguaro Boulevard, which will be bond financed. 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 fiscal year 2014-2015 General Fund operating budget is $13.7 million representing a 4% increase from fiscal year 2013-14 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 $ 22.2 million, a 22% increase over fiscal year 2013-14 in anticipation of the reconstruction of Saguaro Boulevard that will be funded by voter-approved bonds. 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. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2014 (25) 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 $22.8 million; with the capital budget for fiscal year 2014-15 totaling $ 22.2 million (which includes carryover funds for some large projects currently underway). In fiscal year 2014-15, 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 or visit our website at: www.fh.az.gov. BASIC FINANCIAL STATEMENTS TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2014 See accompanying Notes to Basic Financial Statements. (26) Governmental Activities ASSETS Cash and Investments 20,972,629$ Cash with Paying Agent 2,348,018 Receivables, Net: Accounts Receivable 172,590 Intergovernmental Receivables 850,699 Property Taxes Receivable 20,620 Inventory, At Cost 14,358 Prepaid Items 19,345 Restricted Assets 2,091,078 Capital Assets: Non-Depreciable 27,334,347 Depreciable (Net) 73,728,913 Total Assets 127,552,597 LIABILITIES Accounts Payable 790,531 Accrued Wages and Benefits 130,595 Interest Payable 230,406 Retainage Payable 48,660 Unearned Revenue 357,144 Matured Debt Principal Payable 2,160,000 Noncurrent Liabilities: Due Within One Year 2,164,879 Due in More Than One Year 7,289,432 Total Liabilities 13,171,647 NET POSITION Net Investment in Capital Assets 89,713,260 Restricted For: Highways and Streets 702,604 Public Safety 256,850 Capital Outlay 2,450,605 Debt Service 2,061,016 Cottonwoods Maintenance District 9,792 Unrestricted 19,186,823 Total Net Position 114,380,950$ TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2014 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 2,432,965$ 1,373,670$ -$ 43,448$ (1,015,847)$ Public Safety 6,958,056 16,971 39,174 - (6,901,911) Highways and Streets 6,630,875 22,156 1,268,564 20,122 (5,320,033) Culture and Recreation 2,760,690 - - 81,000 (2,679,690) Development Services 1,237,717 - - - (1,237,717) Interest on Long-Term Debt 472,999 - - - (472,999) Total Governmental Activities $20,493,302 $ 1,412,797 $ 1,307,738 $ 144,570 (17,628,197) GENERAL REVENUES Taxes: Sales 8,459,267 Property 1,449,646 Franchise 349,414 State Sales and Income Tax Revenue Sharing - Unrestricted 4,525,857 Vehicle License Tax Revenue Sharing - Unrestricted 800,475 Investment Earnings 123,311 Miscellaneous 166,115 Total General Revenues 15,874,085 Change in Net Position (1,754,112) Net Position - Beginning 116,135,062 Net Position - Ending 114,380,950$ PROGRAM REVENUES TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2014 See accompanying Notes to Basic Financial Statements. (28) General Obligation General HURF Capital Projects Debt Service ASSETS Cash and Investments 7,463,697$ 601,158$ 7,852,549$ 65,074$ Cash with Paying Agent - - - 956,875 Accounts Receivable 119,384 21,205 32,001 - Intergovernmental Receivable 635,612 153,826 - - Taxes Receivable 5,946 - - 11,760 Due from Other Funds 40,808 - - - Inventory, At cost 14,358 - - - Prepaid Items 18,348 997 - - Restricted Assets 75,623 - - - Total Assets 8,373,776$ 777,186$ 7,884,550$ 1,033,709$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable 237,146$ 61,825$ 456,303$ -$ Accrued Wages and Benefits 114,444 12,757 - - Retainage Payable - - 48,660 - Unearned Revenue - - 200,000 - Due to Other Funds - - - - Interest Payable - - - 56,875 Matured Debt Principal Payable - - - 900,000 Total Liabilities 351,590 74,582 704,963 956,875 Deferred Inflows of Resources Unavailable Revenues 24,234 1,213 32,001 - Fund Balances Nonspendable Cash with Escrow Agent - - - - Inventory 14,358 - - - Prepaid Items 18,348 997 - - Restricted - 700,394 - 76,834 Committed 1,345,200 - - - Assigned 1,647,193 - 7,147,586 - Unassigned 4,972,853 - - - Total Fund Balances 7,997,952 701,391 7,147,586 76,834 Total Liabilities, Deferred Inflows of Resources and Fund Balances 8,373,776$ 777,186$ 7,884,550$ 1,033,709$ (29) Municipal Property Nonmajor Total Corporation Governmental Governmental Debt Service Funds Funds -$ 4,990,151$ 20,972,629$ 1,029,700 361,443 2,348,018 - - 172,590 40,818 20,443 850,699 - 2,914 20,620 - - 40,808 - - 14,358 - - 19,345 2,015,455 - 2,091,078 3,085,973$ 5,374,951$ 26,530,145$ 10$ 35,247$ 790,531$ - 3,394 130,595 - - 48,660 - 157,144 357,144 40,808 - 40,808 117,088 56,443 230,406 955,000 305,000 2,160,000 1,112,906 557,228 3,758,144 - - 57,448 1,973,067 - 1,973,067 - - 14,358 - - 19,345 - 2,728,362 3,505,590 - 2,089,361 3,434,561 - - 8,794,779 - - 4,972,853 1,973,067 4,817,723 22,714,553 3,085,973$ 5,374,951$ 26,530,145$ THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2014 See accompanying Notes to Basic Financial Statements. (30) Total Fund Balances for Governmental Funds 22,714,553$ Governmental Capital Assets 194,991,356 Less Accumulated Depreciation (93,928,096) Capital Assets Used in Governmental Activities 101,063,260 Miscellaneous Permits 25,447 Miscellaneous Revenue 32,001 General Obligation Bonds (4,495,000) Revenue Bonds Payable (4,695,000) Compensated Absences (264,311) Total Net Position of Governmental Activities 114,380,950$ 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, 2014 See accompanying Notes to Basic Financial Statements. (31) General Obligation General HURF Capital Projects Debt Service REVENUES Taxes: Sales 7,100,383$ -$ 390,871$ -$ Property - - - 1,029,428 Franchise 349,414 - - - Intergovernmental 4,503,364 2,069,039 43,448 - Fines and Forfeitures 154,024 - - - Licenses and Permits 554,690 - - - Charges for Services 139,220 22,156 - - Leases and Rents 252,584 - - - Investment Earnings 56,576 375 30,815 178 Other 123,932 10,182 - - Total Revenues 13,234,187 2,101,752 465,134 1,029,606 EXPENDITURES Current: General Government 2,125,922 - - - Public Safety 6,886,158 - - - Highways and Streets - 3,073,746 - - Culture and Recreation 1,900,648 - - - Development Services 1,597,517 - - - Debt Service: Principal Retirement - - - 900,000 Interest on Long-Term Debt - - - 113,750 Fiscal Charges - - - 250 Capital Outlay - - 1,750,465 - Total Expenditures 12,510,245 3,073,746 1,750,465 1,014,000 Excess (Deficiency) of Revenues Over Expenditures 723,942 (971,994) (1,285,331) 15,606 OTHER FINANCING SOURCES (USES) Transfers In - 994,000 421,641 - Transfers Out (422,812) (178,796) (994,000) - Total Other Financing Sources (Uses) (422,812) 815,204 (572,359) - Net Change in Fund Balance 301,130 (156,790) (1,857,690) 15,606 FUND BALANCE Beginning of Year 7,696,822 858,181 9,005,276 61,228 End of Year 7,997,952$ 701,391$ 7,147,586$ 76,834$ (32) Municipal Property Nonmajor Total Corporation Governmental Governmental Debt Service Funds Funds 645,342$ 322,671$ 8,459,267$ - 433,628 1,463,056 - - 349,414 - 61,667 6,677,518 - 16,971 170,995 - 337,092 891,782 - - 161,376 - - 252,584 11,341 24,026 123,311 - - 134,114 656,683 1,196,055 18,683,417 - 68,923 2,194,845 - 4,612 6,890,770 - 11,813 3,085,559 - 21,291 1,921,939 - 177,466 1,774,983 1,210,000 305,000 2,415,000 234,176 112,885 460,811 4,510 7,428 12,188 - - 1,750,465 1,448,686 709,418 20,506,560 (792,003) 486,637 (1,823,143) 421,884 928 1,838,453 - (242,845) (1,838,453) 421,884 (241,917) - (370,119) 244,720 (1,823,143) 2,343,186 4,573,003 24,537,696 1,973,067$ 4,817,723$ 22,714,553$ 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, 2014 See accompanying Notes to Basic Financial Statements. (33) Net Change in Fund Balances of Governmental Funds (1,823,143)$ Expenditures for Capital Assets 2,385,168 Less Current Year Depreciation (4,823,757) Excess Depreciation Over Capital Expenditures (2,438,589) Loss on Disposal of Capital Assets (44,833) Capital Contributions 101,122 Property Taxes (13,410) Miscellaneous Permits (63,940) Miscellaneous Revenue 32,001 Principal Payments on General Obligation Bonds 1,205,000 Principal Payments on Revenue Bonds 1,210,000 Net Decrease in Compensated Absences 81,680 Change in Net Position of Governmental Activities (1,754,112)$ 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 amortized over the term of the long term debt in the Statement of Activities except for issuance costs which are expensed in the year when incurred. TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FISCAL YEAR ENDED JUNE 30, 2014 See accompanying Notes to Basic Financial Statements. (34) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales Taxes 7,016,880$ 7,016,880$ 7,100,383$ 83,503$ Franchise Taxes 303,000 303,000 349,414 46,414 Intergovernmental 4,555,649 4,555,649 4,503,364 (52,285) Fines and Forfeitures 246,420 246,420 154,024 (92,396) Licenses and Permits 602,780 602,780 554,690 (48,090) Charges for Services 142,048 142,048 139,220 (2,828) Leases and Rents 224,544 224,544 252,584 28,040 Investment Earnings 61,200 61,200 56,576 (4,624) Other 229,648 229,648 123,932 (105,716) Total Revenues 13,382,169 13,382,169 13,234,187 (147,982) EXPENDITURES Current: General Government: Mayor and Council 77,652 79,702 76,800 2,902 Administration 2,184,483 2,080,191 1,756,630 323,561 Municipal Court 360,006 362,401 292,492 69,909 Total General Government 2,622,141 2,522,294 2,125,922 396,372 Public Safety: Law Enforcement 3,121,325 3,121,325 3,064,708 56,617 Fire and Emergency Medical 3,975,005 4,060,663 3,821,450 239,213 Total Public Safety 7,096,330 7,181,988 6,886,158 295,830 Culture and Recreation: Community Services 2,239,465 2,267,884 1,900,648 367,236 Development Services 1,866,327 1,966,116 1,597,517 368,599 Total Expenditures 13,824,263 13,938,282 12,510,245 1,428,037 Excess (Deficiency) of Revenues Over Expenditures (442,094) (556,113) 723,942 1,280,055 OTHER FINANCING SOURCES (USES) Transfers Out (221,500) (221,500) (422,812) (201,312) Net Change in Fund Balance (663,594) (777,613) 301,130 1,078,743 FUND BALANCE Beginning of Year - - 7,696,822 7,696,822 End of Year (663,594)$ (777,613)$ 7,997,952$ 8,775,565$ 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, 2014 See accompanying Notes to Basic Financial Statements. (35) Variance with Original Budget Final Budget Actual Final Budget REVENUES Intergovernmental 2,018,340$ 2,018,340$ 2,069,039$ 50,699$ Charges for Services 25,240 25,240 22,156 (3,084) Investment Earnings 1,200 1,200 375 (825) Other 6,060 6,060 10,182 4,122 Total Revenues 2,050,840 2,050,840 2,101,752 50,912 EXPENDITURES Current: Highways and Streets 2,094,000 3,091,318 3,073,746 17,572 Excess (Deficiency) of Revenues Over Expenditures (43,160)(1,040,478) (971,994) 68,484 OTHER FINANCING SOURCES (USES) Transfers In - - 994,000 994,000 Transfers Out (225,000) (225,000) (178,796) 46,204 Total Other Finance Sources (Uses) (225,000) (225,000) 815,204 1,040,204 Net Change in Fund Balance (268,160)(1,265,478) (156,790) 1,108,688 FUND BALANCE Beginning of Year - - 858,181 858,181 End of Year (43,160)$ (1,265,478)$ 701,391$ 1,966,869$ NOTES TO BASIC FINANCIAL STATEMENTS THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (36) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying 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 applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A summary of the Town’s more significant accounting policies follows. 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 Town reports the following component units: Eagle Mountain Community Facilities District and the Cottonwoods Maintenance 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 taxes, and thus for the costs of operating the Districts. The Town Council serves as the Board of Directors; however, the Town has no liability for the Districts’ debt, the Districts are responsible for the debt; the debt is therefore not subject to the Town’s debt limit. The District cannot be part of another reporting entity. The District’s governing body is substantially the same as the Town. As a result, 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 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. The MPC cannot be part of another reporting entity. The MPC provides services almost exclusively to the Town. As a result, for financial reporting purposes, transactions of the MPC 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, 2014 (37) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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, 2014 (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, 2014 (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. 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. 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, Deferred Inflows of Resources, 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, 2014 (40) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Inflows of Resources 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.” 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. The Town does not asses a primary tax. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (41) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Inflows of Resources 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 ($530,669), Highway User Revenue fuel tax ($119,479), State sales and income tax ($166,205), and vehicle license tax ($34,346) 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 $75,623 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 $2,015,455 deposited in an irrevocable trust with an escrow agent to make future principal and interest payments on the 2004 Municipal Property Corporation Revenue Bonds. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (42) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 6. Capital Assets Capital assets, which include land, artwork, buildings, improvements, 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. 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 completed. 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 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 accrue as pay periods are completed at the current rate of pay. Effective October 7, 2004, all eligible full-time and part-time employees can accrue vacation leave. Full-time employees accrue up to a maximum of 224 hours of vacation through carryover of balances, 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 960 hours. A portion of this balance will be paid upon a satisfactory separation of service. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (43) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 7. Compensated Absences (Continued) 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. 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 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. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (44) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 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. 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 by passage of a resolution 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 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. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (45) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 10. Fund Balance Classifications (Continued) 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, 2014. The Rainy Day fund 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 as an emergency by the Governor of the State of Arizona or the Mayor of the Town. All withdrawals from the Rainy Day fund 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 fund when 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. 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 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. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (46) 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 a resolution. 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. 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 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. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (47) NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) B. Excess of Expenditures Over Appropriations Expenditures exceeded appropriations in the following funds: Amount of Overexpenditure Major Funds: Municipal Property Corporation Debt Service Fund 337,286$ The overexpenditure of $337,286 was due to the principal and interest payments made on the Series 2004 MPC revenue bonds that are not budgeted for by the Town as the cash has been fully paid to the trustee for future distribution. (Remainder of This Page Intentionally Left Blank) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (48) NOTE 3 DETAILED NOTES ON ALL FUNDS A. Assets 1. Deposits and Investments Deposits and investments at June 30, 2014, consist of the following: Deposits: Cash on Hand 650$ Cash in Bank 795,509 Cash on Deposit with Paying Agent 2,348,018 Investments Local Government Investment Pool 4,952,605 Wells Fargo Money Market 73,640 U.S. Agency Securities 3,080,552 U.S. Treasury Securities 2,091,078 U.S. Treasury Notes 12,069,673 Total 25,411,725 Less Cash with Paying Agent (2,348,018) Less Restricted Assets (2,091,078) Total Cash and Investments 20,972,629$ Deposits The Town’s deposits at June 30, 2014, had a carrying value of $795,509 and a bank balance of $809,618. Of the bank balance, $500,000 was insured by federal depository insurance and $309,618 was collateralized by securities held by the pledging financial institutions in the Town’s name. Investments The Town’s investments at June 30, 2014 were as follows: Investment Type Amount Local Government Investment Pool 4,952,605$ Wells Fargo Money Market 73,640 U.S. Agency Securities 3,080,552 U.S. Treasury Securities 2,091,078 U.S. Treasury Notes 12,069,673 22,267,548$ 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, 2014 (49) 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, 2014, credit risk for the Town’s investments was as follows: Investment Type Rating Agency Amount Local Government Investment Pool AAA S&P 4,952,605$ Wells Fargo Money Market N/A N/A 73,640 U.S. Agency Securities AA+ S&P 3,080,552 U.S. Treasury Securities N/A N/A 2,091,078 U.S. Treasury Notes AA+ S&P 12,069,673 22,267,548$ Custodial credit risk – Concentration credit risk is the risk of loss associated with the majority 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, 2014, the Town had the following diversification of Town investments: Percent of Town Investment Type Amount Investments Local Government Investment Pool 4,952,605$ 22.24% Wells Fargo Money Market 73,640 0.33% U.S. Agency Securities 3,080,552 13.83% U.S. Treasury Securities 2,091,078 9.40% U.S. Treasury Notes 12,069,673 54.20% 22,267,548$ 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, 2014 (50) 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 4,952,605$ -$ -$ 4,952,605$ Wells Fargo Advantage Money Market 73,640 - - 73,640 Federal Farm Credit Bank Notes - - 500,435 500,435 Federal Home Loan Bank Global Notes - - 431,475 431,475 Federal Home Loan Mortgage Corp. Notes - - 452,300 452,300 Federal National Mortgage Association Notes - - 1,696,342 1,696,342 U.S. Treasury Securities 414,291 1,676,787 - 2,091,078 U.S. Treasury Notes - 2,284,421 9,785,252 12,069,673 Total 5,440,536$3,961,208$ 12,865,804$ 22,267,548$ 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 24,234$ -$ Highway User Revenue Fund 1,213 - Capital Projects Fund 32,001 200,000 Grants Nonmajor Governmental Funds - 157,144 57,448$ 357,144$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (51) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 3. Capital Assets Capital assets for the year ended June 30, 2014, were as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land 23,571,668$ -$ -$ 23,571,668$ Artwork 1,886,500 81,000 - 1,967,500 Construction in Progress 765,120 1,693,924 (663,865) 1,795,179 Total Capital Assets, Not Being Depreciated 26,223,288 1,774,924 (663,865) 27,334,347 Capital Assets, Being Depreciated: Infrastructure 130,788,513 - (11,626) 130,776,887 Buildings 18,008,744 198,523 (33,872) 18,173,395 Improvements 14,766,654 476,968 - 15,243,622 Vehicles, Machinery and Equipment 3,482,484 699,740 (719,119) 3,463,105 Total Capital Assets, Being Depreciated 167,046,395 1,375,231 (764,617) 167,657,009 Accumulated Depreciation for: Infrastructure (75,573,328) (3,643,786) - (79,217,114) Buildings (3,819,062) (360,805) 33,872 (4,145,995) Improvements (7,618,057) (718,360) - (8,336,417) Vehicles, Machinery and Equipment (2,813,676) (100,806) 685,912 (2,228,570) Total Accumulated Depreciation (89,824,123) (4,823,757) 719,784 (93,928,096) Total Capital Assets, Being Depreciated, Net 77,222,272 (3,448,526) (44,833) 73,728,913 Governmental Activities Capital Assets, Net 103,445,560$ (1,673,602)$ (708,698)$ 101,063,260$ Depreciation expense was charged to functions/programs as follows: Governmental Activities: General Government 196,870$ Public Safety 67,286 Highways and Streets 3,679,407 Culture and Recreation 880,194 Total Depreciation Expense 4,823,757$ TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (52) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 4. Construction Commitments At June 30, 2014, the Town has the following active construction commitments: Remaining Project Spent-to-date Commitment Avenue of the Fountains Median and Right of Way Improvements 645,290$ 1,094,898$ Fountain Park VI 71,238 26,500 Saguaro Boulevard Reconstruction 265,229 142,012 Fountain Hills Boulevard Shoulder Paving 103,372 10,440 Palisades and Saguaro Traffic Signal Upgrades 13,979 5,991 Total Commitments 1,099,108$ 1,279,841$ Governmental Activities B. Interfund Transfers Interfund transfers for the year ended June 30, 2014, consisted of the following: Municipal Property Capital Corporation Nonmajor HURF Projects Debt Service Governmental Transfers Out Fund Fund Fund Funds Total General Fund -$ -$ 421,884$ 928$ 422,812$ HURF Fund - 178,796 178,796 Capital Projects Fund 994,000 - - - 994,000 Nonmajor Governmental Funds - 242,845 - - 242,845 Total 994,000$ 421,641$ 421,884$ 928$ 1,838,453$ Transfers In The General Fund transferred $421,884 to pay for debt service costs on the Municipal Property Corporation’s outstanding bonds. The General Fund transferred $928 to the Development Fees Nonmajor Governmental Fund to reimburse for a refund incorrectly returned. The Capital Projects Fund transferred $994,000, to the HURF Fund to fund additional street pavement projects. The HURF Fund transferred 178,796 to the Capital Projects Fund for construction of a new streets building. The Nonmajor Governmental Funds transferred $242,845 to the Capital Projects Fund to fund a median improvement project. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (53) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) 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. Tax revenues from the General Fund and Excise Tax Fund are used to pay municipal facilities bonds. Bonds outstanding at June 30, 2014, were as follows: Interest Maturity Original Outstanding Purpose Rates Date Amount Amount Governmental Activities: General Obligation Bonds: General Obligation Refunding Bonds, Series 2005 4.00 07/01/15-19 $ 7,225,000 $ 2,000,000 Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2005 4.00-4.125 7/1/2015-21 4,555,000 2,495,000 Total General Obligation Bonds $ 11,780,000 $ 4,495,000 Revenue Bonds: Municipal Facilities Revenue Bonds, Series 2004 4.25-4.50 7/1/14-15 $ 3,645,000 $ 1,915,000 Municipal Facilities Revenue Refunding Bonds, Series 2005 3.25-4.00 7/01/15-20 5,330,000 2,780,000 Total Revenue Bonds $ 8,975,000 $ 4,695,000 The Town has pledged future excise taxes to repay a total of $4,695,000 in outstanding municipal facilities revenue and refunding bonds. For fiscal year ended June 30, 2014, the net revenues available to service this debt were $14.8 million. The debt principal and interest paid on this debt for the fiscal year was $1,210,000 and $234,176, respectively (10 percent of available pledged revenues). TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (54) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Long-Term Obligations (Continued) Changes in long-term obligations for the year ended June 30, 2014, are as follows: Due Within July 1, 2013 Increases Decreases June 30, 2014 One Year Governmental Activities Bonds General Obligation Bonds 5,700,000$ -$ (1,205,000)$ 4,495,000$ 705,000$ Revenue Bonds 5,905,000 - (1,210,000) 4,695,000 1,265,000 Total Bonds 11,605,000 - (2,415,000) 9,190,000 1,970,000 Other Liabilities: Compensated Absences 345,991 159,256 (240,936) 264,311 194,879 Governmental Activities Long-Term Liabilities 11,950,991$ 159,256$ (2,655,936)$ 9,454,311$ 2,164,879$ Debt service requirements on long-term debt at June 30, 2014, are as follows: Principal Interest 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 1,040,000 100,567 2020 - 2022 1,080,000 60,585 9,190,000$ 1,182,881$ Governmental Activities Year Ending June 30, TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (55) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) D. Fund Balances Fund Balances at June 30, 2014 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 -$ -$ -$ -$ 1,973,067$ -$ 1,973,067$ Inventory 14,358 - - - - - 14,358 Prepaids 18,348 997 - - - - 19,345 Restricted: Debt Service - - - 76,834 - 11,115 87,949 Highways and Streets - 700,394 - - - - 700,394 Local Court Enhancement - - - - - 256,850 256,850 New Development - - - - - 2,450,605 2,450,605 Cottonwoods Maintenance District - - - - - 9,792 9,792 Committed Rainy Day Funds 1,345,200 - - - - - 1,345,200 Town Beautification and Economic Development - - - - - 2,089,361 2,089,361 Assigned Public Art 1,078 - - - - - 1,078 Vehicle Replacement 301,259 - - - - - 301,259 Capital Projects 537,942 - 7,147,586 - - - 7,685,528 Equipment Replacement 806,914 - - - - - 806,914 Unassigned 4,972,853 - - - - - 4,972,853 Total Fund Balance 7,997,952$ 701,391$ 7,147,586$ 76,834$ 1,973,067$ 4,817,723$ 22,714,553$ 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. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2014 (56) NOTE 4 OTHER INFORMATION (CONTINUED) B. Risk Management (Continued) 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. 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, 2014, was $2,380,050. The Town’s total payroll was $2,811,315. 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 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 five years of service on a pro rata basis. 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 the fiscal year, the Town’s required and actual contributions amounted to $261,806. The employees’ contributions totaled $261,806. Employees may also contribute to the lCMA Retirement Corporation 457 plan on a voluntary basis; there is no employer match for those contributions. During the fiscal year, employees contributed $129,453 to that plan. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2013-14 or as of the close of the fiscal year. THIS PAGE BLANK COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES THIS PAGE BLANK NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Development Fees Fund - accounts for restricted development fees collected from developers for projects approved by the Town Council. Local Court Enhancement Fund - accounts for a local court surcharge, restricted for court enhancement. Grants Fund - accounts for the activities of various restricted grants and contributions received by the Town. Downtown Strategy Fund - accounts for the portion of Town sales tax committed by the Town Council for the development of downtown. Economic Development Fund – accounts for the portion of Town sales tax committed by the Town Council for economic development. Cottonwoods Maintenance Fund - accounts for all special assessments restricted to pay for maintenance of the Cottonwoods Special Assessment District. DEBT SERVICE FUNDS Eagle Mountain Debt Service Fund – accounts for the property tax revenues restricted to pay the debt service of the Eagle Mountain Community Facilities District component unit. TOWN OF FOUNTAIN HILLS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2014 (57) Development Fees Local Court Enhancement Grants Downtown Strategy ASSETS Cash and Investments 2,451,501$ 256,850$ 188,804$ 2,035,147$ Cash with Paying Agent - - - - Intergovernmental Receivable - - - 8,164 Taxes Receivable - - - - Total Assets 2,451,501$ 256,850$ 188,804$ 2,043,311$ LIABILITIES AND FUND BALANCES Liabilities Accounts Payable 896$ -$ 31,660$ -$ Accrued Wages and Benefits - - - - Unearned Revenue - - 157,144 - Interest Payable - - - - Matured Debt Principal Payable - - - - Total Liabilities 896 - 188,804 - Fund Balances Restricted 2,450,605 256,850 - - Committed - - - 2,043,311 Total Fund Balances 2,450,605 256,850 - 2,043,311 Total Liabilities and Fund Balances 2,451,501$ 256,850$ 188,804$ 2,043,311$ Special Revenue Funds (58) Debt Service Fund Economic Development Cottonwoods Maintenance Total Special Revenue Funds Eagle Mountain Debt Service Total Nonmajor Governmental Funds 39,640$ 10,008$ 4,981,950$ 8,201$ 4,990,151$ - - - 361,443 361,443 12,245 34 20,443 - 20,443 - - - 2,914 2,914 51,885$ 10,042$ 5,002,393$ 372,558$ 5,374,951$ 2,441$ 250$ 35,247$ -$ 35,247$ 3,394 - 3,394 - 3,394 - - 157,144 - 157,144 - - - 56,443 56,443 - - - 305,000 305,000 5,835 250 195,785 361,443 557,228 - 9,792 2,717,247 11,115 2,728,362 46,050 - 2,089,361 - 2,089,361 46,050 9,792 4,806,608 11,115 4,817,723 51,885$ 10,042$ 5,002,393$ 372,558$ 5,374,951$ Special Revenue Funds TOWN OF FOUNTAIN HILLS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2014 (59) Development Fees Local Court Enhancement Grants Downtown Strategy REVENUES Taxes: Sales -$ -$ -$ 129,068$ Property - - - - Intergovernmental - - 61,667 - Fines and Forfeitures - 16,971 - - Licenses and Permits 337,092 - - - Investment Earnings 11,915 122 - 11,879 Total Revenues 349,007 17,093 61,667 140,947 EXPENDITURES Current: General Government - 3,893 61,667 - Public Safety 4,612 - - - Highways and Streets 11,813 - - - Culture and Recreation 21,291 - - - Development Services - - - 29,885 Debt Service Principal Retirement - - - - Interest on Long-Term Debt - - - - Fiscal Charges - - - - Total Expenditures 37,716 3,893 61,667 29,885 Excess (Deficiency) of Revenues Over Expenditures 311,291 13,200 - 111,062 OTHER FINANCING SOURCES (USES) Transfers In 928 - - - Transfers Out - - - (242,845) Total Other Financing Sources (Uses) 928 - - (242,845) Net Change in Fund Balances 312,219 13,200 - (131,783) FUND BALANCES Beginning of Year 2,138,386 243,650 - 2,175,094 End of Year 2,450,605$ 256,850$ -$ 2,043,311$ Special Revenue Funds (60) Debt Service Fund Economic Development Cottonwoods Maintenance Total Special Revenue Funds Eagle Mountain Debt Service Total Nonmajor Governmental Funds 193,603$ -$ 322,671$ -$ 322,671$ - 4,823 4,823 428,805 433,628 - - 61,667 - 61,667 - - 16,971 - 16,971 - - 337,092 - 337,092 28 5 23,949 77 24,026 193,631 4,828 767,173 428,882 1,196,055 - 3,363 68,923 - 68,923 - - 4,612 - 4,612 - - 11,813 - 11,813 - - 21,291 - 21,291 147,581 - 177,466 - 177,466 - - - 305,000 305,000 - - - 112,885 112,885 - - - 7,428 7,428 147,581 3,363 284,105 425,313 709,418 46,050 1,465 483,068 3,569 486,637 - - 928 - 928 - - (242,845) - (242,845) - - (241,917) - (241,917) 46,050 1,465 241,151 3,569 244,720 - 8,327 4,565,457 7,546 4,573,003 46,050$ 9,792$ 4,806,608$ 11,115$ 4,817,723$ Special Revenue Funds 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, 2014 (61) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales 120,000$ 120,000$ 390,871$ 270,871$ Intergovernmental 3,878,000 3,878,000 43,448 (3,834,552) Licenses and Permits 200,000 200,000 - (200,000) Investment Earnings - - 30,815 30,815 Total Revenues 4,198,000 4,198,000 465,134 (3,732,866) EXPENDITURES Capital Outlay 19,198,080 18,204,080 1,750,465 16,453,615 Excess (Deficiency) of Revenues Over Expenditures (15,000,080)(14,006,080) (1,285,331) 12,720,749 OTHER FINANCING SOURCES (USES) Transfers In 2,093,000 2,093,000 421,641 (1,671,359) Transfers Out - - (994,000) (994,000) Issuance of Long-Term Debt 8,200,000 8,200,000 - (8,200,000) Total Other Financing Sources (Uses) 10,293,000 10,293,000 (572,359) (10,865,359) Net