Loading...
HomeMy WebLinkAbout2019.1119.TCRM.Packet       NOTICE OF MEETING REGULAR MEETING FOUNTAIN HILLS TOWN COUNCIL      Mayor Ginny Dickey  Vice Mayor Sherry Leckrone Councilmember Dennis Brown Councilmember Alan Magazine Councilmember Mike Scharnow Councilmember David Spelich Councilmember Art Tolis      TIME:5:30 P.M. – REGULAR MEETING WHEN:TUESDAY, NOVEMBER 19, 2019 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.    REQUEST TO COMMENT   The public is welcome to participate in Council meetings. TO SPEAK TO AN AGENDA ITEM , please complete a Request to Comment card, located in the back of the Council Chambers, and hand it to the Town Clerk prior to discussion of that item, if possible. Include the agenda item on which you wish to comment. Speakers will be allowed three contiguous minutes to address the Council. Verbal comments should be directed through the Presiding Officer and not to individual Councilmembers. TO COMMENT ON AN AGENDA ITEM IN WRITING ONLY, please complete a Request to Comment card, indicating it is a written comment, and check the box on whether you are FOR or AGAINST and agenda item, and hand it to the Town Clerk prior to discussion, if possible.   REGULAR MEETING    REGULAR MEETING NOTICE OF OPTION TO RECESS INTO EXECUTIVE SESSION Pursuant to A.R.S. §38-431.02, notice is hereby given to the members of the Town Council, and to the general public, that at this meeting, the Town Council may vote to go into executive session, which will not be open to the public, for legal advice and discussion with the Town's attorneys for legal advice on any item listed on the following agenda, pursuant to A.R.S. §38-431.03(A)(3).        1.CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Ginny Dickey     2.ROLL CALL – Mayor Dickey     3.REPORTS BY MAYOR, COUNCILMEMBERS AND TOWN MANAGER     A.PROCLAMATION November 19 - 25, 2019, as Be Kind America Week     4.SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS     A.PRESENTATION by Heinfeld Meech & Co of annual financial audit results.    B.PRESENTATION on Four Peaks Park Update     5.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.     6.CONSENT AGENDA ITEMS All items listed on the Consent Agenda are considered to be routine, noncontroversial matters and will be enacted by one motion 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.     A.CONSIDERATION OF adopting Resolution 2019-56, abandonment of a portion of the 20' Public Utility and Drainage Easement at the westerly side of Plat 203, Block 7, Lot 1 (16326 E. Kingstree Blvd.), as recorded in Book 149, Page 29, records of Maricopa County, Arizona. (EA 2019-17)        Town Council Regular Meeting of November 19, 2019 2 of 4   B.CONSIDERATION OF approving an Extension of Premises application submitted by Sarah Meredith representing S & C Meredith LLC / DBA Alamo Saloon located at 11807 N Saguaro Blvd, Fountain Hills, AZ 85268 for a private party on December 14, 2020 from 6:00 p.m. to 1:30 a.m.      C.CONSIDERATION OF adopting Resolution 2019-57 approving an Intergovernmental Agreement with the Salt River Pima Maricopa Indian Community relating to Proposition 202 funding.     D.CONSIDERATION OF approving a Liquor License Application submitted by Kostas Sotirhos, owner of Alexanders Greek Kitchen, located at 13014 N. Saguaro Boulevard #101, Fountain Hills, AZ. This is for a series 12 (restaurant) license.      7.REGULAR AGENDA     A.PUBLIC HEARING AND CONSIDERATION OF adopting Ordinance#19-16, a text amendment to the Town of Fountain Hills Zoning Ordinance, Chapter 6, Sign Regulations, Sections 6.08 Zoning Districts Table, 6.08. M. and 6.08. Q. The amendments update the Zoning Districts Table with the new language, replace the existing language in Section 6.08 M. regarding Garage Sale Signs with new provisions for Residential Directory Signs and eliminate Section 6.08. Q. regarding Open House Signs.(Case #Z2019-06) (DUE TO A VARIETY OF FACTORS, STAFF IS REQUESTING THE PUBLIC HEARING REMAIN ON THE AGENDA, BUT BE CONTINUED TO THE DECEMBER 3, 2019, COUNCIL MEETING.)     B.CONSIDERATION OF Resolution 2019-52 approving a Development Agreement associated with the Daybreak P.A.D. rezoning located at the northeast corner of Palisades and Shea Boulevards.     C.CONSIDERATION OF approving the installation of the sculpture titled, "Fountain of Light" on the west end of the Avenue of the Fountains across the street from Town Hall.     8.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.     9.ADJOURNMENT      Town Council Regular Meeting of November 19, 2019 3 of 4         CERTIFICATE OF POSTING OF NOTICE The undersigned hereby certifies that a copy of the foregoing notice was duly posted in accordance with the statement filed by the Town Council with the Town Clerk. Dated this ______ day of ____________________, 2019. _____________________________________________  Elizabeth A. Burke, MMC, Town Clerk   The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480-816-5199 (voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in the 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.    Town Council Regular Meeting of November 19, 2019 4 of 4   ITEM 3. A. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Reports Submitting Department: Administration Prepared by: Angela Padgett-Espiritu, Executive Assistant to Manager, Mayor/Council Staff Contact Information: Angela Padgett-Espiritu, Executive Assistant to Manager, Mayor/Council REPORTS (Agenda Language):  PROCLAMATION November 19 - 25, 2019, as Be Kind America Week Staff Summary (Background) Mayor Dickey will be proclaiming the week of November 19 - 25, 2019, as Be Kind America Week. Attachments Proclamation  Form Review Inbox Reviewed By Date Finance Director Elizabeth A. Burke 11/13/2019 10:50 AM Town Manager Grady E. Miller 11/13/2019 10:56 AM Form Started By: Angela Padgett-Espiritu Started On: 11/13/2019 10:26 AM Final Approval Date: 11/13/2019  ITEM 4. A. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Public Appearances/Presentations Submitting Department: Administration Prepared by: Elizabeth A. Burke, Town Clerk Staff Contact Information: David Pock, Finance Director SPECIAL PUBLIC APPEARANCES/PRESENTATIONS (Agenda Language):  PRESENTATION by Heinfeld Meech & Co of annual financial audit results. Staff Summary (Background) In compliance with State statute, an annual financial audit of the Town is completed each year by an independent auditing firm. Heinfeld Meech & Co. completed our audit for the fiscal year ended 6/30/2019. Their audit was conducted in accordance with U.S. generally accepted  auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Heinfeld Meech & Co. has issued the Town an unmodified opinion for fiscal year 2019. Attachments Governance Letter  Management Letter  Report on Internal Control and Compliance  Highway User Revenue Fund Audit  Expenditure Limitation Report Audit  Comprehensive Annual Financial Report Audit  Form Review Inbox Reviewed By Date Finance Director Elizabeth A. Burke 11/13/2019 10:34 AM Town Manager Grady E. Miller 11/13/2019 10:57 AM Form Started By: Elizabeth A. Burke Started On: 11/13/2019 10:25 AM Final Approval Date: 11/13/2019  Page 1 November 4, 2019 To the Town Council Town of Fountain Hills, Arizona We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Town of Fountain Hills, Arizona (Town) for the year ended June 30, 2019. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter provided to you during the planning phase of the audit. Professional standards also require that we communicate to you the following matters related to our audit. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Fountain Hills, Arizona are described in Note 1 to the financial statements. No matters have come to our attention that would require us, under professional standards, to inform you about the methods used to account for significant unusual transactions and the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. 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 management’s current judgments. The most sensitive estimates affecting the financial statements are: Management’s estimate of the useful lives of depreciable capital assets is based on the length of time management estimates those assets will provide some economic benefit in the future. Management’s estimate of the accrued compensated absences is based on leave rates and the Town’s policies regarding payment of unused vested leave. Management’s estimate of the allowance for uncollectible receivable balances is based on past experience and future expectation for collection of various account balances. We evaluated the key factors and assumptions used to develop these estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Page 2 Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Audit Adjustments Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. During the course of the audit we did not identify any misstatements which require communication. In addition, as part of the professional services we provided to the Town we assisted with the preparation of the financial statements and notes to financial statements. In providing this service we prepared adjusting journal entries necessary to convert the accounting records to the basis of accounting required by generally accepted accounting principles. Those adjusting journal entries have been provided to management who reviewed and approved those entries and accepted responsibility for them. 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 auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain written representations from management, which are included in the management representation letter provided to us at the conclusion of the audit. 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 auditor’s 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 regarding auditing and accounting matters. Discussions with Management We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management throughout the course of the year. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention as the Town’s auditors. Compliance with Ethics Requirements Regarding Independence The engagement team, others in our firm, and as appropriate, our firm, have complied with all relevant ethical requirements regarding independence. Heinfeld, Meech & Co., P.C. continually assesses client relationships to comply with relevant ethical requirements, including independence, integrity, and objectivity, and policies and procedures related to the acceptance and continuance of client relationships and specific engagements. Our firm follows the “Independence Rule” of the AICPA Code of Professional Conduct and the rules of state boards of accountancy and applicable regulatory agencies. It is the policy of the firm that all employees be familiar with and adhere to the independence, integrity, and objectivity rules, regulations, interpretations, and rulings of the AICPA, U.S. Government Accountability Office (GAO), and applicable state boards of accountancy. Page 3 Responsibility for Fraud It is important for both management and the members of the governing body to recognize their role in preventing, deterring, and detecting fraud. One common misconception is that the auditors are responsible for detecting fraud. Auditors are required to plan and perform an audit to obtain reasonable assurance that the financial statements do not include material misstatements caused by fraud. Unfortunately most frauds which occur in an organization do not meet this threshold. The attached document prepared by the Association of Certified Fraud Examiners (ACFE) is provided as a courtesy to test the effectiveness of the fraud prevention measures of your organization. Some of these steps may already be in place, others may not. Not even the most well-designed internal controls or procedures can prevent and detect all forms of fraud. However, an awareness of fraud related factors, as well as the active involvement by management and the members of the governing body in setting the proper “tone at the top”, increases the likelihood that fraud will be prevented, deterred and detected. Additional Reports Issued In addition to the auditor’s report on the financial statements we will also issue the following documents related to this audit. These reports are typically issued within 30 days of the date of this letter. Report on internal control over financial reporting and on compliance in accordance with Government Auditing Standards Examination report on the Annual Expenditure Limitation Report Other Important Communications Related to the Audit Attached to this letter are a copy of the signed engagement letter provided to us at the initiation of the audit, and a copy of the management representation letter provided to us at the conclusion of the audit. If there are any questions on the purpose or content of these letters please contact the engagement partner identified in the attached engagement letter. Restriction on Use This information is intended solely for the use of the members of the Town Council and management of Town of Fountain Hills, Arizona and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Heinfeld, Meech & Co., P.C. Phoenix, Arizona Town of Fountain Hills, Arizona Management Letter Year Ended June 30, 2019 Page 1 Honorable Mayor and Members of Town Council and Management Town of Fountain Hills, Arizona Members of the Council and Management: In planning and conducting our audit of the financial statements of Town of Fountain Hills, Arizona for the year ended June 30, 2019, we performed the following in accordance with auditing standards generally accepted in the United States of America, and as required by Government Auditing Standards (GAS): Considered the Town’s internal control over financial reporting. Tested compliance with certain provisions of laws, regulations, contracts, and grant agreements that could have a direct and material effect on the Town’s financial statements. Any audit findings that are required to be reported by GAS have been included in the Town’s Financial Statements and Report on Internal Control and on Compliance for the year ended June 30, 2019. However, during our audit we noted certain matters that are opportunities for strengthening internal controls. Management should address these items to ensure that it fulfills its responsibility to establish and maintain adequate internal controls and comply with laws, regulations, contracts, and grant agreements. Those items and our related recommendations are briefly described in the accompanying summary. The items discussed in the accompanying summary are a result of audit procedures performed based on risk assessment procedures and therefore not all deficiencies or weaknesses in controls may have been identified. This information is intended for the Town of Fountain Hills, Arizona’s Town Council and is not intended to be and should not be used by anyone other than the specified party. However, this information is a matter of public record, and its distribution is not limited. We have already discussed these items and suggestions with Town personnel and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. Sincerely, Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 8, 2019 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT LETTER YEAR ENDED JUNE 30, 2019 Page 2 BUILDING PERMIT FEES We tested nineteen building permits issued during the fiscal year and found one file where the incorrect fees were charged to the customer because the Town input the information into the software system incorrectly. Moreover, for all eight permits reviewed that required a manual calculation, there was no documentation that a review of the calculation was done. This item was noted in the prior fiscal year. We recommend the Town enhance internal control procedures that require an employee to reconcile manual building permit files to the computerized system to ensure accuracy of the calculations and to ensure customers are charged the correct amounts. This reconciliation should be documented and reviewed by management. Management’s Response The Town agrees with the auditors' recommendations and has taken steps to develop and implement a building permit reconciliation process, including evidence of management review, to ensure accuracy and completeness. The Town is also considering the simplification of its fee calculations by transitioning from square footage to construction value as its basis for fees. INFORMATION TECHNOLOGY The Town does not have a formal disaster recovery or contingency plan that ensures successful resumption of system services in case of disruption or failure. Although informal processes or procedures may exist, creating a formal plan is recommended. We recommend the Town enhance internal controls over information technology and create a formal disaster recovery or contingency plan and have it reviewed at least annually to confirm responsibilities, identify internal and external vulnerabilities, and remedy any deficiencies in the plan. Management’s Response The Town agrees with the auditors' recommendations and has started drafting an IT Disaster Recovery Plan. Once completed, the plan will be made available to town management. At a minimum, the plan will be reviewed on an annual basis by IT staff and updated as needed. This review will be evidenced by either an annotation in the plan or by management letter. Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor’s Report The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Town of Fountain Hills, Arizona, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise Town of Fountain Hills, Arizona’s basic financial statements, and have issued our report thereon dated October 8, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Town of Fountain Hills, Arizona’s internal control over financial reporting (internal control) to determine the 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 Town of Fountain Hills, Arizona’s internal control. Accordingly, we do not express an opinion on the effectiveness of Town of Fountain Hills, Arizona’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Page 1 Compliance and Other Matters As part of obtaining reasonable assurance about whether Town of Fountain Hills, Arizona’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 8, 2019 Page 2 INDEPENDENT ACCOUNTANT’S REPORT Honorable Mayor and Members of the Town Council Town of 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 of Fountain Hills, Arizona pursuant to Arizona Revised Statutes Title 28, Chapter 18, Article 2, and any other dedicated state transportation revenues received by the Town of Fountain Hills, Arizona, were used solely for authorized transportation purposes during the year ended June 30, 2019. 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. Those standards require that we plan and perform the examination to obtain reasonable assurance about the Town of Fountain Hills, Arizona’s compliance with the requirements referred to above, in all material respects. An examination involves performing procedures to obtain evidence about the Town of Fountain Hills, Arizona’s compliance with the requirements referred to above. The nature, timing, and extent of the procedures selected depend on our judgement, including an assessment of the risks of material noncompliance of the report, whether due to fraud or error. We believe the evidence we obtained is sufficient and appropriate to provide 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 year ended June 30, 2019. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 8, 2019 Town of Fountain Hills, Arizona Annual Expenditure Limitation Report Year Ended June 30, 2019 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT YEAR ENDED JUNE 30, 2019 CONTENTS PAGE Independent Accountant’s 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 INDEPENDENT ACCOUNTANT’S REPORT The Auditor General of the State of Arizona The Honorable Mayor and Town Council of the Town of Fountain Hills, Arizona We have examined the accompanying Annual Expenditure Limitation Report of Town of Fountain Hills, Arizona for the year ended June 30, 2019, and the related notes to the report. The Town of Fountain Hills, Arizona’s management is responsible for presenting this report in accordance with the uniform expenditure reporting system as described in Note 1. 