Change in Fund Balance (4,707,080)(3,713,080) (1,857,690) 1,855,390 FUND BALANCE Beginning of Year - - 9,005,276 9,005,276 End of Year (4,707,080)$ (3,713,080)$ 7,147,586$ 10,860,666$ 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, 2014 (62) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property 1,013,040$ 1,029,428$ 16,388$ Investment Earnings 210 178 (32) Total Revenues 1,013,250 1,029,606 16,356 EXPENDITURES Debt Service: Principal Retirement 900,000 900,000 - Interest on Long-Term Debt 113,750 113,750 - Fiscal Charges 2,100 250 1,850 Total Expenditures 1,015,850 1,014,000 1,850 Excess (Deficiency) of Revenues Over Expenditures (2,600) 15,606 18,206 FUND BALANCE Beginning of Year - 61,228 61,228 End of Year (2,600)$ 76,834$ 79,434$ 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, 2014 (63) Variance with Final Budget Actual Final Budget REVENUES Taxes: Sales 594,000$ 645,342$ 51,342$ Investment Earnings 500 11,341 10,841 Total Revenues 594,500 656,683 62,183 EXPENDITURES Debt Service: Principal Retirement 955,000 1,210,000 (255,000) Interest on Long-Term Debt 149,400 234,176 (84,776) Fiscal Charges 7,000 4,510 2,490 Total Expenditures 1,111,400 1,448,686 (337,286) Excess (Deficiency) of Revenues Over Expenditures (516,900) (792,003) (275,103) OTHER FINANCING SOURCES (USES) Transfers In 193,500 421,884 228,384 Net Change in Fund Balance (323,400) (370,119) (46,719) FUND BALANCE Beginning of Year - 2,343,186 2,343,186 End of Year (323,400)$ 1,973,067$ 2,296,467$ 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, 2014 (64) Variance with Final Budget Actual Final Budget REVENUES Licenses and Permits $ 130,632 $ 337,092 $ 206,460 Investment Earnings 100 11,915 11,815 Total Revenues 130,732 349,007 218,275 EXPENDITURES Current Public Safety 10,000 4,612 5,388 Highways and Streets 20,000 11,813 8,187 Culture and Recreation 20,000 21,291 (1,291) Total Expenditures 50,000 37,716 12,284 Excess (Deficiency) of Revenues Over Expenditures 80,732 311,291 230,559 OTHER FINANCING SOURCES (USES) Transfers In - 928 928 Net Change in Fund Balance 80,732 312,219 231,487 FUND BALANCE Beginning of Year - 2,138,386 2,138,386 End of Year 80,732$ 2,450,605$ 2,369,873$ 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, 2014 (65) Variance with Final Budget Actual Final Budget REVENUES Fines and Forfeitures 14,250$ 16,971$ 2,721$ Investment Earnings 300 122 (178) Total Revenues 14,550 17,093 2,543 EXPENDITURES Current: General Government 48,875 3,893 44,982 Excess (Deficiency) of Revenues Over Expenditures (34,325) 13,200 47,525 FUND BALANCE Beginning of Year - 243,650 243,650 End of Year (34,325)$ 256,850$ 291,175$ 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, 2014 (66) Variance with Original Final Actual Final Budget REVENUES Intergovernmental $ 1,498,655 $ 1,498,655 $ 61,667 $ (1,436,988) EXPENDITURES Current: General Government 1,498,655 1,297,964 61,667 1,236,297 Excess (Deficiency) of Revenues Over Net Change in Fund Balance - 200,691 - (200,691) FUND BALANCE Beginning of Year - - - - End of Year -$ 200,691$ -$ (200,691)$ Budget TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL DOWNTOWN STRATEGY FUND FISCAL YEAR ENDED JUNE 30, 2014 (67) Variance with Final Budget Actual Final Budget REVENUES Taxes: Sales 114,084$ 129,068$ 14,984$ Investment Earnings - 11,879 11,879 Total Revenues 114,084 140,947 26,863 EXPENDITURES Current: Development Services 114,079 29,885 84,194 Excess (Deficiency) of Revenues Over Expenditures 5 111,062 111,057 OTHER FINANCING SOURCES (USES) Transfers Out (1,840,000) (242,845) 1,597,155 Net Change in Fund Balance (1,839,995) (131,783) 1,708,212 FUND BALANCE Beginning of Year - 2,175,094 2,175,094 End of Year (1,839,995)$ 2,043,311$ 3,883,306$ Original and TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL ECONOMIC DEVELOPMENT FUND FISCAL YEAR ENDED JUNE 30, 2014 (68) Variance with Final Budget Actual Final Budget REVENUES Taxes: Sales 171,119$ 193,603$ 22,484$ Investment Earnings - 28 28 Total Revenues 171,119 193,631 22,512 EXPENDITURES Current: Development Services 171,119 147,581 23,538 Excess (Deficiency) of Revenues Over Expenditures - 46,050 46,050 FUND BALANCE Beginning of Year - - - End of Year -$ 46,050$ 46,050$ 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, 2014 (69) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property 4,823$ 4,823$ -$ Investment Earnings - 5 5 Total Revenue 4,823 4,828 5 EXPENDITURES Current: General Government 3,500 3,363 137 Excess (Deficiency) of Revenue Over Expenditures 1,323 1,465 142 FUND BALANCE Beginning of Year - 8,327 8,327 End of Year 1,323$ 9,792$ 8,469$ 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, 2014 (70) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property 430,248$ 428,805$ (1,443)$ Investment Earnings 600 77 (523) Total Revenues 430,848 428,882 (1,966) EXPENDITURES Debt Service: Principal Retirement 305,000 305,000 - Interest on Long-Term Debt 112,885 112,885 - Fiscal Charges 7,350 7,428 (78) Total Expenditures 425,235 425,313 (78) Excess (Deficiency) of Revenues Over Expenditures 5,613 3,569 (2,044) FUND BALANCE Beginning of Year - 7,546 7,546 End of Year 5,613$ 11,115$ 5,502$ Original and THIS PAGE BLANK 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) (71) 2005 2006 2007 2008 Governmental Activities: Net Investment in Capital Assets 17,495,539$ 20,806,507$ 92,508,637$ 94,939,805$ Restricted 5,144,127 12,446,147 12,210,966 12,799,502 Unrestricted 10,821,304 9,053,611 14,276,126 13,230,726 Total Governmental Activities Net Position 33,460,970$ 42,306,265$ 118,995,729$ 120,970,033$ Fiscal Year Source: The source of this information is the Town’s financial records. (72) 2009 2010 2011 2012 2013 2014 94,611,110$ 95,467,509$ 92,579,483$ 92,006,103$ 89,800,560$ 89,713,260$ 11,828,137 11,396,116 4,385,595 5,951,416 5,721,744 5,480,867 13,765,293 12,321,090 22,598,669 21,064,267 20,612,758 19,186,823 120,204,540$ 119,184,715$ 119,563,747$ 119,021,786$ 116,135,062$ 114,380,950$ Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (73) 2005 2006 2007 2008 EXPENSES Governmental Activities: General Government 3,766,500$ 3,875,014$ 4,292,515$ 3,921,588$ Public Safety 5,024,686 5,403,620 5,935,742 6,532,292 Highways and Streets 1,281,061 1,581,068 5,225,835 5,981,347 Culture and Recreation 2,362,661 2,576,406 3,282,160 3,092,661 Development Services 1,460,181 1,812,469 2,512,170 2,861,653 Interest on Long-Term Debt 1,162,796 1,297,119 1,163,370 1,132,947 Total Government Activities Expenses 15,057,885 16,545,696 22,411,792 23,522,488 PROGRAM REVENUES Governmental activities: Fees, Fines, and Charges for Services General Government 4,431,154 4,029,437 910,978 830,963 Public Safety - - 982,659 746,227 Highways and Streets - - - - Operating Grants and Contributions 1,692,712 2,022,675 - 56,802 Capital Grants and Contributions 237,307 989,100 835,659 Total Governmental Activities Program Revenues 6,420,723 6,155,938 3,509,168 3,222,272 Net (Expenses)/Revenues (8,637,162)$ (10,389,758)$ (18,902,624)$ (20,300,216)$ Fiscal Year Source: The source of this information is the Town’s financial records. (74) 2009 2010 2011 2012 2013 2014 4,231,529$ 3,720,236$ 2,876,848$ 3,119,113$ 2,909,443$ 2,432,965$ 7,312,415 6,293,323 5,963,067 5,820,136 6,100,131 6,958,056 5,051,294 5,202,285 5,567,973 4,718,047 5,712,817 6,630,875 3,336,616 2,927,848 2,840,154 2,754,731 2,779,294 2,760,690 2,218,994 1,612,287 1,572,202 1,442,613 1,633,361 1,237,717 1,033,536 950,484 851,957 779,576 567,043 472,999 23,184,384 20,706,463 19,672,201 18,634,216 19,702,089 20,493,302 544,753 1,340,457 1,126,926 1,025,940 1,204,356 1,373,670 55,042 32,667 21,222 20,323 14,227 16,971 - 2,556 16,270 11,825 4,916 22,156 - 1,666,498 1,614,462 1,285,656 1,266,906 1,307,738 1,353,409 632,617 2,273,414 1,392,706 150,535 144,570 2,841,453 3,674,795 5,052,294 3,736,450 2,640,940 2,865,105 (20,342,931)$ (17,031,668)$ (14,619,907)$ (14,897,766)$ (17,061,149)$ (17,628,197)$ (Continued) Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CHANGES IN NET POSITION (CONTINUED) LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (75) 2005 2006 2007 2008 (Concluded) GENERAL REVENUES AND OTHER Governmental Activities: Taxes: Sales Taxes 8,879,798$ 11,007,924$ 11,407,714$ 10,489,591$ Property Taxes 2,020,800 1,648,947 1,385,953 1,635,542 Franchise Taxes 216,031 314,359 324,318 336,290 State Shared Revenues 4,756,481 5,389,551 8,444,731 8,848,199 Investment Earnings 395,124 673,351 1,094,994 780,935 Miscellaneous 120,666 200,921 85,418 183,963 Total Governmental Activities 16,388,900 19,235,053 22,743,128 22,274,520 CHANGE IN NET POSITION Governmental Activities 7,751,738$ 8,845,295$ 3,840,504$ 1,974,304$ Fiscal Year Source: The source of this information is the Town’s financial records. (76) 2009 2010 2011 2012 2013 2014 8,932,374$ 7,644,440$ 8,013,480$ 7,787,489$ 7,957,163$ 8,459,267$ 1,531,770 1,928,028 1,349,079 1,453,405 1,385,147 1,449,646 321,964 285,881 322,659 332,130 334,668 349,414 8,456,552 6,000,923 5,217,140 4,515,511 4,979,183 5,326,332 258,478 22,831 28,456 88,877 69,998 123,311 76,300 129,740 68,125 178,393 300,899 166,115 19,577,438 16,011,843 14,998,939 14,355,805 15,027,058 15,874,085 (765,493)$ (1,019,825)$ 379,032$ (541,961)$ (2,034,091)$ (1,754,112)$ Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (77) 2005 2006 2007 2008 General Fund: Reserved $ 40,664 $ 14,393 $ 2,934,144 $ 3,053,070 Unreserved, Designated for: Vehicle Replacement - - - - Unreserved, Undesignated 9,041,779 6,515,855 3,666,005 3,526,738 Total General Fund $ 9,082,443 $ 6,530,248 $ 6,600,149 $ 6,579,808 All Other Governmental Funds: Unreserved, Designated for Vehicle Replacement $ - $ - $ - $ - Unreserved, Undesignated Reported in: Special Revenue Funds 2,176,086 1,951,434 5,305,432 3,876,927 Capital Projects Funds 2,429,225 9,496,266 9,916,670 10,764,857 Debt Service Funds 644,089 159,530 1,386,674 1,585,740 Total All Other Governmental Funds $ 5,249,400 $ 11,607,230 $ 16,608,776 $ 16,227,524 2011 2012 2013 2014 General Fund: Nonspendable Inventory $ 13,183 $ 9,332 $ 10,201 $ 14,358 Prepaid Items 29,234 28,245 32,493 18,348 Committed - 1,345,200 1,345,200 1,345,200 Assigned - 2,190,910 2,191,063 1,647,193 Unassigned 8,263,549 3,656,173 4,117,865 4,972,853 Total General Fund $ 8,305,966 $ 7,229,860 $ 7,696,822 $ 7,997,952 All Other Governmental Funds: Nonspendable Cash with Escrow Agent $ - $ 2,623,895 $ 2,301,609 $ 1,973,067 Prepaid Items 6,217 5,474 4,706 997 Restricted 4,379,987 3,300,426 3,354,189 3,505,590 Committed 11,480,869 2,039,560 2,175,094 2,089,361 Assigned - 9,312,168 9,005,276 7,147,586 Total All Other Governmental Funds $ 15,867,073 $ 17,281,523 $ 16,840,874 $ 14,716,601 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. (78) 2009 2010 $ 3,234,860 $ 3,235,811 127,916 333,796 3,302,373 3,418,799 $ 6,665,149 $ 6,988,406 $ 95,620 $ 159,484 4,198,782 4,498,523 10,246,395 10,020,336 1,218,971 1,182,834 $ 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) (79) 2005 2006 2007 2008 2009 REVENUES Taxes 11,151,893$ 12,993,876$ 13,159,087$ 12,457,086$ 10,960,001$ Intergovernmental 6,686,500 7,412,226 8,444,731 9,353,260 9,607,961 Fines and Forfeitures 249,564 235,050 304,214 287,120 339,658 Licenses and Permits 2,230,046 1,918,107 1,239,318 1,125,957 541,627 Charges for Services 1,834,205 1,689,046 898,955 620,300 316,676 Leases and Rents 222,327 255,527 267,350 296,434 290,083 Special Assessments 1,512 21,147 4,228 4,337 4,037 Investment Income (Loss)395,124 673,351 1,094,994 780,935 258,478 Other 179,657 233,565 85,418 183,963 43,683 Total Revenues 22,950,828 25,431,895 25,498,295 25,109,392 22,362,204 EXPENDITURES General Government 9,547,409 4,459,183 4,024,551 3,548,295 3,514,249 Public Safety 4,754,523 5,208,770 5,689,020 6,321,669 6,624,141 Highways and Streets 1,682,563 2,121,986 2,028,397 2,214,557 1,199,850 Culture and Recreation 3,004,216 3,607,750 2,131,374 2,257,007 2,215,065 Development Services 1,460,181 1,812,469 2,462,643 2,751,740 2,036,295 Capital Outlay - - 2,002,887 5,239,169 3,708,277 Debt Service Principal Retirement 1,308,228 1,968,228 1,968,228 2,153,228 2,240,000 Interest on Long-Term Debt 1,164,561 1,192,414 1,058,665 1,025,320 929,134 Other Debt Service 229,990 532,762 - - - Total Expenditures 23,151,671 20,903,562 21,365,765 25,510,985 22,467,011 Excess of Revenues Over (Under) Expenditures (200,843) 4,528,333 4,132,530 (401,593) (104,807) OTHER FINANCING SOURCES (USES) Transfers In 4,805,635 10,146,663 4,383,069 2,756,988 3,759,735 Transfers Out (4,805,635) (10,146,663) (4,383,069) (2,756,988) (3,950,654) 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 - - (190,919) Net Change in Fund Balance 1,460,215$ 4,744,552$ 4,132,530$ (401,593)$ (295,726)$ Debt Service as a Percentage of Noncapital Expenditures 13.22% 21.46% 18.53% 18.60% 20.33% Fiscal Year Source: The source of this information is the Town’s financial records. (80) 2010 2011 2012 2013 2014 9,818,985$ 9,704,054$ 9,577,321$ 9,713,445$ 10,271,737$ 7,672,037 7,165,103 6,035,448 6,323,047 6,677,518 297,030 236,221 223,673 187,251 170,995 399,094 312,367 194,976 570,904 891,782 464,036 388,635 405,663 162,086 161,376 215,520 227,195 206,018 213,871 252,584 - - - - - 22,831 28,456 88,877 69,998 123,311 129,740 72,125 178,393 300,899 134,114 19,019,273 18,134,156 16,910,369 17,541,501 18,683,417 3,186,368 2,575,975 2,887,321 2,699,109 2,194,845 6,200,227 5,772,800 5,869,445 6,022,269 6,890,770 973,746 1,123,230 1,054,930 2,058,990 3,085,559 2,007,737 1,871,446 1,794,332 1,791,018 1,921,939 1,669,449 1,564,615 1,421,787 1,643,757 1,774,983 1,254,223 1,043,304 884,323 453,002 1,750,465 2,460,000 2,115,000 1,965,000 2,280,000 2,415,000 842,857 744,330 639,135 554,860 460,811 - - 55,752 12,183 12,188 18,594,607 16,810,700 16,572,025 17,515,188 20,506,560 424,666 1,323,456 338,344 26,313 (1,823,143) 1,127,776 431,880 2,470,027 1,279,397 1,838,453 (1,127,776) (431,880) (2,470,027) (1,279,397) (1,838,453) - - - - - - - - - - - - - - - - - - - - 424,666$ 1,323,456$ 338,344$ 26,313$ (1,823,143)$ 18.29% 17.41% 17.09% 16.63% 18.20% Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (81) Fiscal Year Sales Taxes Property Taxes Franchise Taxes Total 2005 8,879,798$ 2,056,064$ 216,031$ 11,151,893$ 2006 11,007,924 1,671,593 314,359 12,993,876 2007 11,407,714 1,427,055 324,318 13,159,087 2008 10,489,591 1,631,205 336,290 12,457,086 2009 8,932,374 1,705,663 321,964 10,960,001 2010 7,644,440 1,888,664 285,881 9,818,985 2011 8,013,480 1,367,915 322,659 9,704,054 2012 7,787,489 1,457,702 332,130 9,577,321 2013 7,957,163 1,421,614 334,668 9,713,445 2014 8,459,267 1,463,056 349,414 10,271,737 Source: The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS, ARIZONA ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) (82) Fiscal Year Net Assessed Taxable Value Total Direct Tax Rate* Estimated Actual Taxable Value 2005 349,398,334$ $ 0.4150 3,162,854,959$11.05 % 2006 375,183,181 0.3510 3,411,460,877 11.00 2007 397,380,162 0.3012 3,615,453,567 10.99 2008 610,738,122 0.2124 5,840,184,927 10.46 2009 684,742,347 0.1972 6,648,954,354 10.30 2010 651,218,464 0.2273 6,255,310,705 10.41 2011 576,535,714 0.1639 5,461,763,819 10.56 2012 451,860,136 0.2258 4,370,950,282 10.34 2013 377,521,718 0.2657 3,668,373,751 10.29 2014 366,302,672 0.2773 3,579,924,332 10.23 Net Assessed Taxable Value as a Percentage of Estimated Actual Taxable Value Source: The source of this information is the Arizona Department of Revenue’s Abstract of the Assessment Roll and the Town’s financial records. * Per $100 of secondary assessed value. TOWN OF FOUNTAIN HILLS, ARIZONA PRINCIPAL PROPERTY TAXPAYERS JUNE 30, 2014 AND 2005 (UNAUDITED) (83) Taxpayer Net Secondary Assessed Value Rank Net Secondary Assessed Value Rank Chaparral City Water Company 3,314,550$ 1 0.90 % 3,137,501$ 2 0.90 % Inland Western Fountain Hills Four Peaks, LLC 2,868,432 2 0.78 - N/A Whitestone Fountain Hills, LLC 1,738,782 3 0.47 - N/A WSL Fountain View Investors V, LLC 1,681,860 4 0.46 - N/A Target Corporation 1,432,483 5 0.39 2,327,837 3 0.67 Firerock, LLC 1,289,141 6 0.35 1,045,133 11 0.30 Smith's Food & Drug Centers Inc. 1,261,980 7 0.34 1,049,895 10 0.30 Qwest Corporation 1,193,858 8 0.33 3,261,132 1 