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. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether this report is presented in accordance with the uniform expenditure reporting system, in all material respects. An examination involves performing procedures to obtain evidence about the amounts and disclosures in the report. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of the report, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide reasonable basis for our opinion. In our opinion, the Annual Expenditure Limitation Report referred to above is presented, in all material respects, in accordance with the uniform expenditure reporting system as described in Note 1. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 8, 2019 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL EXPENDITURE LIMITATION REPORT – PART I YEAR ENDED JUNE 30, 2019 1.Economic Estimates Commission expenditure limitation $ 28,954,251 2.Voter-approved alternative expenditure limitation (approved N/A)0 3.Enter applicable amount from line 1 or line 2 $ 28,954,251 4.Amount subject to the expenditure limitation (total amount from Part II, Line C)22,279,108 5.Amount under the expenditure limitation $ 6,675,143 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 Signature of Finance Director Name and Title: David Pock, Finance Director Telephone Number: 480-816-5162 Date: October 8, 2019 See accompanying notes to report. Page 2 InternalGovernmental Enterprise Service FiduciaryFunds Funds Funds Funds TotalA. Amounts reported on theReconciliation, Line D $ 27,424,907 $ - $- $- $ 27,424,907 - B.Less exclusions claimed:- 1Bond proceeds- Debt service requirements on bonded indebtedness1,972,850 1,972,850 Proceeds from other long-term obligations- Debt service requirements on other long-term obligations- 2Dividends, interest, and gains on the sale or redemption of investment securiti524,998 524,998 3 Trustee or custodian- 4Grants and aid from the federal government- 5Grants, aid, contributions, or gifts from a private agency, organization, or individual, except amounts received in lieu of taxes133,197 133,197 6 Amounts received from the State of Arizona 71,338 71,338 7Quasi-external interfund transactions8,388 8,388 8Amounts accumulated for the purchase of land, and the purchase or construction of buildings or improvement- 9Highway user revenues in excess of those received in fiscal year 1979-82,362,032 2,362,032 10 Contracts with other political subdivisions- 11Refunds, reimbursements, and other recoveries72,996 72,996 12Voter-approved exclusions not identified above- 13Prior years carryforward- 14Total exclusions claimed5,145,799 --- 5,145,799 C.Amounts subject to expenditure limitatio$ 22,279,108 $- $- $ - $ 22,279,108 TOWN OF FOUNTAIN HILLS, ARIZONAANNUAL EXPENDITURE LIMITATION REPORT - PART IIYEAR ENDED JUNE 30, 2019DescriptionSee accompanying notes to report.Page 3 InternalGovernmental Enterprise Service FiduciaryDescription Funds Funds Funds Funds TotalA.$ 28,276,029 $ - $- $ - $ 28,276,029 B. Subtractions:1.Items not requiring the use ofworking capital -Depreciation-Loss on disposal of capital assets-Bad debt expense-Other postemployment benefits expense-Claims incurred but not reported-Pension expense-Landfill closure and postclosure care costs-2.-792,151 792,151 3.Required fees paid to the Arizona Department of Revenue58,971 58,971 4.Involuntary court judgments-5. Total subtractions851,122 --- 851,122 C. Additions:1. Principal payments on long-term debt-2. Acquisition of capital assets-3.Other postemployment benefits paid in the current yearbut reported as expenses in previous years-4.Claims paid in the current year but reported asexpenses incurred but not reported in previous years-5.Pension contributions paid in the current year-6.-7. Total additions- --- -D. Amounts reported on Part II, Line A$ 27,424,907 $- $- $ - $ 27,424,907 See accompanying notes to report.TOWN OF FOUNTAIN HILLS, ARIZONAANNUAL EXPENDITURE LIMITATION REPORT - RECONCILIATIONYEAR ENDED JUNE 30, 2019Total expenditures/expenses/deductions and applicable other financing uses, special items, and extraordinary items reported within the fund financial statementsExpenditures of separate legal entities established under Arizona Revised StatuesLandfill closure and postclosure care costs paid in the current year but reported as expenses in previous yearsPage 4 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT YEAR ENDED JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Annual Expenditure Limitation Report (AELR) is presented as prescribed by the Uniform Expenditure Reporting System (UERS), as required by Arizona Revised Statutes §41-1279.07. The AELR 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 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 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 - The exclusion claim for expenditures of separate legal entities established under Arizona Revised Statutes in the Governmental Funds consists of expenditures from the Municipal Property Corporation Debt Service Fund, Cottonwoods Maintenance Fund and the Eagle Mountain Debt Service Fund. Governmental Municipal Property Corporation Debt Service Fund $ 381,854 Cottonwoods Maintenance Fund 4,530 Eagle Mountain Debt Service Fund 405,767 $ 792,151 NOTE 3 - The subtraction of $58,971 for required fees paid to Arizona state agencies was paid to the Arizona Department of Administration pursuant to A.R.S. §42-5041 for administrative, program, and operating costs incurred in providing administrative and tax collection services to the Town. NOTE 4 - The exclusions claimed for debt service requirements on bonded indebtedness in the Governmental Funds consisted of principal retirement, interest and fiscal fees in the General Obligation Debt Service Fund. NOTE 5 - The exclusions claimed for dividends, interest, and gains on the sale or redemption of investment securities in the Governmental Funds consisted of investment earnings. The current year exclusion utilized is a follows: Governmental Carryforward exclusions as of 6/30/18 $ 61,206 Investment earnings 554,549 Current year exclusion utilized 524,998 Carryforward exclusions as of 6/30/19 $ 90,757 Page 5 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO ANNUAL EXPENDITURE LIMITATION REPORT YEAR ENDED JUNE 30, 2019 NOTE 6 - Grant revenues, contributions and sponsorships from private organizations are claimed as exclusions in the year the expenditure occurs and any unused amounts are carried forward for future years. The current year grant exclusion utilized is a follows: Proposition 202 $ 90,000 Contributions 38,096 Sponsorships 5,101 Current year exclusion utilized $ 133,197 NOTE 7 - State grant revenues are claimed as exclusions in the year the expenditure occurs and any unused amounts are carried forward for future years. The current year state grant exclusion utilized is a follows: Proposition 302 $ 35,127 Local Transportation Assistance Fund 36,211 Current year exclusion utilized $ 71,338 NOTE 8 - Quasi-external interfund transactions are claimed as exclusions in the year the expenditure occurs and any unused amounts are carried forward for future years. The current year exclusion is $8,388 related to the Town's environmental fee paid from the General Fund to the Environmental Fee Fund. NOTE 9 - The highway user revenue (HURF) earned in excess of the amounts received in fiscal year 1979-80 is as follows: HURF Fund Intergovernmental Revenue $ 2,741,035 Less: Vehicle License Tax Revenues (1,061,441) Excludable revenue $ 1,679,594 Carryforward HURF funds as of 6/30/18 $ 2,600,533 HURF Fund expenditures 4,662,485 Less: expenditures of Vehicle License Tax (1,061,441) Less: expenditures of non-excludable revenue (1,039,012) Less: amounts transferred from the Capital Projects Fund (200,000) HURF eligible expenditures in current year 2,362,032 Less: current year HURF Funds utilized (2,362,032) Carryforward HURF Funds as of 6/30/19 $ 1,918,095 NOTE 10 - Refunds, reimbursements, and other recoveries are claimed as exclusions in the year the expenditure occurs and any unused amounts are carried forward for future years. The current exclusions utilized was $72,996. Page 6 TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Issued by: Administration Department Finance Division TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal 1 List of Principal Officials 11 GFOA Certificate of Achievement 12 Organizational Chart 13 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT 17 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 21 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 34 Statement of Activities 35 Fund Financial Statements: Balance Sheet – Governmental Funds 38 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 41 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 44 Notes to Financial Statements 45 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION – continued Page REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: General Fund 66 Highway User Revenue Fund 67 Grants Fund 68 Note to Required Supplementary Information 69 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet – All Non-Major Governmental Funds – By Fund Type 72 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – All Non-Major Governmental Funds – By Fund Type 73 Special Revenue Funds: Combining Balance Sheet 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 78 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 80 Debt Service Funds: Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 86 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION – continued Page Capital Projects Fund: Combining Balance Sheet 90 Combining Statement of Revenues, Expenditures and Changes in 91 Fund Balances Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 92 STATISTICAL SECTION Financial Trends: Net Position by Component 96 Changes in Net Position 98 Financial Trends: Fund Balances – Governmental Funds 100 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 102 Revenue Capacity: Governmental Activities – Tax Revenues by Source 104 Assessed Value and Estimated Actual Value of Taxable Property 105 Principal Property Taxpayers 106 Property Tax Levies and Collections 107 Taxable Sales by Category 108 Direct and Overlapping Sales Tax Rates 110 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION – continued Page Debt Capacity: Ratios of Outstanding Debt by Type 111 Ratios of General Bonded Debt Outstanding 112 Direct and Overlapping Governmental Activities Debt 113 Legal Debt Margin Information 114 Calculation of Legal Debt Margin 116 Revenue Bond Coverage 117 Demographic and Economic Information: Demographic and Economic Statistics 118 Principal Employers 120 Operating Information: Authorized Full-Time Equivalent Government Employees by Function 121 Operating Indicators by Function 122 Capital Assets Statistics by Function 123 (This page intentionally left blank) INTRODUCTORY SECTION (This page intentionally left blank) www.fh.az.gov October 8, 2019 To the Honorable Mayor, Members of the Town Council, and Citizens of the Town of Fountain Hills: State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with 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 certified public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) of the Town of Fountain Hills (Town) for the fiscal year ended June 30, 2019. This report consists of management’s representations concerning the finances of the Town. 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 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’s financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the Town’s 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’s financial statements have been audited by Heinfeld, Meech & Co., P.C., a certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended June 30, 2019, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; 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’s financial statements for the fiscal year ended June 30, 2019, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor’s report is presented as the first component of the financial section of this report. TOWN OF FOUNTAIN HILLS 16705 E. Avenue of the Fountains, Fountain Hills, AZ 85268 480.816.5100 | Fax: 480.837.3145 Accounting principles generally accepted in the Unites 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’s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE GOVERNMENT The Town of Fountain Hills overlooks the Verde River Valley and the east valley of the metro Phoenix area. The Town 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, Fountain Hills is surrounded by the 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, 2,460 feet at the Adero Canyon Trailhead, and is approximately 500 feet above Phoenix. Over the past twenty-five plus years, Fountain Hills has grown from 10,190 residents to a town of 24,987 in 2018. 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 Town standards. The Town offers a wide range of living accommodations, from small condominium complexes to large custom homes. Fountain Hills also offers recreational and cultural programs and services that contribute to a high quality of life for its residents. The community consists of primarily residential property and open space; of the total 20.32 square miles of land, only 2.5% of the total is zoned commercial and/or industrial, 23.3% is preserved as open space and 51.0% is residential. Page 2 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. 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. Legislative authority is vested in a seven member Town Council. The Mayor is a member of the Town Council who is directly elected by voters and chairs the Town Council meetings. The members of the Council are elected at large and serve four year overlapping terms. The Town Council is responsible for the adoption of local ordinances, budget adoption, appointment of residents to citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and overall management of the Town through department directors and approximately 56 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 and emergency services); development services (code enforcement, planning and zoning); public works (including 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. Fountain Hills Town Hall Page 3 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 report of the Town. 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. Internal Controls. As earlier noted, the management of the Town of Fountain Hills, Arizona, is responsible for establishing and maintaining a system of internal control. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding; 1) Safeguarding of assets against loss from unauthorized use or deposition, and 2) Reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes: 1) The cost of a control should not exceed the benefits likely to be derived, and 2) The valuation of costs and benefits requires estimates and judgments by management. The system of internal control is subject to periodic evaluation by management and is also considered by the independent auditors in connection with the annual audit of the Town’s financial statements. All internal control evaluations occur within the above framework. The Town's internal accounting controls are considered to adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Budgetary Controls. The budget process is a cyclical process and begins each year with the preparation of the base budget by each department head. Each budget is based on expenditures to date and the previous years’ experience. The departments’ base budgets, along with any requests for new positions, programs or services are reviewed by the Town Manager. The Town Manager then meets with department heads to review their base budgets and requests for new services and/or programs. Once management has reviewed the departments’ requests, a tentative budget is presented to the Town Council by the Town Manager. Page 4 The Town Council formally adopts the budget and appropriates funding for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds. Therefore, these funds have appropriated budgets, and budget to actual information is presented. In April/May, 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 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 IX, Section 20. The Town is subject to the State of Arizona’s Expenditure Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carry-over of unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. All appropriations lapse at year-end. To ensure compliance with the state imposed expenditure limitation, a uniform expenditure report must be filed with the state each year. This report reconciles total Town expenditures from the audited financial statements to total expenditures for reporting in accordance with the state’s uniform expenditure reporting system (ARS Section 41-1279.07). Public hearings on the budget are held each year in accordance with legal requirements in order to obtain comments from local taxpayers. The appropriated budget is prepared by fund and department. Department heads may make transfers of appropriations within the department. Transfers of appropriations between departments, however, require Town Council approval. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. Budget-to- actual comparisons for the General Fund and Major Special Revenue Funds are presented in the Required Supplementary Information and all other funds are presented in Combining and Individual Fund Financial Statements and Schedules. Local Economy. The Town of Fountain Hills, Arizona, continues to face many issues during these slow growth economic times. Its citizens, governing body, and municipal government are committed to finding solutions for each of the issues. In order to address these issues, the Town has proposed a baseline budget requiring any new positions to be deemed mission critical. All vacancies will be evaluated to assess the need for replacement, elimination or modification to the job description. The Town will be closely monitoring its revenue sources and make adjustments accordingly. Local sales tax receipts have continued to increase during the fiscal year. Construction activity increased almost 40% from the prior year, due to several commercial and residential developments currently in progress. The following chart is a look at the past five years’ local sales tax activity by sector: Page 5 As can be seen in the chart, sales tax collections continue to show signs of moderate growth. Retail sales experienced a 4.4% increase over the prior year; restaurant/bar revenues have exceeded any prior year with an increase of 7.7% from FY17-18. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and increased 37.2% from the prior year; recent building permit activity indicates that construction sales tax is likely to increase over the next fiscal year. The Transportation/Communication/Utility sector was the only one to decrease during the year with a 1.5% drop in revenues. 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 84% of total General Fund revenue for fiscal year 2018-19. 