0.93 Arizona State Land Department 1,122,752 9 0.31 - N/A EN, LLC 1,092,294 10 0.30 2,096,229 4 0.60 Fountain Hills Village LLC - - 2,004,824 5 0.57 Kimco Barclay Fountain Hills LP - - 1,681,694 6 0.48 Four Peaks Limited Partnership - - 1,468,985 7 0.42 Sun Tech Development, LLC - - 1,169,471 8 0.33 MCO Properties, Inc. - - 1,144,428 90.33 16,996,132$ 4.63 % 20,387,129$ 5.83 % Percentage of Total Net Secondary Assessed Value 2014 2005 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) (84) 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 2005 2,041,230$ 1,992,532$ 97.6 % 22,287$ 2,014,819$ 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 47,833 1,626,416 99.7 2009 1,719,105 1,660,820 96.6 53,378 1,714,198 99.7 2010 1,895,552 1,838,909 97.0 52,188 1,891,097 99.8 2011 1,340,544 1,307,092 97.5 24,924 1,332,016 99.4 2012 1,446,076 1,414,482 97.8 20,359 1,434,841 99.2 2013 1,429,284 1,401,654 98.1 15,795 1,417,449 99.2 2014 1,449,884 1,426,612 98.4 - 1,426,612 98.4 Source: The source of this information is the Maricopa County Treasurer’s Office. TOWN OF FOUNTAIN HILLS, ARIZONA TAXABLE SALES BY CATEGORY LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (85) 2005 2006 2007 2008 2009 Sales Category: Construction 1,837,317$ 3,106,859$ 2,694,700$ 2,062,028$ 1,414,240$ Transportation and Utilities 1,124,677 1,240,123 1,330,052 1,422,158 1,311,735 Wholesale/Retail 3,536,045 3,796,192 4,144,263 3,912,512 3,687,409 Restaurants and Bars 524,368 547,276 537,596 582,226 493,242 Real estate, Rental and Leasing 604,356 881,584 792,358 982,198 664,999 Services 185,868 263,239 280,290 327,411 258,138 Other 1,067,167 1,172,651 1,632,142 1,201,058 929,163 Total 8,879,798$ 11,007,924$ 11,411,401$ 10,489,591$ 8,758,926$ Fiscal Year Source: The source of this information is the Town’s financial records. Note: Other includes all state and local sales tax audit adjustments. (86) 2010 2011 2012 2013 2014 538,551$ 567,136$ 600,402$ 563,540$ 781,742$ 1,424,827 1,388,074 1,407,331 1,402,193 1,375,620 3,555,974 3,567,615 3,600,619 3,601,212 3,653,447 509,624 559,930 575,705 645,258 655,656 650,071 731,615 678,267 719,884 782,453 241,686 276,566 274,481 309,827 342,924 723,707 922,545 642,414 715,248 867,425 7,644,440$ 8,013,481$ 7,779,219$ 7,957,162$ 8,459,267$ Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) (87) Fiscal Year 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 2014 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 RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) (88) 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 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 6,800,000 - - 13,645,000 601 2013 2,900,000 2,800,000 5,650,000 - - 11,350,000 496 2014 2,000,000 2,495,000 4,695,000 - - 9,190,000 390 Governmental Activities Source: The source of this information is the Town’s financial records and the U.S. Bureau of Economic Analysis. Note: All amounts presented are net of original issue discounts and premiums. Population data can be found in the Schedule of Demographic and Economic Statistics. TOWN OF FOUNTAIN HILLS, ARIZONA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) (89) Fiscal Year General Obligation Bonds Estimated Actual Taxable Value of Property Percentage of Estimated Actual Taxable 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 2005 10,675,000$ 3,162,854,959$ 0.34 %468$ 12,975,000$ 569$ 22,950,831$ 2006 9,600,000 3,411,460,877 0.28 419 12,310,000 537 25,327,909 2007 8,620,000 3,615,453,567 0.24 375 11,595,000 504 25,498,519 2008 7,570,000 5,840,184,927 0.13 333 10,790,000 475 25,113,210 2009 6,530,000 6,648,954,354 0.10 290 9,905,000 440 21,393,767 2010 5,415,000 6,255,310,705 0.09 240 8,920,000 395 18,958,595 2011 4,595,000 5,461,763,819 0.08 202 7,885,000 347 18,307,726 2012 3,755,000 4,370,950,282 0.09 164 6,800,000 297 17,194,297 2013 2,900,000 3,668,373,751 0.08 127 5,650,000 247 17,751,673 2014 2,000,000 3,579,924,332 0.06 87 4,695,000 193 18,891,710 Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. Note: All amounts presented are net of original issue discounts and premiums. Population data can be found in the Schedule of Demographic and Economic Statistics. TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2014 (UNAUDITED) (90) Governmental Unit Outstanding Debt Estimated Percentage Applicable Estimated Share of Overlapping Debt Overlapping: Maricopa County 108,975,000$ 1.15%1,253,213$ Maricopa County Community College District 713,145,000 1.15%8,201,168 East Valley Institute of Technology - 2.63%- Fountain Hills Unified School District 8,505,000 96.11%8,174,156 Eagle Mountain Community Facilities District 2,495,000 100.00%2,495,000 20,123,536 Direct: Town of Fountain Hills, Arizona 9,190,000 Total Direct and Overlapping Debt 29,313,536$ Source: The source of this information is the Town’s records and the State and County Abstract of the Assessment Roll, 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) (91) 6% Debt Limit 2005 2006 2007 2008 Debt Limit 10,485,644$ 22,510,991$ 23,842,810$ 36,644,287$ Total Applicable to Limit 1,325,000 800,000 550,000 275,000 Legal Debt Margin 9,160,644$ 21,710,991$ 23,292,810$ 36,369,287$ Total Debt Applicable to the Limit as a Percentage of the Debt Limit 13% 4% 2% 1% 20% Debt Limit 2005 2006 2007 2008 Debt Limit 34,952,148$ 75,036,636$ 79,476,032$ 122,147,624$ Total Applicable to Limit 9,350,000 8,800,000 8,070,000 7,295,000 Legal Debt Margin 25,602,148$ 66,236,636$ 71,406,032$ 114,852,624$ Total Debt Applicable to the Limit as a Percentage of the Debt Limit 27% 12% 10% 6% Fiscal Year Fiscal Year Source: The source of this information is the Town’s financial records. (92) 2009 2010 2011 2012 2013 2014 41,084,541$ 39,073,108$ 34,592,143$ 27,111,608$ 22,651,303$ 21,978,160$ - - - - - - 41,084,541$ 39,073,108$ 34,592,143$ 27,111,608$ 22,651,303$ 21,978,160$ 0% 0% 0% 0% 0% 0% 2009 2010 2011 2012 2013 2014 136,948,469$ 130,243,693$ 115,307,143$ 90,372,027$ 75,504,344$ 73,260,534$ 6,530,000 5,415,000 4,595,000 3,755,000 2,900,000 2,000,000 130,418,469$ 124,828,693$ 110,712,143$ 86,617,027$ 72,604,344$ 71,260,534$ 5% 4% 4% 4% 4% 3% Fiscal Year Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CALCULATION OF LEGAL DEBT MARGIN AS OF JUNE 30, 2014 (UNAUDITED) (93) Net Secondary Assessed Valuation 366,302,672$ Water, Sewer, Artificial Lighting, Parks, Open Space, Public Safety, Law Enforcement, Fire and Emergency Facilities, Street and Transportation Facilities, and Recreational Facility Improvements Debt Limit - 20% of Net Secondary Assessed Valuation 73,260,534$ Net Debt Applicable to Limit 2,000,000 20% Legal Debt Margin 71,260,534 All other general obligation bonds Debt Limit - 6% of Net Secondary Assessed Valuation 21,978,160 Net Debt Applicable to Limit - 6% Legal Debt Margin 21,978,160 Total legal debt margin 93,238,694$ 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) (94) Fiscal Year Principal Interest Total Pledged Revenues Coverage 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 985,000 417,028 1,402,028 14,380,648 10.3 2011 1,035,000 327,312 1,362,312 14,001,045 10.3 2012 1,085,000 285,288 1,370,288 13,079,953 9.5 2013 1,150,000 234,175 1,384,175 13,772,209 9.9 2014 1,210,000 234,176 1,444,176 14,774,914 10.2 Municipal Facilities Corporation 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) (95) 2004 2005 2006 2007 Population 22,048 22,547 22,788 22,932 Per capital personal income 31,133$ 32,414$ 32,320$ 32,230$ Median age N/A N/A 46.4 46.4 School enrollment 2,453 2,373 2,425 2,307 Town of Fountain Hills unemployment rate 2.1% 2.0% 1.7% 1.5% Land use Total acres N/A N/A 12,996.0 13,005.7 Total square miles N/A N/A 20.31 20.32 Vacant lots N/A N/A N/A 3,355 Number of units Housing N/A N/A 12,681 12,850 Lodging N/A N/A 4 4 Restaurants N/A N/A 50 53 Shopping centers N/A N/A 14 14 Schools Public N/A N/A 4 4 Preschool N/A N/A 5 4 Charter N/A N/A 2 1 Calendar Year Source: The source of the “Personal Income” and “Per Capita” information is the U.S. 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 2013. (96) 2008 2009 2010 2011 2012 2013* 22,984 22,736 22,489 22,554 22,695 22,893 38,439$ 38,918$ 40,672$ 44,660$ 47,260$ 48,244$ 48.3 48.9 53.9 53.9 53.9 53.0 2,233 2,203 2,103 1,981 1,886 1,820 2.6% 4.5% 4.8% 6.7% 5.6% 6.0% 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 1,295 1,253 1,226 1,218 1,209 1,196 12,832 12,927 12,983 12,990 12,977 12,991 4 4 4 4 4 4 47 52 53 56 56 54 19 19 20 20 20 20 4 4 4 4 3 3 4 4 4 4 6 7 1 1 1 1 1 1 Calendar Year TOWN OF FOUNTAIN HILLS, ARIZONA PRINCIPAL EMPLOYERS JUNE 30, 2013, AND 2002* (UNAUDITED) (97) Employer Employees Rank Percentage of Total Town Employment Employees Rank Fountain Hills Unified School District No. 98 327 1 7.0% 250 1 Fountain View Village 150 2 3.2% - Fry's 90 3 1.9% - Safeway Stores 88 4 1.9% 95 4 Target Stores 84 5 1.8% - Eagle Mountain Golf Club 70 6 1.5% 40 9 Firerock Country Club 68 7 1.5% - Bashas 67 8 1.4% 70 6 United Stated Postal Service 64 9 1.4% - Sunridge Canyon Golf Course 59 10 1.3% 70 7 Desert Canyon Golf Club 58 11 1.2% 50 8 Town of Fountain Hills 41 0.9% 115 3 MCO Properties, Inc. 12 0.3% 85 5 Monks Construction - 150 2 Total 1,178 25.3% 925 Total Town employment 4,655 2002*2013 Source: The source of this information is the Maricopa Association of Governments. * Data for 2014 and 2003 were not available. TOWN OF FOUNTAIN HILLS, ARIZONA AUTHORIZED FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (98) Function 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Municipal Court 5.00 5.50 5.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 Administration 11.00 12.50 13.00 13.50 13.50 13.25 11.25 11.58 11.68 10.56 Development Services 39.50 41.00 41.00 40.50 40.00 35.75 23.25 20.25 18.75 16.25 Community Services 21.50 23.50 28.00 29.25 29.75 27.10 21.63 21.53 21.18 20.18 Total 77.00 82.50 87.00 88.25 88.25 81.10 61.13 58.36 56.61 50.99 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) (99) Function/Program 2005 2006 2007 2008 2009 2010 Municipal Court: Cases filed N/A N/A N/A N/A N/A 3,520 Hearings/Trials held N/A N/A N/A N/A N/A 1,089 Administration: FTEs per 1,000 residents 3.4 3.6 3.6 3.5 3.3 3.2 Registered voters - general election none 13,669 none 14,335 none 15,511 Voter turnout - general election none 21% none 39% none 50% Development Services: Building permits issued 430 468 759 716 391 409 Building inspections conducted 8,446 9,377 7,975 5,692 3,189 1,936 Number of code violation cases N/A N/A N/A N/A N/A 1,024 Number of zoning cases N/A N/A N/A N/A N/A 7 Community Services: Number of Community Center bookings N/A N/A N/A N/A N/A 3,396 Number of participants in recreational programs N/A N/A N/A N/A N/A 1,960 Number of Senior Services members N/A N/A N/A N/A N/A 1,105 Number of home delivered meals N/A N/A N/A N/A N/A 10,169 Law Enforcement (contracted): Physical arrests 644 N/A 993 524 825 679 Traffic violations 2,432 N/A 2,315 2,504 4,900 2,959 Fire & Emergency Medical (contracted): Total incident responses N/A 3,056 3,069 2,694 2,787 2,875 Average response time (in minutes) N/A 3:47 3:49 3:37 3:44 4:32 Fiscal Year Source: The source of this information is the Town’s financial records. Note: N/A indicates that the information is not available. (100) 2011 2012 2013 2014 2,584 2,173 1,740 1,649 738 731 703 1,665 2.7 2.6 2.5 2.2 none 16,074 none N/A none 34% none N/A 354 352 419 566 1,546 1,257 1,395 2,131 843 804 746 716 14 7 10 41 3,315 3,236 3,196 3,383 1,759 1,833 1,789 2,291 1,205 1,208 1,118 1,189 9,742 8,419 6,941 4,799 645 522 545 743 1,909 1,366 1,296 1,379 3,179 3,082 3,136 2,956 3:46 3:50 3:53 3:37 Fiscal Year TOWN OF FOUNTAIN HILLS, ARIZONA CAPITAL ASSETS STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (101) Function/Program 2005 2006 2007 2008 2009 2010 Public Safety: Number of Fire stations 222222 Highways and Streets Streets (Centerline Miles) 178.5 178.5 178.5 178.5 178.5 178.5 Streets (Lane Miles) 395 395 395 395 395 395 Pedestrian Lighting N/A 34 34 34 34 34 Traffic Signals 11 12 12 13 13 13 . Parks and Recreation: Acreage 116 116 116 116 116 116 Playgrounds 333444 Baseball/Softball Diamonds 666666 Soccer/Football Fields 111444 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. Note: N/A indicates the information is not available. (102) 2011 2012 2013 2014 2222 178.5 178.5 178.5 178.5 395 395 395 395 34 34 34 34 13 13 13 13 116 116 116 116 4444 6666 4444 1111 N/A 740 740 740 N/A 4.3 10.43 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 The Government Finance Officers Association of the United States and Canada presents this CERTIFICATE OF RECOGNITION FOR BUDGET PREPARATION to Craig Rudolphy,Finance Director Town of Fountain Hills,Arizona The Certificate ofRecognition for Budget Preparation ispresentedbythe Government Finance Officers Association to those individuals who have been instrumental in their government unit achieving a Distinguished Budget Presentation Award.The Distinguished Budget Presentation Award,which is thehighestawardin governmental budgeting,ispresentedto those government units whose budgets arejudged to adhere toprogram standards. Executive Director Date October 06,2014 m GOVERNMENT FINANCE OFFICERS ASSOCIATION Distinguished Budget Presentation Award PRESENTED TO Town of Fountain Hills Arizona Forthe Fiscal Year Beginning July 1,2014 m J Meeting Date:11/6/2014 Agenda Type:Consent TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Type:Regular Session Submitting Department:Development Services Staff Contact Information:Randy Harrel, PE, RLS,CFM Town Engineer Strategic Values: Maintain/Improve Community Infrastructure Council Goal: Not Applicable (NA) REQUEST TO COUNCIL (Agenda Language):CONSIDERATION of an "Agreement among the Flood Control Districtof Maricopa County,Chaparral City Water Company,and the Town of Fountain Hills for the Construction,Construction Management, and Operation and Maintenance of the Ashbrook Wash Project Water Line Relcations"(FCD2014G001) Applicant:Scott Vogel.PE/Project Management Branch Manager,Flood Contol District of Maricopa County Applicant Contact Information:E-mail:csv@mail.maricopa.gov ;Tele.(602)506-4771 Property Location:Ashbrook Wash,Bayfield to Del Cambre Related Ordinance,Policy or Guiding Principle:N/A Staff Summary (background):As a part of the Ashbrook Wash Improvements project (a joint project of the Town,with the Flood Control District of Maricopa County as the lead agency),several CCWC waterlines will need to be relocated,at CCWC's expense.CCWC has requested to include this waterline work in the above- noted Ashbrook Wash Improvements construction project,with CCWC paying the costs for that work. The Town owns the street rights-of-way and the Ashbrook Wash parcels where this work will take place (and the Town holds the Prior Rights (i.e.the right to require utility companies to move their facilities)in these project areas).So,CCWC has requested that the Town be a party to this agreement,so that the Town can officilaly require CCWC to move their facilities,as needed for this project. Risk Analysis (options or alternatives with implications):N/A Fiscal Impact (initial and ongoing costs;budget status):None Budget Reference (page number):N/A Funding Source:NA If Multiple Funds utilized,list here: Budgeted;if No,attach Budget Adjustment Form:NA Recommendation(s)by Board(s)or Commission(s):N/A Staff Recommendation(s):Staff recommends approval. List Attachment(s):Project Map;Agreement....(FCD 2014G001) Page 1 of 2 SUGGESTED MOTION (for council use):Move to approve the "Agreement among the Flood Control District of Maricopa County, the Chapparral City Water Company,and the Town of Fountain Hills for the Construction, Construction Management,and Operation and Mainatenance of the Ashbrook Wash Project Water Line Relocations (Agreement FCD 2014G001) PaulMood,Development Services Director Approved:^->. Ken Buchanan,Town ManagerManager 10/21/2014 10/28/2014 Page 2 of2 I'':::—DocumentPath;X:\tjw\Asslgnmems\Bono_FCD\AshbrookV\shbrookWash2801WestDurangoStreet,Phoenix, Arizona 85009, (602) 506-1501m-Mi)AshbrookWashImprovementProject___JJ***iM&?fa'fctUCleaningandChannelizationasNecessary£xCulvertReplacementA1 inch = 250 feetV•-••••••z.