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 0.4%). State-shared income tax revenue category is based on two years prior personal and corporate earnings; revenue from the State income tax decreased by 1.8% in FY18- 19. State sales tax has increased over the past several years, and this year continued the trend by increasing revenue by 5.3% compared to the prior year. Other local activity has remained fairly level during the 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. Page 6 Development Activity over the past year: Development Services has been involved with the following development activities during fiscal year 2018-19 (7/1/2018 – 6/30/2019): o Five Temporary Visitor Permits were issued. o Two Site Plans were approved during the period. o Four Special Use Permits were granted. o Six Administrative Use Permits were issued. o Fifteen Banner and Sign Permits were issued. o Eleven commercial development/subdivision cases were granted. o One General Plan Amendment was granted. o Fifty new Single-Family Residential Building Permits were issued. o Twenty-nine Multi-Family Permits were issued. o There were new six Commercial Building Permits issued. o There were nine Commercial Tenant Improvement Permits issued during the last fiscal year. A summary of the activity, by month, is shown below: Fiscal year SFR DUP/MULTI T.I. & Comm Pools, Fences & Other Add Ons (Not Garages Garages & Carports MONTH TOTAL Bldgs. Total Units Permits Issued JULY 5 0 0 0 1 35 6 1 48 AUGUST 7 8 8 8 2 31 5 0 53 SEPTEMBER 2 2 2 2 2 25 3 0 34 OCTOBER 7 2 2 2 1 37 6 2 55 NOVEMBER 4 2 2 2 2 29 6 0 43 DECEMBER 6 1 2 1 1 33 3 0 44 JANUARY 5 4 6 4 0 29 4 1 43 FEBRUARY 2 4 4 4 2 33 3 1 45 MARCH 3 3 4 3 0 28 2 3 39 APRIL 0 1 2 1 1 40 6 1 49 MAY 5 0 0 0 1 67 5 1 79 JUNE 4 2 2 2 2 32 4 0 44 YEARLY TOTAL 50 29 34 29 15 419 53 10 576 Page 7 Economic Outlook. Retail Sales – Not having a property tax, the Town of Fountain Hills relies heavily on Town transaction privilege tax (TPT), sometimes called a sales tax. Overall, Town TPT revenues provide over 50% of the General Fund revenues. The Town's TPT rate is currently at 2.6%. The construction TPT is equally divided between the General Fund and the Capital Projects Fund. State-Shared Revenues – The Town of Fountain Hills receives significant revenue allocations from the State. These "State-Shared Revenues" include allocations of the state-collected income tax, sales tax, fuel tax and motor vehicle-in-lieu taxes. All but the fuel tax and the vehicle license tax are placed in the Town's General Fund, where it is used to sustain a large portion of the Town's day-to-day activities. These revenue sources have improved recently with the economy showing signs of recovery. Highway User Revenue Fund (HURF) – The State-shared fuel tax, as it is often called, is placed in this fund to be used specifically for street maintenance and related activity. Although the State-shared revenue formula generally allocates revenues based on official census data, in recent years, the state legislature has reduced the formula distribution of State-shared revenues to cities. 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. The Town’s Financial Policies have helped weather the slow economic recovery. This policy continues to require the Town to internally restrict an amount equal to 20% of the average actual General Fund revenues for the preceding five fiscal years as part of its General Fund balance. This amount is estimated to be about 60 days of expenditures coverage and is considered a “Rainy Day” fund. Additionally, a reserve of 10% of the average actual General Fund revenues for the preceding five fiscal years is set aside for “pay-as-you-go” capital replacement expenditures, vehicle or equipment replacement, capital projects, prepaying or defeasing existing Town debt, or any other expenditure that is non-recurring in nature. 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 needs to be reconsidered. Page 8 In early 2009, the Strategic Planning Advisory Commission (SPAC) 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 was built upon the foundation of a clearly defined vision statement and eight key values, with specific indicators to evaluate Council and staff priorities. In 2017, SPAC again updated the Strategic Plan. Based on citizen input, the newest Strategic Plan is designed to guide our future decisions grounded on these common values: 1. Economic Growth 2. Infrastructure Maintenance 3. Demographic Balance 4. Financial Stability and Sustainability 5. Community and Quality of Life These values guide the Town’s annual budget process. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS The Town of Fountain Hills’ adopted FY18-19 budget reflected the continued slow recovery in the local economy, which is also somewhat mirrored at the national and state levels. Due to the challenging economic conditions, the Town had 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 has been reduced from 115 to 56 FTE’s (full time equivalents) over the past years. The Town Council established priorities in FY16-17 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. Also, effective July 1, 2016, 0.2% of local sales tax revenues that had been allocated to MPC debt service payments were reallocated to pavement maintenance. Economic Development initiatives are funded through a dedicated portion of the local sales tax which provides funding for business attraction, retention and expansion. For the Year. The following list depicts the continued commitment of the Town of Fountain Hills to make the community a better place to live. Fiscal year 2018-19 goals attained are summarized within this list of accomplishments:  Completion of Fire Station 2 relocation design and construction  Completion of design and construction of the Valley Metro Bus Stop  Completion of the Adero Canyon Trailhead  Reconstructed three of the ballfields at Golden Eagle Park damaged by storms  Published the new Fountain Hills First magazine  New public art installed: Athena’s Prayer  Secured grant funding from the Arizona Office of Tourism - Proposition 302  Secured grant funding from Salt River Pima-Maricopa Indian Community - Proposition 202 Page 9 AWARDS AND ACKNOWLEDGEMENTS 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, 2018. This was the twenty-third consecutive year that the Town has received this prestigious award. In order to be awarded a Certificate of Achievement, the Town published an easily readable and efficiently organized CAFR. This report satisfied both accounting principles generally accepted in the United States of America (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 the fiscal year ended 2019 Certificate. For the seventh year, the Town was also given the Award for Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended June 30, 2018. In addition, the government received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2018. 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 seventeenth consecutive year that the Town has received the award. Acknowledgments. The preparation of this Comprehensive Annual Financial Report could not have been accomplished without the efficient and dedicated services of the entire team of the Finance Division. I also wish to extend my appreciation to the Mayor and members of Town Council for their leadership and support in planning and conducting the financial affairs of the Town in a responsible and progressive manner. Each employee of the Town has my sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, Grady E. Miller Town Manager Page 10 TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2019 ELECTED OFFICIALS Ginny Dickey, Mayor Art Tolis, Vice-Mayor Dennis Brown, Councilmember Sherry Leckrone, Councilmember Alan Magazine, Councilmember Mike Scharnow, Councilmember David Spelich, Councilmember DEPARTMENT DIRECTORS Grady Miller, Town Manager David Pock, Finance Director David Trimble, Deputy Town Manager/Administrative Services Director Rachael Goodwin, Community Services Director John Wesley, Development Services Director James Smith, Economic Development Director Justin Weldy, Public Works Director Elizabeth Burke, Town Clerk Captain Dave Ott, Rural Metro Corporation, Fire Chief Captain Larry Kratzer, Maricopa County Sheriff’s Office, District Commander Robert Melton, Presiding Judge Mark Iacovino, The Law Office of Mark Iacovino, Town Prosecutor Aaron Arnson, Pierce Coleman PLLC, Town Attorney Page 11 Page 12 Development ServicesCitizens of Fountain HillsCitizens of Fountain HillsPresiding JudgeTown of Fountain Hills OrganizationRecreation / TourismCommunity ServicesFire / EMSAdministrationLaw EnforcementTown ManagerTown AttorneyCommunityCenterCode EnforcementBuilding SafetyFinance Town ClerkAdministrative ServicesSenior ServicesParksTown ProsecutorEconomic Development Appointedby CouncilContractedVolunteer ProgramMayor and Town CouncilMayor and Town CouncilGISPlanningEngineeringStreetsFacilitiesPublic WorksInspectionPublic Information Page 13 (This page intentionally left blank) Page 14 FINANCIAL SECTION Page 15 (This page intentionally left blank) Page 16 INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the Town Council Town of 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 Town of Fountain Hills, Arizona (the Town), as of and for the year ended June 30, 2019, 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. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2019, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Page 17 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and budgetary comparison information, as listed in the table of contents, 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 Introductory Section, Combining and Individual Fund Financial Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual 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 Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 8, 2019, on our consideration of the Town of Fountain Hills, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Fountain Hills, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 8, 2019 Page 18 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) Page 19 (This page intentionally left blank) Page 20 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 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, 2019. 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. The management’s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. FINANCIAL HIGHLIGHTS  The Town’s total net position of governmental activities increased $6.1 million to $123.7 million, representing a 5.2 percent increase of the total net position.  General revenues from governmental activities accounted for $21.7 million in revenue, or 82.1 percent of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $4.7 million or 17.9 percent of total governmental activities revenues.  The Town had $26.4 million in expenses related to governmental activities, an increase of 13.5 percent from the prior fiscal year, primarily due to the large capital projects in progress.  