*,-**:»,»••iwx*....,:%•loodControlDistrictof MaricopaCounty,GISDivision,November 2013www.fcd.maricopa.gov Agreement FCD 2014G001 PCN 670.01.30 PAGE 1 OF 7 When Recorded Return to: Flood Control District of Maricopa County 2801 West Durango Street Phoenix, AZ 85009-6399 AGREEMENT among the FLOOD CONTROL DISTRICT OF MARICOPA COUNTY, the CHAPARRAL CITY WATER COMPANY, and the TOWN OF FOUNTAIN HILLS for the CONSTRUCTION, CONSTRUCTION MANAGEMENT, AND OPERATION AND MAINTENANCE of the ASHBROOK WASH PROJECT WATER LINE RELOCATIONS Agreement FCD 2014G001 Agenda Item _____________________ This Agreement is entered into by and among the Flood Control District of Maricopa County, a municipal corporation and political subdivision of the State of Arizona, acting by and through its Board of Directors, hereinafter called the DISTRICT; the Chaparral City Water Company, an Arizona corporation, hereinafter called the COMPANY, and the Town of Fountain Hills, a municipal corporation, acting by and through its Town Council, hereinafter called the TOWN. The DISTRICT, the COMPANY and the TOWN are hereinafter collectively called the PROJECT PARTNERS. RECITALS 1. The DISTRICT and the TOWN are proposing to construct improvements to Ashbrook Wash (Drainage Project), including new box culvert crossings at Bayfield Drive and Saguaro Boulevard. The box culvert crossings will replace existing culverts which are inadequate to convey storm water from the design storm event. 2. The Drainage Project will be constructed within TOWN-owned road and channel rights-of-way. 3. The COMPANY owns, operates and maintains a potable water system within the Town of Fountain Hills, including water lines on Bayfield Drive and Saguaro Boulevard that require relocation to facilitate the Drainage Project. The COMPANY does not have prior rights for the facilities that require relocation for the Drainage Project, and is therefore responsible for the cost of the water line relocations. 4. The DISTRICT is empowered to enter into this Agreement by Arizona Revised Statutes (A.R.S.) Section 48-3603, as revised, and pursuant to Resolution FCD 2013R005, approved by the DISTRICT’s Board of Agreement FCD 2014G001 PCN 670.01.30 PAGE 2 OF 7 Directors and recorded on December 19, 2013, and has authorized the undersigned to execute this Agreement on behalf of the DISTRICT. NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and agreements set forth herein, the parties hereto state, confirm, and agree as follows: PURPOSE OF THE AGREEMENT 5. This Agreement shall be effective after it is approved and executed by the COMPANY, the TOWN and the DISTRICT and recorded by the Maricopa County Recorder. 6. The COMPANY, its successors and assigns, agrees to complete the design plans, specifications and an engineer’s estimate for the water line relocations required by the Drainage Project and provide them to the DISTRICT. The plans and specifications will be included in the Drainage Project bid package. Any and all costs associated with the water line relocations shall be borne solely by the COMPANY. 7. The DISTRICT agrees to include in its Drainage Project construction the plans and specifications for the water line relocations, prepared by the COMPANY. The lowest responsive and responsible bid for the Drainage Project, including water line relocations, shall be accepted by the DISTRICT. 7.1 Upon award of the Drainage Project construction contract, the DISTRICT shall invoice the COMPANY the low bid price for the water line relocations’ bid items, plus eight percent (8%) for construction management and general construction items such as mobilization, traffic control, survey and materials testing. 7.2 The DISTRICT shall submit to the COMPANY any change orders which increase the cost of the water line relocations for review. The COMPANY shall be responsible for all change orders or cost overruns associated with the water line relocations. The COMPANY shall provide a timely review and either reject or approve the change orders; provided, however, all change orders that are not either approved or disapproved by the COMPANY within ten (10) days after submittal by the DISTRICT shall be deemed approved by the COMPANY. 7.3 Upon completion of construction of the water line relocations and acceptance by the COMPANY and the DISTRICT, the DISTRICT shall invoice the COMPANY for any remainder of the water line relocation costs (applicable costs due to changed conditions and/or change orders), plus eight percent (8%) for construction management and general construction items. 8. The COMPANY shall: 8.1 Within thirty (30) calendar days of receipt of an invoice from the DISTRICT, pay the DISTRICT the invoiced amount which shall be equal to the low bid price for the water line relocation bid items, plus eight percent (8%) for construction management and general construction items. 8.2 Within thirty (30) calendar days of receipt of an invoice from the DISTRICT, pay the DISTRICT any additional remaining water line relocation costs (applicable costs due to changed conditions and/or change orders), plus eight percent (8%) for construction management and general construction items such as mobilization, traffic control, survey and materials testing. Any unspent COMPANY funds due to cost decreases shall be returned to the COMPANY within 30 days of a Drainage Project construction contract accounting by the DISTRICT. 8.3 The COMPANY shall obtain all required permits for construction of the water line relocations, including any TOWN and Maricopa County Environmental Services permits. Agreement FCD 2014G001 PCN 670.01.30 PAGE 3 OF 7 8.4 Upon completion of the water line relocations to the satisfaction of the DISTRICT and the COMPANY, the COMPANY shall own, operate and maintain the relocated water lines, provided, however, that no interest whatsoever in the TOWN road and channel rights-of-way shall pass to the COMPANY, its directors, officers, employees or agents. The TOWN shall retain at all times a prior and superior right in the TOWN rights-of-way and nothing in this Agreement shall be construed to convey, deny or lessen the ownership rights of the TOWN. 9. The TOWN shall: 9.1 Require the relocation, at the sole cost and expense of the COMPANY, of all COMPANY utilities located in the TOWN road and channel rights-of-way as necessary for the completion of the Drainage Project. The Drainage Project shall not be responsible for the relocation cost of the COMPANY utilities. 10. Each PROJECT PARTNER, and the PROJECT PARTNERS collectively, shall: 10.1 Comply with A.R.S. Sections 41-4401 and 23-214, subsection A. 10.1.1 Each party to this Agreement retains the legal right to inspect the records of the other parties’ and any contractors’ or subcontractors’ employees performing work under this Agreement to verify compliance with A.R.S. Sections 41-4401 and 23-214, subsection A. 10.1.2 Failure by any party to this Agreement to comply with A.R.S. Sections 41-4401 and 23- 214, subsection A shall be deemed a breach of this Agreement and is subject to penalties up to and including termination of the Agreement. 10.2 Require that any contractor selected for the PROJECT: 10.2.1 Warrant its compliance with all federal immigration laws and regulations that relate to its employees and their compliance with A.R.S. section 23-214(A); 10.2.2 Agree that a breach of the warranty under paragraph 10.2.1 shall be deemed a material breach of contract and is subject to penalties up to and including termination of the contract; 10.2.3 Agree that the other parties to this Agreement retains the legal right to inspect the papers of the contractor or subcontractor employee(s) who work(s) on this Agreement to ensure that contractor or subcontractor is complying with the warranty under paragraph 10.2.1. 10.3 In the case of any dispute over any items in this Agreement, agree to use their best efforts and enter into good faith negotiations to resolve the disputed matters. However, this shall not limit the rights of the PROJECT PARTNERS to seek any remedies provided by law. 11. Each party to this Agreement shall, as “Indemnitor,” to the extent permissible by law, indemnify, defend and hold harmless the other PROJECT PARTNER (“Indemnitee”) including agents, officers, directors, governors and employees thereof, from and against any and all loss or expense incurred as a result of any claim or suit of any nature whatsoever, to the extent arising out of any act or omission of Indemnitor pursuant to this Agreement, including but not limited to, reasonable attorneys’ fees, court costs, and other expenses relating to the defense against claims or litigation, incurred by the Indemnitee. Notwithstanding the above, Indemnitee shall be liable for its own negligence or wrongful acts as provided by law. In no event shall the Indemnitor owe or be obligated to pay any amounts which the Indemnitee has not actually paid or has no actual obligation to pay. In the event any agreement to pay to Agreement FCD 2014G001 PCN 670.01.30 PAGE 4 OF 7 resolve issues of liability is not enforceable, or any agreement or settlement results in an actual obligation lower than the full amount of liability, the Indemnitor’s obligation to pay shall be limited to the amount Indemnitee has paid or would be obligated to pay in the absence of any agreement to indemnify. 12. All notices or demands upon any party to this Agreement shall be in writing and shall be delivered in person or sent by mail addressed as follows: Flood Control District of Maricopa County Chief Engineer and General Manager 2801 West Durango Street Phoenix, AZ 85009-6399 Chaparral City Water Company c/o EPCOR Utilities, Inc. Senior Project Manager, Engineering 2355 West Pinnacle Peak Road, Suite 300 Phoenix, AZ 85027 Town of Fountain Hills Town Manager 16705 East Avenue of the Fountains Fountain Hills, AZ 85268 13. This Agreement shall expire either (a) two years from the date of recording with the County Recorder or (b) upon completion of the Drainage Project and after all funding obligations and reimbursements have been satisfied in accordance with this Agreement, whichever is the first to occur. However, by mutual written agreement of all parties, this Agreement may be amended or terminated. Any amendment shall not take effect unless and until recorded in the office of the Maricopa County Recorder. The operation and maintenance and indemnification provisions of this Agreement and Paragraph 8.4 of this agreement shall survive the expiration of this Agreement. 14. This Agreement is subject to cancellation by either party pursuant to the provisions of Arizona Revised Statutes Section 38-511. 15. Attached to this Agreement or contained herein are the written determinations by the appropriate attorneys for the parties to this Agreement, that these agencies are authorized under the laws of the State of Arizona to enter into this Agreement and that it is in proper form. 16. If legislation is enacted after the effective date of this Agreement that changes the relationship or structure of one or more parties to this Agreement, the parties agree that this Agreement shall be renegotiated at the written request of either party. Agreement FCD 2014G001 PCN 670.01.30 PAGE 5 OF 7 FLOOD CONTROL DISTRICT OF MARICOPA COUNTY A Municipal Corporation Recommended by: William D. Wiley, P.E. Date Chief Engineer and General Manager Approved and Accepted: By: __________ Chairman, Board of Directors Date Attest: By: __________ Clerk of the Board Date The foregoing Intergovernmental Agreement FCD 2014G001 has been reviewed pursuant to Arizona Revised Statutes 11-952, as amended, by the undersigned General Counsel, who has determined that it is in proper form and within the powers and authority granted to the Flood Control District of Maricopa County under the laws of the State of Arizona. Flood Control District General Counsel Date Agreement FCD 2014G001 PCN 670.01.30 PAGE 6 OF 7 Chaparral City Water Company An Arizona corporation, By: Its: STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA) This foregoing Agreement FCD 2014G001 was acknowledged before me this ____ day of ______________, 2014, by ________________________ on behalf of Chaparral City Water Company, an Arizona corporation. My Commission Expires: ________________________________ _____________________ Notary Republic Agreement FCD 2014G001 PCN 670.01.30 PAGE 7 OF 7 TOWN OF FOUNTAIN HILLS A Municipal Corporation, Approved as to Subparagraph 8.4, Paragraph 9, and Paragraph 12. By: Linda Kavanagh, Mayor Date Attest: By: Bevelyn J. Bender, Town Clerk Date The foregoing Intergovernmental Agreement FCD 2014G001 has been reviewed pursuant to Arizona Revised Statutes 11-952, as amended, by the undersigned attorney who has determined that it is in proper form and within the power and authority granted to the Town of Fountain Hills under the laws of the State of Arizona. By: Andrew J. McGuire, Town Attorney Date TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:11/6/2014 Meeting Type:Regular Session Agenda Type:Consent Submitting Department:Community Services Staff Contact Information:Mark Mayer -mmayer@fh.az.gov /(480)816-5190 * g Strategic Planning Goal:Not Applicable (NA)Operational Priority:Not Applicable (NA) i >I REQUEST TO COUNCIL (Agenda Language):Consideration of Approving the Fourth Amendment to the Hiking Agreement between the Town and MCO Applicant:N/A Applicant Contact Information:N/A Property Location:N/A Related Ordinance,Policy or Guiding Principle:N/A Staff Summary (background):Through an agreement with MCO in 2004 access through their property from the end of Eagle Ridge Drive to the Town's McDowell Mountain Preserve was approved for limited access to the Preserve with the use of scheduled hikes and trail stewards supervising the participants.The original agreement expired in 2005. The agreement was extended to October 31,2008 with the approval of the first amendment to the hiking agreement.A second amendment extended the agreement until October 31,2011.The third amendment extended the agreement until October 31,2014. Staff is requesting that the Council approve the fourth amendment to the hiking agreement,which will extend the agreement until October 31,2018. Risk Analysis (options or alternatives with implications):N/A Fiscal Impact (initial and ongoing costs;budget status):N/A Budget Reference (page number):N/A Funding Source:NA If Multiple Funds utilized,list here: Budgeted;if No,attach Budget Adjustment Form:NA Recommendation(s)by Board(s)or Commission(s):N/A Staff Recommendation(s):Staff is recommending approval of the agreement List Attachment(s):Fourth Amendment to the Hiking Agreement Page 1 of 2 SUGGESTED MOTION (for council use):Motion to Approve the Fourth Amendment to the Hiking Agreement between the Town and MCO Prepared by: NA 8/1/2011 Director's Approval: fS —A—^-0—-^^Mark Mayer,Community Services Director V 10/28/2014 Approvediproved:f\ AA^L*^-. Ken Buchanan,Town Manager 10/29/2014 Page 2 of2 FOURTH AMENDMENT TO HIKING LICENSE AGREEMENT BETWEEN MCO PROPERTIES L.P. AND THE TOWN OF FOUNTAIN HILLS THIS FOURTH AMENDMENT TO THE HIKING LICENSE AGREEMENT (this "Fourth Amendment")is made as of October 16,2014,between ADERO CANYON,LLC, a Delaware limited liability company ("Adero"),successor in interest to MCO PROPERTIES L.P., a Delaware limited partnership d/b/a MCO Properties Limited Partnership ("MCO")and the TOWN OF FOUNTAIN HILLS,an Arizona municipal corporation (the "Town"). RECITALS A.MCO and the Town entered into a Hiking License Agreement dated November 19,2004, to permit the Town to conduct hiking tours and trail building utilizing an existing trail that crosses Town right-of-way and property owned by MCO (the "Initial Agreement"). B. The Initial Agreement was amended three times, on October 6, 2005 (the "First Amendment"), October 2, 2008 (the "Second Amendment"), and September 15, 2011 (the "Third Amendment") for the primary purpose of extending the term. The Initial Agreement, the First Amendment,the Second Amendment and the Third Amendment are collectively referred to herein as the "Agreement."All capitalized terms used in this Fourth Amendment and not otherwise defined shall have the meanings set forth in the Agreement. C. MCO transferred its rights to the License Area to Adero, and the Town and Adero desire to amend the Agreement to provide for an additional extension of the term of the Agreement and to make other modifications. AGREEMENT NOW,THEREFORE,in consideration of the foregoing recitals, which are incorporated herein by reference,the following mutual covenants and conditions,and othergoodand valuable consideration,the receipt and sufficiency of which are hereby acknowledged,Adero and the Town hereby agree to amend the Agreement as follows: 1.Term of Agreement. The term of Agreement is hereby extended from October 31, 2014,to October 31,2018.Either party may terminate the Agreement and the license grantedin the Agreementat any time upon providing 30 days noticeto the other party. 2. Schedule of Guided Hiking.Exhibit B of the Agreement is hereby deleted in its entirety.Guided hikes under the Agreement (as modified by this Fourth Amendment),may be conducted at anytimeduringthe extended termofthe Agreement as described herein. 2214637.3 3.Modifications to License Area.Entities affiliated with Adero may,during the term of the Agreement,replat the license area described in Exhibit A to the Agreement.In the event the replat causes the alignment of Eagle Ridge Drive to be changed,the parties agree that (i) the license area subject to this Agreement shall be modified to reflect the new Eagle Ridge Drive and the description set forth in Exhibit A shall be modified to reflect a new license area of comparable size to the currently-existing area and (ii) the License Area, in its current location or as modified, may be temporarily unavailable for use when construction activities render it unsafe for public access, as determined by Adero in its reasonable discretion. 4. No Limitation on Town Use of Right-of-Way.The Agreement (as modified by this Fourth Amendment)shall not be interpreted as a limitation on the Town's authority to utilize the platted Eagle Ridge right-of-way, including for construction of the "Temporary Foot Path" as described in subsection 7.1.3(i)of the Final Settlement Agreement (Amended and Restated May 1, 2014),Maricopa County Recorder 20140314508. 5.Effect of Amendment.In all other respects, the Agreement is affirmed and ratified and, except as expressly modified herein, all terms and conditions of the Agreement shallremain in full force and effect. 6. Non-Default. By executing this Fourth Amendment, Adero affirmatively asserts that (i) the Town is not currently in default, nor has been in default at any time prior to this Fourth Amendment, under any of the terms or conditions of the Agreement and (ii) any and all claims, known and unknown, relating to the Agreement and existing on or before the date of this Fourth Amendment are forever waived. 7.Conflict of Interest.This Fourth Amendment may be cancelled by the Town pursuant to Ariz.Rev.Stat.§38-511. [SIGNATURES ON FOLLOWING PAGES] 2214637.3 IN WITNESS WHEREOF,the parties hereto have executed this instrument as of the date and year first set forth above. "Town" TOWN OF FOUNTAIN HILLS, an Arizona municipal corporation Kenneth W.Buchanan,Town Manager ATTEST: Bevelyn J.Bender,Town Clerk (ACKNOWLEDGMENT) STATE OF ARIZONA ) )ss. COUNTY OF MARICOPA ) On ,2014,before me personally appeared Kenneth W. Buchanan, the Town Manager of the TOWN OF FOUNTAIN HILLS, an Arizona municipal corporation, whose identity was proven to me on the basis of satisfactory evidence to be the person who he claims to be, and acknowledged that he signed the above document,on behalf of the Town of Fountain Hills. Notary Public (Affix notary seal here) [SIGNATURES CONTINUE ON FOLLOWING PAGE] 2214637.3 "ADERO" Adero Canyon LLC,a Delaware limited liability company Jeremy Hall,President STATE OF Ah?on,, COUNTY OF ko^^(na (ACKNOWLEDGMENT) J )ss. _) On (Pc-ft?b^r J 7~Bv ,2014,before me personally appeared Jeremy Hall,President of ADERO CANYON LLC,a Delaware limited liability company,whose identity was proven to me on the basis of satisfactory evidence to be the person who he claims to be, and acknowledged that he signed the above document,on behalf of the company. \^jCju&*y*MjjJj j^y>LAaA>^J Notary Public (Affix notary seal here) 2214637.3 r CASSANDRA B.HANSEN Notary Public -Arizona Maricopa County My Comm.Expires Jan 20,2017 TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:11/6/2014 Meeting Type:Regular Session Agenda Type:Regular Submitting Department:Administration Staff Contact Information:Ken Buchanan,Town Manager,kbuchanan@fh.az.gov,480-816-5130 Strategic Priority:All Council Goal: REQUEST TO COUNCIL (Agenda Language):REQUEST TO COUNCIL (Agenda Language):CONSIDERATION of appointing four (4)citizens to the Strategic Planning Advisory Commission (SPAC),each for a 2-year term beginning on November 6,2014 and expiring on November 5,2016. Applicant: Applicant Contact Information: Property Location: Related Ordinance,Policy or Guiding Principle:Resolution 2009-09 adopting the amended and restated Strategic Planning Advisory Commission Bylaws. Staff Summary (background):There are currently four (4)vacancies on SPAC.Mayor Kavanagh appointed a Town Council Subcommittee consisting of Vice Mayor Cecil A.Yates and Councilmembers Cassie Hansen and Dennis Brown to interview applicants and provide recommendations on appointees to fill the vacancies. The subcommittee's recommendations were transmitted to Mayor Kavanagh. These appointments align with Strategic Directions of Strategic Plan 2010 relating to Civic Responsibility, specifically C2 (to discover,recognize and utilize the talents of our citizens and use these assets to address community needs)and CR3 (to foster a culture of public service and volunteerism). Risk Analysis (options or alternatives with implications): Fiscal Impact (initial and ongoing costs;budget status): Budget Reference (page number): Funding Source:NA If Multiple Funds utilized,list here: Budgeted;if No,attach Budget Adjustment Form:NA Recommendation(s)by Board(s)or Commission(s): Staff Recommendation(s): List Attachment(s): Page 1 of 2 SUGGESTED MOTION (for council use):MOVE to appoint rname four (4)citizens! as Commissioners on the Strategic Planning Advisory Commission,each for a term beginning on November 6,2014 and expiring on November 5,2016. Approved: Ken Buchanan,Town Manager 10/30/14 Page 2 of2 TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:11/6/2014 Meeting Type:Regular Session Agenda Type:Regular Submitting Department:Community Services Staff Contact Information:Rachael Goodwin,Supervisor of Recreation,480-816-5135,rgoodwin@fh.az.gov Strategic Planning Goal:Not Applicable (NA)Operational Priority:Not Applicable (NA) REQUEST TO COUNCIL (Agenda Language):CONSIDERATION of SPECIAL EVENT APPLICATION for the Fountain Hills Farmers Market and Art on the Avenue,presented by Dutchman's Holdings and J. Yates Enterprise. Markets are requested to be held weekly from 1lam - 5pm on Thursdays along the Avenue of the Fountain Median, from January 8 to April 9, 2015. Organizers would also like to include an additional market date of March 17,2015. Applicant:Judi Yates and Aaron Eckburg Applicant Contact Information:602-284-8835 Property Location:Avenue of the Fountains Median,Fountain Hills , AZ Related Ordinance,Policy or Guiding Principle:Town Code Chapter 8,article 8-3 Staff Summary (background):The seasonal Farmers Market and Art on the Avenue event is currently approved through Dec 31, 2014.The event would liketo continue through the 2015 calendar year, resuming on Thursday January 8 and running weekly on Thursdays through April 9. In addition to their weekly Thursday markets,organizers also seek to hold a market event on March 17, to coincide with Town of Fountain Hills annual St.Patrick's Day tradition of turning the fountain green.After April 9, the market will close for the summer season and looks to re-open on Oct 29 and function through Dec 31,2015. Risk Analysis (options or alternatives with implications):N/A Fiscal Impact (initial and ongoing costs;budget status):N/A Budget Reference (page number):N/A Funding Source:NA If Multiple Funds utilized,listhere: N/A Budgeted;if No,attach Budget Adjustment Form:na Recommendation(s)by Board(s)or Commission(s):N/A Staff Recommendation(s):Approve List Attachment(s):Event Application SUGGESTED MOTION (for council use):Move to approve the Special Event Application as presented. Page 1 of 2 Prepared by;' R.idl;11jt'ljotKtr/tli,Recreation Supervisor Director's Approval: Mark Mayer,Communityservices Director 10/28/2014 T"10/28/2014 Approved:^^.•* Ken Buchanan,town Manager 10/28/2014 I'ayc 2 ol"2 Date of Application:October1,201 4 OVERVIEW Town of Fountain Hills Special Event Application J5 '<f L Event Name:Fountain Hills Farmers Market &Art on the Avenue Event Date(s) Description of Event-Fine art fair and farmers market held in the median on Avenue of the Fountains as in previous years APPLICANT INFORMATION Name.Dutchman's Holdings,LLC &J. Yates Enterprise Phone. Address.PO Box 18866,Fountain Hills,AZ 85269 Email-aeckDur9@dutchmansmarkets.com /j EVENT INFORMATION Event Location:East &West Medians on Avenue of the Fountains Events Day(s):Weekly on Thursdays Nature of Event (dance performance,concert,festival):art festival &farmers market Estimated Attendance:500-1,500 weekly what is this based on?educated guess Event Time(s):11 am-5pm Sponsors: Details: •Tents or Canopies •Portable Restrooms •Alcohol •Food Vendors •Merchandise Vendors •Trash/Recycling •Electricity/Generators •Temporary Lighting •Inflatables •Signs/Banners •Parking at Event •Amplified Sound •Fireworks Yes0 NoD YesQ NoH YesQ No0 Yes0 NoD Yes0 NoD YesD No0 Yes0 NoD YesD NO0 YesD MO0 YesEZl NoD Vendor.all farmers market vendors required to have tents Vendor: Ifyes,provide additional page with details,along with liquor application. Special Event (Series 15)O Wine Festival/Wine Fair (Series 16)I I Ifyes,provide additional page with vendor name,contact name,phone,email, Fountain Hills Business License #,and Arizona Sales Tax/TPT #;vendors also must have proper permits from Maricopa County Environmental Health Ifyes,provide additional page with vendor name,contact name,phone,email, Fountain Hills Business License*,and Arizona Sales Tax/TPT # Vendor: Vendor.some food vendors,knife sharpening vendor,music Vendor: Vendor: Ifyes,provide additional pages with site map,town map,and legend showing sign location,size,and text Yes 0 NoD Where: YesEZl NoD YesD No0 Public Parking [•]Private Parking (attach permission from property owner)LJ . „ ,occasional musicians &weekly background music provided at farmers marketVendororPerformer: Vendor: STREETS/TRAFFIC Street Closures Yes Q No 0 If yes,have you included a barricading plan? •Streets: • Days:Times: YesQ NoD PUBLIC SAFETY Law Enforcement •Will security be required?Yes Q No 0 If yes,has security been contracted/scheduled?Yes O No Q j MCSO Deputies/Posse Q Private Security Q Contact:Phone: Will officers be needed for traffic control?Yes O No 0 If yes,provide additional pages with site map,town map showing location(s) Emergency Medical Services • Has the Fountain Hills Fire Department been notified of the event? •Will FHFD be on-site?YesQ No 0 CERTIFICATION I hereby certify that (i) the information provided relating to this application is true,correct and complete to the best of my knowledge and (ii)I am authorized to execute this application.On behalf of myself and anyone who is related to or associated with the special event (each,a "Responsible Party"),I hereby release and hold harmless the Town of Fountain Hills for, from and against any and all claims arising out of the Special Event. To the fullest extent permitted by law, the Responsible Parties shall indemnify,defend and hold harmless the Town and each Council Member,officer,employee or agent thereof (each, an "Indemnified Party"), for, from and against any and all losses, claims,damages,liabilities, costs and expenses (including,reasonable attorneys'fees, and costs) to which any such Indemnified Party may become subject,under any theory of liability whatsoever ("Claims"),insofar as such Claims (or actions in respect thereof) relate to the special event.I hereby acknowledge that all transactions in the course of the special event are subject to any applicable Town,county and/or state sales tax and assurance that all event participants shall be notified regarding sales tax regulations. Yes0 NoD ™i October 1,2014 Applicant Signature Date DEPARTMENTAL REVIEW Approve Disapprove Date Name and title Signature/Initials Town Clerk 3L •Wfym fip.u fe/rJJr.W I /*&a Comments:T X ^tyt^LQO ss-iCommunityServiceswD Comments: Streets &Medians fc •\)QJzilA (&»% Comments: y^P j&i&fyuo \wtPlanning&Zoning X-• Comments: /*cyFireMarshal¥-•/o^r/fd QtHgL OTT £>] Comments: MCSO w D tofz~lil\f KliL K^U Comments: RECOMMENDED ACTION Administrative Action Approved Denied Date Name and title Signature/Initials Event Status a-•r9dl-/«|j^C3u»k&~~*.*A Comments: Town Council Action Approved Denied Meeting Date Mayor Signature Date Event Status •• Comments: TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:11/6/2014 Meeting Type:Regular Session Agenda Type:Regular Submitting Department:Community Services Staff Contact Information:Rachael Goodwin,Supervisor of Recreation,480-816-5135,rgoodwin@fh.az.gov Strategic Planning Goal:Not Applicable (NA)Operational Priority:Not Applicable (NA) REQUEST TO COUNCIL (Agenda Language):DISCUSSION WITH POSSIBLE DIRECTION TO STAFF regarding the RENAMING the Avenue of the Fountains "Median"with fmal name suggestions,as submitted by public solicitation, compiled by Tourism staff. Applicant:None Applicant Contact Information: Property Location: Related Ordinance,Policy or Guiding Principle: Staff Summary (background):This item is to present Council with public and staff input for the potential re naming of the "median"on the Avenue of the Fountains,as requested by Council on September 18,2014.The survey was launched on September 22 and closed on Friday,Oct 24.Name suggestions were accepted via Survey Monkey online as well through drop off suggestion boxes at Town Hall and the Community Center.The survey was promoted through both print and online outlets including a press release,articles in the Fountain Hills Times and the Arizona Republic and multiple posts through the Experience Fountain Hills and Town Facebook pages.In total,228 suggestions were collected.Additionally,the Fountain Hills Times conducted an informal online poll asking readers as to whether the median should be renamed.The results were 3.5%for renaming and 96.5%against. Town staff observed a number of trends within the suggestions and recommend the following options: -"Promenade"was a reoccurring suggestion,including Promenade Park,Fountain Promenade,Promenade on the Avenue and Promenade at the Avenue.(Suggested 11 times) -"Plaza"was also a frequent suggestion,including The Plaza,Fountain Plaza,Plaza on or at the Avenue. (Suggested 15 times) -Other suggestions with multiple entries included names with "Green,""Center,""Pavilion"or "Commons" including Fountain Center,Fountain Green,or The Green on the Avenue (Suggested 19 times) -The last reoccurring theme was to not rename the space.(Suggested 21 times) Risk Analysis (options or alternatives with implications):N/A Fiscal Impact (initial and ongoing costs;budget status):N/A Budget Reference (page number):N/A Funding Source:NA Page 1 of 2 If Multiple Funds utilized,list here:N/A Budgeted;if No,attach Budget Adjustment Form:NA Recommendation(s)by Board(s)or Commission(s):N/A Staff Recommendation(s): List Attachment(s):Town Manager Memo,Poll Results SUGGESTED MOTION (for Council use):Move to direct staff on offical name for Avenue of the Fountains "Median." Prepared Richael "eattfini Supervisor Director's Approval: Mark Mayer,Community Services Director Approved:^_^ Ken buchanan,Town ManagerManager 10/28/2014 10/28/2014 10/28/2014 Page 2 of 2 MEMORANDUM DATE: FROM: TO: SUBJECT: November 4l"2014 Ken Buchanan, Town Manager tP Mayor &Town Council NAMING OF THE MEDIANS ith The Mayor& Town Council directedstaffto seek further input regardinga possiblenaming of the medians. In review of the results from the findings of a survey monkey instrument, staff compiled the most common names for possible consideration. It is staffs recommendation to leave the name as the "Avenue of the Fountains". Page 1 of 1 OnlinePollwww.fhtimes.comTHISWEEK'SQUESTIONyoureadyforupto 18monthsofmajorroadconstructioninFountainHills?DIt'sabouttime.3Findmeadetour.LASTWEEK'SRESULTSDoyoufeeltheAvenuemedianshouldbenamed?3.5%Yes96.5%NoTakeourweeklyonlinepollonthehomepageofourwebsite,www.fhtimes.comThisis notascientificpublicpolLPollsexpimMonday,Spm. TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:11/6/2014 Meeting Type:Regular Session Agenda Type:Regular Submitting Department:Administration Staff Contact Information:Craig Rudolphy,Finance Director,480-816-5162,crudolphy@fh.az.gov Strategic Planning Goal: 12 Reliable funding for infrastucture maintenance Operational Priority:Pavement Management Program REQUEST TO COUNCIL (Agenda Language):CONSIDERATION of RESOLUTION 2014-44, ordering the sale of, not to exceed,$8,200,000 principal amount of Town of Fountain Hills,Arizona General Obligation Bonds,Series 2014. Applicant: Applicant Contact Information: Property Location: Related Ordinance,Policy or Guiding Principle: Staff Summary (background):The Town of Fountain Hills voters approved a bond elelction on November 5, 2013.The bond proceeds will provide the resources to reconstruct Saguaro Boulevard.The bonds will be sold with a maturity date of five (5)years. Risk Analysis (options or alternatives with implications): Fiscal Impact (initial and ongoing costs;budget status):$8,200,000 Budget Reference (page number):pp. 91,298,334-335 Funding Source:General Fund if Multiple Funds utilized,list here:Capital Projects Fund Budgeted;if No,attach Budget Adjustment Form:na Recommendation(s)by Board(s)or Commission(s): Staff Recommendation(s):Approve RESOLUTION 2014-44,ordering the sale of, not to exceed,$8,200,000 principal amount of Town of Fountain Hills,Arizona General Obligation Bonds,Series 2014. List Attachment(s): SUGGESTED MOTION (for council use):Approve RESOLUTION 2014-44,ordering the sale of, not to exceed, $8,200,000 principal amount ofTown of Fountain Hills,Arizona General Obligation Bonds,Series 2014. Prepared by:Craig Rudolphy,Finance Director 10/28/2014 Page 1 of 2 Director's Approval/ VP>f Craig Rudotphy,Finance Director /10/28/2014 Approved:^proved:^—v Ken BuchananTTown Manager 10/28/2014 Page 2 of 2 2245517.3 RESOLUTION NO. 2014-44 RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, ORDERING THE SALE OF NOT TO EXCEED $8,200,000 PRINCIPAL AMOUNT OF TOWN OF FOUNTAIN HILLS, ARIZONA GENERAL OBLIGATION BONDS, SERIES 2014. WHEREAS, the Town of Fountain Hills, Arizona (the “Town”) plans to issue not to exceed $8,200,000 of its General Obligation Bonds, Series 2014 (the “Bonds”); and WHEREAS, the Bonds will be sold through an on-line bidding process pursuant to Arizona Revised Statutes (“ARIZ. REV. STAT.”) Section 35-457; WHEREAS, the Town advertised an invitation for bids (DS2015-102) regarding the Saguaro Boulevard reconstruction (the “Project”); WHEREAS, the Town will revise the par amount of the Bonds set forth in the Notice (as defined herein) after the Town receives bids for the Project; NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND THE TOWN COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, as follows: Section 1. The Bonds are hereby ordered to be sold through an on-line bidding process pursuant to ARIZ. REV. STAT. Title 35, Chapter 3, Article 3, as amended, and in accordance with the Notice Inviting Bids for the Purchase of Bonds (the “Notice”) in substantially the form attached hereto as Exhibit A. The Bonds are payable as to both principal and interest from an ad valorem tax levied against all of the taxable property in the Town without limit as to rate or amount. Section 2. The Town’s Finance Director or his designee is hereby authorized to finalize the terms of the Notice and to reject all bids or accept the lowest cost bid received for the purchase of the Bonds. Such acceptance shall be subject to confirmation by the Mayor and Town Council. No defect or error in such Notice shall affect or invalidate the sale of the Bonds. The Town’s Finance Director is hereby authorized to cause a preliminary official statement to be prepared in compliance with Section 240.15c2-12, General Rules and Regulations, Securities and Exchange Act of 1934 (the “Rule”), and is authorized to deem such preliminary official statement “final” for purposes of the Rule. Section 3. All bids for the Bonds will be received through Thomson Financial’s PARITY® System “on-line bidding process” as permitted in ARIZ. REV. STAT. Section 35-457. The official bid form shall be created for the electronic bidding. The Town will assume no responsibility for the proper functioning of the PARITY® System, for any error contained in any bid submitted electronically, or failure of any bid to be transmitted, received or opened at the official time for receipt of bids. 2245517.3 2 PASSED AND ADOPTED BY the Mayor and Council of the Town of Fountain Hills on November 6, 2014. 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 CERTIFICATE I, Bevelyn J. Bender, the duly appointed and acting Town Clerk of the Town of Fountain Hills, Arizona, do hereby certify that the above and foregoing Resolution No. 2014-44 was duly passed by the Mayor and Council of the Town of Fountain Hills, Arizona, at a regular meeting held on November 6, 2014, and the vote was ___ aye’s and ___ nay’s and that the Mayor and ____ Council Members were present thereat. DATED: November 6, 2014. Bevelyn J. Bender, Town Clerk 2245517.3 A-1 EXHIBIT A $8,200,000* TOWN OF FOUNTAIN HILLS, ARIZONA GENERAL OBLIGATION BONDS, SERIES 2014 NOTICE INVITING BIDS FOR THE PURCHASE OF BONDS (Electronic Bidding Only) NOTICE IS HEREBY GIVEN that unconditional bids will be received to and including the hour of 10:00 a.m., Mountain Standard Time (“M.S.T.”), on December 4, 2014, by the Town of Fountain Hills, Arizona (the “Town”), for the purchase of all, but not less than all, of $8,200,000* aggregate principal amount of the Town’s General Obligation Bonds, Series 2014 (the “Bonds”). A bid may be submitted only through the facilities of PARITY® (“PARITY”). Submission of bids is further discussed below. Through PARITY, the Town’s Finance Director or Wedbush Securities Inc., the Town’s financial advisor (the “Financial Advisor”), will electronically receive the bids at such time. The Mayor and Council will meet at the hour of 6:30 p.m. on December 4, 2014, for the purpose of considering bids received and, if an acceptable bid is received, awarding the contract for the purchase of the Bonds to the winning bidder. The Town reserves the right to continue the date for receipt of bids. If the date for receipt of bids is continued, prior to 10:00 a.m. M.S.T. on December 4, 2014, or prior to 10:00 a.m., M.S.T., on the day prior to the date to which receipt of bids has been continued, the Town will give notice of the continuance through PARITY at www.ipreo.com. The Bonds will be dated as of the date of initial delivery, and will bear interest from their date to the maturity of each of the Bonds at a rate or rates per annum of not to exceed eight percent (8%). Interest on the Bonds is payable semiannually on January 1 and July 1 during the term of the Bonds commencing January 1, 2016. The Bonds will mature on July 1 in the years and in the principal amounts as follows: Maturity Date (July 1) Principal Amount* 2016 $1,475,000 2017 1,620,000 2018 1,650,000 2019 1,700,000 2020 1,755,000 TIME FOR RECEIPT OF BIDS: Bids will be received to and including the hour of 10:00 a.m., M.S.T., unless the sale is postponed. The time maintained by PARITY shall constitute the official time. * Subject to change. The Town reserves the right to adjust the maturity schedule prior to the sale date to reflect the actual construction bid awarded. 2245517.3 A-2 ELECTRONIC BIDDING PROCEDURES: All bids must be submitted only through the facilities of PARITY in accordance with this Notice Inviting Bids for the Purchase of Bonds (the “Notice”). The normal fee for the use of PARITY may be obtained from PARITY and such fee will be the responsibility of the bidder. All bids must be submitted on the official bid form that resides on the PARITY system (the “Official Bid Form”), without alteration or interlineation. Subscription to the Ipreo LLC’s BiDCOMP Competitive Bidding System is required in order to submit a bid. The Town will neither confirm any subscription nor be responsible for the failure of any prospective bidder to subscribe. The Town is using PARITY as a communication media, and not as the Town’s agent, to conduct electronic bidding for the Bonds. All bids made through the facilities of PARITY shall be deemed irrevocable offers to purchase the Bonds on the terms provided in this Notice and shall be binding upon the entity making the bid, as if made by a signed, sealed bid delivered to the Town. The Town and the Financial Advisor assume no responsibility or liability for bids submitted through PARITY. Neither the Town nor the Financial Advisor shall be responsible for any malfunction or mistake made by, or as result of the use of the electronic bidding facilities provided and maintained by, PARITY. The use of PARITY is at the sole risk of the prospective bidders. If any provisions of this Notice shall conflict with information provided by PARITY, as the approved provider of electronic bidding services, this Notice shall control. Further information about PARITY, including any fee charged, may be obtained from BiDCOMP/PARITY, c/o Ipreo, 1359 Broadway, 2nd Floor, New York, New York 10018, Attn: Customer Support (212.849.5021). Bidders are requested to state in their bids the net interest cost to the Town, as described under “AWARD AND DELIVERY” herein. All electronic bids shall be deemed to incorporate the provisions of this Notice and the Official Bid Form. PURPOSE: The Bonds are being issued to provide funds to design, improve, construct, reconstruct and rehabilitate Saguaro Boulevard; and to pay the costs of issuance of the Bonds. BOOK-ENTRY-ONLY SYSTEM: The Bonds will be initially issued to, and registered in the name of, Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as the securities depository of the Bonds for a book-entry-only system (the “Book- Entry-Only System”). Under the Book-Entry-Only System, beneficial ownership interests in the Bonds will be available in book-entry form only through direct or indirect DTC participants. Ownership interests in the Bonds may be purchased in denominations of $5,000 of principal amount due on a specific maturity date or integral multiples thereof. Transfers of beneficial ownership interest in the Bonds will be accomplished by book entries made by DTC and the DTC Participants or Indirect DTC Participants who act on behalf of the beneficial owners (the “Beneficial Owners”). For every transfer and exchange of a beneficial interest in the Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Town and discharging its responsibilities with respect thereto under applicable law. Under such circumstances (if there is not a successor securities depository), physical certificates representing the Bonds will be executed and delivered. In addition, the Town may determine to discontinue the Book-Entry-Only System of transfers through DTC (or a successor securities depository). In such event, physical certificates representing the Bonds will be registered in the names of the Beneficial Owners and executed and delivered. Upon registration of Bonds in the Beneficial Owner’s name, the 2245517.3 A-3 Beneficial Owners will become the owners of the Bonds (the “Owners of the Bonds”) for all purposes, including the receipt of principal and interest payments and notices with respect to the Bonds. For a more detailed description of the Book-Entry-Only System, see the information in the official statement relating to the Bonds entitled “Book-Entry-Only System.” OPTIONAL REDEMPTION: The Bonds are not subject to call for redemption prior to maturity. REGISTRATION AND TRANSFER: Zions First National Bank will serve as bond registrar and paying agent with respect to the Bonds (the “Registrar”). If the Book-Entry-Only System is discontinued, the Registrar will administer registration and transfer of the Bonds and the Bonds will be transferable only upon the bond register to be maintained by the successor Registrar upon surrender to the Registrar. The Registrar may be changed without notice to any owner or beneficial owner of the Bonds. PAYMENT OF BONDS: So long as the Bonds are held under the Book-Entry-Only System, all payments of principal and interest shall be paid to DTC. If the Book-Entry-Only System is discontinued, interest on the Bonds shall be payable by check mailed on or prior to the interest payment date to the Owners of the Bonds at the addresses of such owners as they appear on the books of the Registrar on the record date (as described hereafter). Principal of, and premium, if any, on the Bonds shall be paid when due upon surrender of such Bonds at the designated corporate trust office of the Registrar (unless the Owner of the Bonds is eligible for payment by wire transfer). If the Book-Entry-Only System is discontinued, principal of the Bonds will be payable, when due, only upon presentation and surrender of the Bond at the designated corporate trust office of the Paying Agent (as defined hereafter). Upon written request of a registered owner of at least $1,000,000 in principal amount of Bonds not less than twenty (20) days prior to an interest payment date, all payments of interest and, if adequate provision for surrender is made, principal shall be paid by wire transfer in immediately available funds to an account within the United States of America designated by such Owner. Notwithstanding any other provision, payment of principal of and interest on any Bond that is held by a securities depository or Bonds subject to a Book- Entry-Only System may be paid by the Paying Agent by wire transfer in “same day funds”. RECORD DATE: The record date for determination of ownership for payment of interest shall be the fifteenth calendar day prior to an interest payment date. The Registrar shall pay interest to the Owners of record on the record date notwithstanding that transfers of ownership may occur on any Bond between the record date and the next interest payment date. SECURITY: Principal of and interest on the Bonds are secured by a continuing, direct ad valorem tax levied against all of the taxable property located within the boundaries of the Town without limit as to rate or amount. INTEREST RATES: Bids for the purchase of the Bonds must state the rate or rates of interest to be paid and no bid at a price less than the par value of the Bonds, together with all accrued interest thereon at the date of delivery of the Bonds, will be considered. All Bonds of the same maturity must bear the same rate of interest. The highest rate bid shall not exceed the lowest rate bid by more than one and one half percent (1.5%) per annum. Bids must be expressed in multiples of one-eighth (1/8) or one-tenth (1/10) of one percent. Interest will be calculated on the basis of a year comprised of 360 days consisting of twelve (12) months of thirty (30) days each. Any interest rate bid which would result in an interest payment amount having fractional cents will be deemed a waiver of the right to payment of such fractional cents. No fractional cents will be paid or accumulated for payment on any Bond. 2245517.3 A-4 STATE LAW PREMIUM LIMIT ON BONDS: The Bonds may not be reoffered to produce a Net Premium (as hereinafter defined) associated with the Bonds in excess of five percent (5%) of the par value of the Bonds. REOFFERING THE BONDS AT A NET PREMIUM IN EXCESS OF $410,000† WILL CAUSE THE BONDS TO BE INVALID. The term “Net Premium” means the difference between the par amount of the Bonds and the issue price of the Bonds determined pursuant to United States Treasury Regulations. The issue price of the Bonds is the aggregate of the issue price of each maturity of the Bonds. The issue price of each maturity of the Bonds is that initial offering price to the public (excluding bond houses, brokers and similar persons or organizations acting in the capacity of underwriters or wholesalers) at which a substantial amount of Bonds of that maturity (at least ten percent (10%) of such maturity) are reasonably expected to be sold as of the sale date (December 4, 2014). If the offering prices certified by the winning bidder (as described below) cause the Net Premium to exceed five percent (5%) of the principal amount of the Bonds, the award will be cancelled and the Bonds will not be delivered to the winning bidder. The issue price of the Bonds may not exceed their fair market value as of the sale date. INFORMATION TO BE PROVIDED BY WINNING BIDDER: The winning bidder will be required to furnish to the Town, at or before the closing, a certificate in a form acceptable to Gust Rosenfeld, P.L.C. (“Bond Counsel”), Phoenix, Arizona, stating that it did offer all of the Bonds to the public in a bona fide public offering and it reasonably expected that a substantial amount of the Bonds of that maturity (i.e. at least ten percent (10%) of each maturity of the Bonds) would be sold by it, as of the sale date, at the initial offering prices set forth in the certificate, together with such additional representations as Bond Counsel may require to verify that it is reasonable to rely on the winning bidder’s certification about the reasonably expected initial public offering price, including that the issue price of the Bonds set forth in the certificate did not exceed their fair market value as of the sale date. The “public” does not include bond houses, brokers or similar persons or organizations acting in the capacity of underwriters and wholesalers. The initial offering prices to be certified shall be furnished to the Town within 24 hours after the award of the Bonds. FORM OF BID AND GOOD FAITH DEPOSIT: The prescribed form of bid for the Bonds will be available on the PARITY system and all bids must be submitted on that form. The winning bidder shall deliver a good faith deposit in the amount of $164,000 (the “Deposit”), in the form of either of the following: (i) a certified or cashier’s check payable to the Town or (ii) a wire transfer to the Town, delivered to the Town within 24 hours of notification of the award. Such bidder shall be solely responsible for the timely delivery of their Deposit whether by check or wire transfer. Neither the Town nor the Financial Advisor has any liability for delays in the transmission of the Deposit. The Deposit made by certified or cashier’s check should be made payable to the Town and delivered to Town of Fountain Hills, Attn: Finance Director, 16705 E. Avenue of the Fountains, Fountain Hills, Arizona 85268. The Deposit sent via wire transfer should be sent to the Town according to the following instructions: [_____________, ABA Number __________; Account number _______; For Further Credit to: _____________, Reference: Name of Bidder – General Obligation Bonds, Series 2014.] Contemporaneously with such wire transfer, the bidder shall send an e-mail to the Town’s Finance Director (e-mail address: crudolphy@fh.az.gov) and to the Financial Advisor (e-mail addresses: jim.stricklin@wedbush.com and bicej@wedbush.com), including the following information; (i) indication † Subject to change; the State law premium limit on bonds will be adjusted in conjunction with any change to the principal amount of the Bonds. 2245517.3 A-5 that a wire transfer has been made, (ii) the amount of the wire transfer, (iii) the issue to which it applies, and (iv) federal reference number, if available. The Deposit received from the winning bidder, the amount of which will be deducted at settlement, will be deposited by the Town and no interest will accrue to the winning bidder. In the event the winning bidder fails to comply with the accepted bid, said amount will be retained by the Town as liquidated damages. CUSIP NUMBERS: CUSIP numbers will be placed on the Bonds, but neither failure to place such numbers on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the winning bidder thereof to accept delivery of and pay for the Bonds in accordance with the terms of the sale. No CUSIP number will be deemed to be part of any Bond or of the contract evidenced thereby. All expenses of printing CUSIP numbers on the Bonds will be paid by the Town, but the CUSIP Service Bureau charge for the assignment of CUSIP numbers will be paid by the winning bidder of the Bonds. RIGHT OF REJECTION: The Town reserves the right in its discretion to reject any and all bids received and to waive any irregularity or informality in the bids, except that the time for receiving bids shall be of the essence. COST OF BOND FORMS: The Town shall bear the cost of printing of the Bonds and will furnish fully executed Bonds, registered in the name of the winning bidder or nominees, to the winning bidder upon payment therefor. AWARD AND DELIVERY: Unless all bids are rejected, the Bonds will be awarded to the bidder who complies with the provisions of this Notice and whose bid results in the lowest net interest cost to the Town. The net interest cost will be determined by computing the aggregate amount of interest payable on the Bonds from their date to their respective maturity dates and by deducting therefrom any premium. Delivery of the Bonds will be made to the winning bidder upon payment in federal or immediately available funds at the offices of Bond Counsel, or, at the winning bidder’s request and expense, at any other place mutually agreeable to both the Town and the winning bidder. CANCELLATION: Bidders are to take notice that, pursuant to Arizona law, if, within three (3) years from the award of the contract to purchase the Bonds, any person who was significantly involved in initiating, negotiating, securing, drafting or creating the contract for the purchase of the Bonds on behalf of the Town becomes an employee or agent of the winning bidder in any capacity or a consultant to the winning bidder with respect to the contract for the purchase of the Bonds, the Town may cancel the contract without penalty or further obligation by the Town. In addition to such cancellation, the Town may recoup any fees or commissions paid or due to any person who was significantly involved in initiating, negotiating, securing, drafting or creating the contract for the purchase of the Bonds on behalf of the Town. LEGAL OPINION: The Bonds are sold with the understanding that the Town will furnish the winning bidder with the approving opinion of Gust Rosenfeld, P.L.C., serving as Bond Counsel. An undated copy of such opinion can be found in the preliminary official statement (the “Preliminary Official Statement”). Said attorneys have been retained by the Town as Bond Counsel and in such capacity are to render their opinion only upon the legality of the Bonds under Arizona law and on the exemption of the interest income on such Bonds from federal and State of Arizona income taxes (see “Tax-Exempt Status” below). Fees of Bond Counsel for services rendered in connection with such approving opinion are expected to be paid from Bond proceeds. Except to the extent necessary to issue its approving opinion as to validity of the Bonds, Bond Counsel has not been requested to examine or review and has not examined or reviewed any financial documents, statements or materials that have been or may be furnished in connection with the authorization, issuance or marketing of the Bonds and accordingly will not express any 2245517.3 A-6 opinion with respect to the accuracy or completeness of any such financial documents, statements or materials. In submitting a bid for the Bonds, the bidder agrees to the representation of the Town by Bond Counsel. TAX-EXEMPT STATUS: In the opinion of Bond Counsel under existing laws, regulations, rulings and judicial decisions, and assuming continuing compliance with certain restrictions, conditions and requirements by the Town, interest income on the Bonds is excluded from gross income for purposes of calculating federal income taxes. In the opinion of Bond Counsel, interest income on the Bonds is exempt from Arizona income taxes. Should changes in the law cause Bond Counsel’s opinion to change prior to delivery of the Bonds to the winning bidder, the winning bidder will not be obligated to pick up and pay for the Bonds, and the winning bidder’s Deposit will be returned. QUALIFIED TAX-EXEMPT OBLIGATIONS: The Bonds will be “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). PRELIMINARY OFFICIAL STATEMENT DEEMED FINAL, DELIVERY OF FINAL OFFICIAL STATEMENT: The Town, acting through its Finance Diretor, will deem the Preliminary Official Statement provided in connection with the sale of the Bonds to be final as of its date, as required by Section 240.15c2-12, General Rules and Regulations, Securities Exchange Commission Act of 1934 (the “Rule”), except for the omission of offering prices, selling compensation, delivery dates, terms to be specified in the winning bidder’s bid, ratings, other terms depending on such matters and the identity of the winning bidder, all as may be necessary for the Town to complete a final official statement. Within twenty-four (24) hours after the award of the Bonds, the winning bidder must provide the Town with all necessary offering price information, selling compensation information, all other terms of the sale which depend on such matters and any underwriter information, all as may be necessary for the Town to complete the final official statement. Within seven (7) business days after the award of the Bonds, the Town will provide the winning bidder with the final official statement in an electronic format as prescribed by the MSRB at no cost. The final official statement will be in substantially the same form as the Preliminary Official Statement with such additions, deletions or revisions as the Town deems necessary. The Town will deliver at closing an executed certificate stating that as of the date of delivery the information contained in the final official statement, including any supplement, relating to the Town and the Bonds is true and correct in all material respects and that such final official statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. CONTINUING DISCLOSURE: In connection with the issuance of the Bonds, the Town will deliver a continuing disclosure certificate for purposes of the Rule as hereinafter described and as described in the final official statement. For purposes of the Rule, the Town is the only “obligated person” with respect to the Bonds. The Town will agree, as described in the final official statement, to provide or cause to be provided (i) certain annual financial information and operating data (the “Annual Information”) for the preceding fiscal year, (ii) the Town’s audited financial statements, (iii) timely notice, not in excess of ten business days after the occurrence of certain listed events with respect to the Bonds, and (iv) timely notice of any failure by the Town to provide its Annual Information within the time specified in that certificate. See the more complete description of the certificate in the final official statement. 2245517.3 A-7 The Annual Information which was due on February 1, 2010 through and including 2014 with respect to past undertakings entered into by the Town were not timely filed in compliance with the Rule. However, the Town timely filed its audited financial statements in each of those years. The Town filed this Annual Information on August 1, 2014. The Annual Information which was due on February 1, 2010 through and including 2014 with respect to past undertakings entered into by the Town of Fountain Hills Municipal Property Corporation, in which the Town is the “obligated person” with respond to those bonds, were not timely filed in compliance with the Rule. However, the Town timely filed its audited financial statements in each of those years. The Town filed this Annual Information on August 1, 2014. The Town has established procedures to ensure timely and proper filing of its Annual Information. NO LITIGATION AND NON-ARBITRAGE: The Town will deliver a certificate to the effect, except as otherwise described in the Preliminary Official Statement or the final official statement, that no litigation is pending affecting the issuance and sale of the Bonds. The Town will also deliver an arbitrage certificate covering its reasonable expectations concerning the Bonds. ADDITIONAL INFORMATION: Copies of this Notice and the Preliminary Official Statement relating to the Bonds will be furnished to any bidder upon request made to the Finance Director of Fountain Hills, Arizona; 16705 E. Avenue of the Fountains, Fountain Hills, Arizona 85268, telephone 480-816-5162 or to Wedbush Securities Inc., 3200 E. Camelback Road, Suite 290, Phoenix, Arizona 85018, telephone 602-952-6852, Financial Advisor to the Town with respect to the Bonds. TOWN OF FOUNTAIN HILLS, ARIZONA The League's monthly online newsletter Issue138 •October 2014 1 fjQiimtisaMm •— League of Arizona Cities ^TownsCV_>J.ClV_-vJ AND ±\J VV AXvJ1 onnection League's New Policy Committees In May,the League Executive Committee approved a change in the annual resolutions process.The new system will allow for more in-depth research and greater involvement by elected officials and staff in developing the League's Municipal Policy Statement. The new process will include five separate committees that will more thoroughly vet issues that come to light.These policy committees will be chaired by a member of the Executive Committee,and will consist of elected officials and municipal staff.At times,other stakeholders may be invited to participate to provide needed expertise and perspective. Tempe Mayor and League of Arizona Cities and Towns President Mark Mitchell appointed these five Executive Committee members to serve as chairs for these Policy Committees: Budget,Finance and Economic Development Mayor Kenny Evans of Payson General Administration,Human Resources and Elections Mayor Lana Mook of El Mirage Neighborhoods,Quality of Life and Sustainability Councilmember Gilbert Lopez of Coolidge Public Safety,Military Affairs and Courts Mayor Jerry Weiers of Glendale Transportation,Infrastructure and Public Works Mayor Jonathan Rothschild of Tucson "These municipal leaders will be essential in setting the League's legislative priorities,"said League President and Tempe Mayor Mark Mitchell. "I appreciate their willingness to serve and am confident their leadership will bring forth the types of proposals that will ensure success not only for the League but for the State of Arizona." In this new process,cities and towns will be able to submit policy ideas to the League at any time during the year and do not need to have a co-sponsoring city or town.If your city or town wishes to submit an idea for consideration,you can send it with a brief yet thorough explanation to y Back to the BmaMMm resolutions@azleague.org.You do not need to create a full resolution as you did in the past.However,you may be consulted to provide more information on the idea and also may be invited to speak to the issue at one of the policy committee meetings.As in past years,Resolutions will be debated for final passage at the League's Annual Conference. We are inviting you as elected officials and municipal staff to volunteer to participate in these committees.If you are interested,please submit your name,title and committee of interest to resolutions@azleague.org.We expect these committees to meet a few times a year.We are including a general schedule of meeting dates in this correspondence.The actual committee membership and meeting schedule will be set by the committee chairs.Since we are just initiating this process,the first set of meetings will occur as soon as practical.In the future we expect committee work to be conducted year round as needed. League of Arizona Cities and Towns 1820 W.Washington St. Phoenix,AZ 85007 Phone:602-258-5786 Fax:602-253-3874 http://www.azleague.org If you have ideas for this newsletter or encounter difficulty reading this email, please contact Samantha Womer at swomer@azleague.org with your concerns.