Among the major governmental funds, the General Fund had $17.5 million in current fiscal year revenues, which primarily consisted of taxes and intergovernmental revenues. The total expenditures of the General Fund were $14.6 million. The General Fund’s fund balance increased $123 thousand to $7.3 million at the end of the current fiscal year. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is 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. Page 21 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 OVERVIEW OF FINANCIAL STATEMENTS – continued Government-wide financial statements. The government-wide financial statements provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business. These statements are prepared using the accrual basis of accounting. The Statement of Net Position presents information on all of the Town’s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the 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 distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the Town include administration, development services, public safety, public works, and culture and recreation. 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 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. Page 22 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 OVERVIEW OF FINANCIAL STATEMENTS – continued 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, Highway User Revenue (HURF), Grants, Capital Projects and all Debt Service Funds, all of which are considered major funds. Data from 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 the 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 financial statements can be found immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s budget process. The Town adopts an annual budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances - budget and actual has been provided for the General Fund and major Special Revenue Funds as required supplementary information. 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. 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, governmental activities assets exceeded liabilities by $123.7 million at the current fiscal year end. Page 23 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The largest portion of the Town’s governmental activities net position reflects its investment in capital assets (e.g., land, infrastructure, buildings and improvements, vehicles, machinery and equipment and construction in progress); less any related outstanding debt used to acquire those assets. 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 outstanding 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 represents resources that are subject to external restrictions on how they may be used. The remaining balance is unrestricted and may be used to meet the Town’s ongoing obligations to its citizens and creditors. The following tables present a summary of the Town’s net position for the fiscal years ended June 30, 2019 and June 30, 2018. Governmental Activities As of June 30, 2019 As of June 30, 2018 Current and other assets $ 20,419,804 $ 23,821,565 Capital assets, net 107,559,746 102,259,689 Total assets 127,979,550 126,081,254 Current and other liabilities 3,661,199 5,475,597 Long-term liabilities 631,777 2,994,108 Total liabilities 4,292,976 8,469,705 Net position Net investment in capital assets 104,781,328 96,777,854 Restricted 3,646,449 4,589,526 Unrestricted 15,258,797 16,244,169 Total net position $ 123,686,574 $ 117,611,549 At the end of the current fiscal year the Town reported positive balances in all three categories of net position for governmental activities. The Town also reported positive balances in all net position categories in the prior fiscal year. Page 24 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued 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. Changes in net position. The Town’s total revenues for the current fiscal year were $26.4 million. The total cost of all programs and services was $26.4 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2019 and June 30, 2018. Governmental Activities Fiscal Year Ended June 30, 2019 Fiscal Year Ended June 30, 2018 Revenues Program revenues: Charges for services $ 2,676,671 $ 2,316,983 Operating grants and contributions 1,850,676 1,737,958 Capital grants and contributions 181,939 304,951 General revenues Property taxes 2,476,546 2,263,623 Sales taxes 11,491,123 10,311,578 Franchise taxes 423,947 421,682 State-shared revenue 5,453,029 5,384,831 Vehicle License taxes 1,061,441 1,011,836 Investment earnings 554,549 158,860 Miscellaneous 202,969 10,409 Total revenues $ 26,372,890 $ 23,922,711 Expenses General government $ 3,318,477 3,431,752 Development services 867,725 1,460,967 Public safety 8,142,069 7,567,012 Public works 10,263,244 7,380,663 Culture and recreation 3,767,996 3,311,648 Interest on long-term debt 57,054 118,552 Total expenses 26,416,565 23,270,594 Excess before special item (43,675) 652,117 Special item – Donation of capital assets 6,118,700 0 Changes in net position 6,075,025 652,117 Net position, beginning 117,611,549 116,959,432 Net position, ending $123,686,574 $ 117,611,549 Page 25 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The charts below compare the governmental expenses from fiscal years 2018-19 and 2017-18. Page 26 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The following items are significant current year transactions that have had an impact on the change of net position.  Fees, Fines and Charges for Services revenue increased 15.5 percent compared to the prior year due in large part to permitting activity for large developments in Town.  Interest on long-term debt decreased 51.9 percent due to the reduction of principal outstanding.  Public safety costs include contracts for police and fire; one contract is multi-year with automatic increases while the other is a cost reimbursement contract.  Investment income increased in the current year 249.1 percent over the prior year due to higher overall market returns.  Overall, expenses increased 13.5 percent due to the continuation of the pavement management program. The following table presents the cost of the Town’s major functional activities. The table also shows each function’s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the Town’s taxpayers by each of these functions. Year Ended June 30, 2019 Year Ended June 30, 2018 Total Expenses Net (Expense)/ Revenue Total Expenses Net (Expense)/ Revenue Governmental Activities General government $ 3,318,477 $ (2,946,699) $ 3,431,752 $ (2,978,065) Development services 867,725 276,146 1,460,967 (146,052) Public safety 8,142,069 (7,940,248) 7,567,012 (7,266,692) Public works 10,263,244 (8,573,437) 7,380,663 (5,725,133) Culture and recreation 3,767,996 (2,465,987) 3,311,648 (2,676,208) Interest on long-term debt 57,054 (57,054) 118,552 (118,552) Total expenses $ 26,416,565 $ (21,707,279) $ 23,270,594 $ (18,910,702)  The cost of all governmental activities this year was $26.4 million.  Federal, State, and county governments and charges for services subsidized certain governmental programs with revenues of $4.7 million.  Net cost of governmental activities of $21.7 million was financed by general revenues, which consist of primarily sales taxes of $11.5 million and State-shared revenues of $6.5 million. Page 27 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 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 spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the Town’s net resources available for spending at the end of the fiscal year. 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 decrease of $2.0 million in the combined fund balance from $21.3 million to $19.3 million. The General Fund comprises 37.7 percent of the total fund balance. Approximately $1.9 million or 25.5 percent of the General Fund’s fund balance is unassigned. The General Fund is the principal operating fund of the Town. The fund balance slightly increased by $123,365 to $7.3 million as of fiscal year end. General Fund revenues increased $1.5 million primarily due to increased building activity, which resulted in collections of construction-related sales tax and permit fees to increase. General Fund expenditures decreased $355.9 thousand. Although public safety costs increased in the current fiscal year, the Town purchased a fire truck in the prior fiscal year that was a major investment in capital assets. The net difference between those items resulted in the net decrease seen in the General Fund. The Highway User Revenue Fund comprises 14.0 percent of total fund balance. The fund balance decreased $682.4 thousand from the prior year as a result of the continuation of the pavement management program. The Capital Projects Fund comprises 30.2 percent of the total fund balance. All of the fund balance is committed or assigned to capital projects. The fund balance decreased $1.3 million due to the completion of the Adero Canyon trailhead and Fire Station #2. BUDGETARY HIGHLIGHTS Although the Town reapportioned the budgeted General Fund expenditures between departments, the total General Fund budget remained the same. Page 28 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 BUDGETARY HIGHLIGHTS – continued A schedule showing the budget amounts compared to the Town’s actual financial activity for the General Fund is provided in this report as required supplementary information. The significant variances are summarized as follows:  The favorable variance of $1.2 million in overall revenues is primarily due to increased building activity resulting in increased permit revenue and local sales taxes collected.  The favorable total expenditures variance of $1.7 million is due primarily to lowered expenditures throughout all departments, in particular contractual services. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. As of the end of the current fiscal year, the Town had invested $107.6 million in capital assets, including buildings, facilities, vehicles, computers, equipment, infrastructure and artwork. This amount represents a net increase, prior to depreciation, of $10.4 million from the prior fiscal year. The increase was primarily due to the completion of the Adero Canyon trailhead, Fire Station #2 and donated land. Total depreciation expense for the current fiscal year was $5.3 million. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2019 and June 30, 2018. Governmental Activities As of June 30, 2019 As of June 30, 2018 Capital assets – non-depreciable $ 33,387,396 $ 30,157,640 Capital assets – depreciable, net 74,172,350 72,102,049 Total $107,559,746 $102,259,689 The estimated construction commitments amount is $179,607. Additional information on the Town’s capital assets can be found in Note 5. Debt Administration. At year-end, the Town had $2.8 million in governmental long-term debt outstanding, with $2.3 million due within one year. Long-term debt decreased by $2.7 million during the current fiscal year. Page 29 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2019 CAPITAL ASSETS AND DEBT ADMINISTRATION – continued State statutes currently limit the amount of general obligation debt a Town may issue to a percentage of its total assessed valuation for water, sewer, artificial lighting, parks, open space, recreational facility improvements, public safety, law enforcement, fire and emergency facilities and street and transportation facilities. The current 20 percent debt limitation for the Town is $108.0 million. State statutes also currently limit the amount of general obligation debt a Town may issue to a percentage of its total assessed valuation for all other purposes. The current six percent debt limitation for the Town is $32.4 million. Additional information on the Town’s long-term debt can be found in Notes 6 and 7 in the notes to the financial statements. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, 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. Page 30 BASIC FINANCIAL STATEMENTS Page 31 (This page intentionally left blank) Page 32 GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 33 ASSETS Current assets: Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Inventory, at cost Prepaid items Total current assets Noncurrent assets: Capital assets not being depreciated Capital assets, net of accumulated depreciation Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Accrued wages and benefits Other liabilities Customer deposits Compensated absences payable Revenue bonds payable General obligation bonds payable Unearned revenues Total current liabilities Noncurrent liabilities: Non-current portion of long-term liabilities Total noncurrent liabilities Total liabilities NET POSITION Net investment in capital assets Restricted for: Public works Capital outlay Debt service Unrestricted Total net position Governmental Activities $ 19,225,688 147,645 893,087 84,988 45,917 5,168 17,311 20,419,804 33,387,396 74,172,350 107,559,746 127,979,550 595,009 87,573 4,620 35,900 334,411 300,000 2,010,000 293,686 3,661,199 631,777 631,777 4,292,976 104,781,328 2,427,339 1,010,392 208,718 15,258,797 $123,686,574 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2019 The notes to the basic financial statements are an integral part of this statement. Page 34 Program Revenues Net (Expense) Revenue and Changes in Net Position Functions/Programs Governmental activities: General government Development services Public safety Public works Culture and recreation Interest on long-term debt Total governmental activities Expenses $ 3,318,477 867,725 8,142,069 10,263,244 3,767,996 57,054 $26,416,565 Charges for Services $ 280,312 1,143,871 90,774 10,214 1,151,500 $2,676,671 Operating Grants and Contributions $ 91,466 47,235 1,679,593 32,382 $1,850,676 Capital Grants and Contributions $ 63,812 118,127 $181,939 Governmental Activities $ (2,946,699) 276,146 (7,940,248) (8,573,437) (2,465,987) (57,054) (21,707,279) General revenues: Taxes: Property taxes Sales taxes Franchise taxes State sales & income tax revenue sharing - unrestricted Vehicle license tax revenue sharing - unrestricted Investment earnings Miscellaneous Special item - Donation of capital assets Total general revenues and special items Changes in net position Net position, beginning of year Net position, end of year 2,476,546 11,491,123 423,947 5,453,029 1,061,441 554,549 202,969 6,118,700 27,782,304 6,075,025 117,611,549 $123,686,574 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2019 The notes to the basic financial statements are an integral part of this statement. Page 35 (This page intentionally left blank) Page 36 FUND FINANCIAL STATEMENTS Page 37 ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Inventory, at cost Prepaid items Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Other liabilities Customer deposits Unearned revenues Total liabilities Deferred inflows of resources: Unavailable revenues - property taxes Unavailable revenues - other Total deferred inflows of resources Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances General $ 6,836,223 133,645 633,470 18,308 5,168 17,311 $7,644,125 $ 201,314 72,032 4,256 35,900 34,785 348,287 1,180 1,180 22,479 3,027,804 2,380,653 1,863,722 7,294,658 $7,644,125 Highway User Revenue $ 2,636,675 5,240 236,735 $2,878,650 $ 163,917 9,013 172,930 5,240 5,240 2,422,099 278,381 2,700,480 $2,878,650 Grants $ 258,901 $258,901 $ 258,901 258,901 $258,901 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2019 The notes to the basic financial statements are an integral part of this statement. Page 38 General Obligation Debt Service $ 95,741 71,003 $166,744 $ 50,741 50,741 116,003 116,003 $166,744 Eagle Mountain Debt Service $ 15,740 13,928 $29,668 $ 10,577 10,577 19,091 19,091 $29,668 Municipal Property Corporation Debt Service $ 12,306 $12,306 $ 12,306 12,306 $12,306 Capital Projects $ 5,987,840 24,921 $6,012,761 $ 180,780 180,780 4,342,555 1,489,426 5,831,981 $6,012,761 Non-Major Governmental Funds $ 3,382,262 8,760 22,882 57 2,688 $3,416,649 $ 48,998 6,528 364 55,890 1,010,392 1,525,831 824,536 3,360,759 $3,416,649 Total Governmental Funds $ 19,225,688 147,645 893,087 84,988 45,917 5,168 17,311 $20,419,804 $ 595,009 87,573 4,620 35,900 293,686 1,016,788 61,318 6,420 67,738 22,479 3,579,891 8,896,190 4,972,996 1,863,722 19,335,278 $20,419,804 Page 39 (This page intentionally left blank) Page 40 Total governmental fund balances 19,335,278$ Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets 226,020,211$ Less accumulated depreciation (118,460,465)107,559,746 Some receivables are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in the funds. Property taxes 61,318 Other 6,420 67,738 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Compensated absences payable (497,770) Bonds payable (2,778,418)(3,276,188) Net position of governmental activities 123,686,574$ TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2019 The notes to the basic financial statements are an integral part of this statement. Page 41 Revenues: Property taxes Sales taxes Franchise taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues Expenditures: Current - General government Development services Public safety Public works Culture and recreation Capital outlay Debt service - Principal retirement Interest on long-term debt Fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year General $ 9,198,866 423,947 1,413,507 280,801 5,499,303 181,105 217,656 120,340 166,055 17,501,580 2,825,398 858,957 7,873,036 823,223 2,188,071 68,863 14,637,548 2,864,032 (2,740,667) (2,740,667) 123,365 7,171,293 $7,294,658 Highway User Revenue $ 883,932 2,741,035 63,446 91,634 3,780,047 4,495,263 167,222 4,662,485 (882,438) 200,000 200,000 (682,438) 3,382,918 $2,700,480 Grants $ 91,211 91,211 55,000 36,211 91,211 $ TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2019 The notes to the basic financial statements are an integral part of this statement. Page 42 General Obligation Debt Service $ 2,011,868 18,703 2,030,571 1,880,000 92,250 600 1,972,850 57,721 57,721 58,282 $116,003 Eagle Mountain Debt Service $ 409,114 3,344 412,458 385,000 20,767 405,767 6,691 6,691 12,400 $19,091 Municipal Property Corporation Debt Service $ 7,090 7,090 370,000 10,854 1,000 381,854 (374,764) 381,554 381,554 6,790 5,516 $12,306 Capital Projects $ 966,359 63,812 196,459 1,226,630 2,720 471,256 388,492 4,215,558 5,078,026 (3,851,396) 2,724,571 (200,000) 2,524,571 (1,326,825) 7,158,806 $5,831,981 Non-Major Governmental Funds $ 6,749 441,966 627,115 70,127 2,227 10,143 71,264 1,229,591 263,945 7,632 506,247 268,464 1,046,288 183,303 366,407 (731,865) (365,458) (182,155) 3,542,914 $3,360,759 Total Governmental Funds $ 2,427,731 11,491,123 423,947 2,040,622 280,801 8,401,676 181,105 347,141 130,483 554,549 26,279,178 3,147,063 858,957 7,880,668 6,295,989 2,845,027 4,487,854 2,635,000 123,871 1,600 28,276,029 (1,996,851) 3,672,532 (3,672,532) (1,996,851) 21,332,129 $19,335,278 Page 43 Changes in fund balances - total governmental funds (1,996,851)$ Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the portion of capital outlay for capitalized assets as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. Expenditures for capitalized assets 4,465,837$ Less current year depreciation (5,332,480) (866,643) Donated items are not reported in the governmental funds. However, in the Statement of Activities, the costs of those assets are reported as capital grants and contributions 6,166,700 or a special item. Some revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes 48,815 Other (3,103) 45,712 Repayments of bond principal are expenditures in the governmental funds, but the repayment reduces long-term liabilities in the Statement of 2,635,000 Net Position. 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 governmental funds. Amortization of deferred bond items 68,417 Compensated absences 22,690 91,107 Changes in net position in governmental activities 6,075,025$ TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2019 The notes to the basic financial statements are an integral part of this statement. Page 44 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Town’s accounting policies are described below. A. Reporting Entity The Town’s major operations include development services, culture and recreation, public works, public safety and general administrative services. The Town is a municipal corporation governed by an elected Mayor and Council. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The Town is a primary government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, the component units combined with the Town for financial statement presentation purposes and the Town are not included in any other governmental reporting entity. Consequently, the Town’s financial statements include only the funds of those organizational entities for which its elected governing body is financially accountable. Eagle Mountain Community Facilities District and the Cottonwoods 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 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 Districts cannot be part of another reporting entity. The Districts’ governing bodies are substantially the same as the Town and the Town’s management oversees operations, resulting in the Town having the ability to exercise control. 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. Page 45 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 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. 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. The reported information includes all of the Town's component units. For the most part, the effect of internal activity has been removed from these statements. Interfund services provided and used, such as interfund transfers, are not eliminated in the process of consolidation. Governmental activities normally are supported by taxes and intergovernmental revenues. The Town does not have any fiduciary or business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is 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, unrestricted state shared revenues, investment income and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. Page 46 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. 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 expenditures, as well as expenditures related to compensated absences, and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, state shared revenues, licenses and permits, charges for services, 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. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. 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. 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. The Town reports the following major governmental funds. General Fund – The General Fund is the Town’s primary operating fund. This fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Page 47 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Highway User Revenue Fund (HURF) – This fund accounts for the Town’s share of motor vehicle fuel tax revenues and sales tax. Grants Fund – This fund accounts for the activities of various restricted grants and contributions received by 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. Eagle Mountain Debt Service Fund – This fund accounts for the property tax revenues restricted to pay the debt service of the Eagle Mountain Community Facilities District. Capital Projects Fund – This fund accounts for the capital improvements to various projects and equipment purchases of the Town. D. Cash and Investments Cash and cash equivalents at year end were cash on hand, cash in bank, restricted cash, and cash and investments held by the State Treasurer. Cash and investments are pooled, except for investments that are restricted under provisions of bond indentures or other restrictions that are required to be reported in the individual funds. Arizona Revised Statutes authorize the Town to invest public monies in the State Treasurer’s local government investment pools, the County Treasurer’s investment pool, obligations of the U.S. Government and its agencies, obligations of the state and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. Investments are stated at fair value. Arizona statute requires a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102 percent of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. Page 48 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES E. Investment Earnings Investment earnings is composed of interest, dividends, and net changes in the fair value of applicable investments. Investment earnings is a component of revenue in the governmental funds financial statements. F. 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). Interfund balances between governmental funds are eliminated on the statement of net position. 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. All receivables are shown net of an allowance for uncollectibles. G. Inventory All inventories are valued 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 in the governmental funds. H. 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. Page 49 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. Capital Assets Capital assets, which include land and improvements, artwork, buildings and improvements, vehicles, machinery, and equipment, construction in progress, and infrastructure assets, are reported in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost in excess of $10,000 and an estimated useful life in excess of one year. Capital assets are recorded at historical cost, if purchased or constructed. Donated capital assets are recorded at the acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the life of the asset are not capitalized. Capital assets of the Town are depreciated using the straight-line method over the following estimated useful lives: Buildings and building improvements 20 - 50 years Improvements other than buildings 20 years Infrastructure 15 - 50 years Vehicles, machinery and equipment 5 - 20 years J. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Town did not have any items that qualified for reporting in this category. In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. Page 50 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES K. 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. All eligible full-time and part-time regularly-scheduled employees can accrue vacation leave. Employees accrue up to a maximum of two times the yearly maximum accrual of vacation through carryover of balances. In the event of termination, employees will be paid for any accrued, but unused, vacation hours. Full-time and part-time regularly-scheduled employees accrue sick leave, up to a maximum of 1040 hours. Part-time non-regularly-scheduled, temporary, or seasonal, and other employees accrue paid sick time for hours worked, not to exceed 40 hours per calendar year. 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 termination, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. L. 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 are amortized over the life of the bonds using the straight-line method. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. 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 on 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. M. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the statement of activities. Interfund transfers in the fund financial statements are reported as other financing sources/uses in governmental funds. Page 51 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES N. Net Position Flow Assumption In the government-wide financial statements the Town applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted amounts are available. O. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 – 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. Nonspendable. The nonspendable fund balance classification includes amounts that cannot be spent because they are not in spendable form, or legally or contractually required to be maintained intact. Restricted. Fund balance is reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or is imposed by law through constitutional provisions or enabling legislation. Committed. The committed fund balance classification includes amounts that can be used only for the specific purposes imposed by formal action of the Town Council, the Town’s highest level of decision making authority, by resolution or ordinance. Those committed amounts cannot be used for any other purpose unless the Town Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. Page 52 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 2 – FUND BALANCE CLASSIFICATIONS Assigned. Amounts in the assigned fund balance classification are intended to be used by the Town for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the General Fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the General Fund, assigned amounts represent intended uses established by the Town Council or a management official delegated that authority by formal Town Council action. The authority to make assignments has been delegated by the Town Council to the Finance Director. Unassigned. Unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. The Town applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. The Town has established a fund balance policy which states that the combined General Fund operating fund balance should be at least 30 percent of the average actual General Fund revenues for the preceding five fiscal years. 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 $2,915,640, reported as a committed fund balance at June 30, 2019. The Rainy Day fund may only be used for the following: 1) to replace the loss of more than 25 percent 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 annual installments of not less than one percent of the previous fiscal year General Fund balance. Repayments shall be appropriated as part of the annual budget adoption. Page 53 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 2 – FUND BALANCE CLASSIFICATIONS The table below provides detail of the major components of the Town’s fund balance classifications at year end. General Fund Highway User Revenue Fund General Obligation Debt Service Fund Eagle Mountain Debt Service Fund Municipal Property Corporation Debt Service Fund Capital Projects Fund Non-Major Governmental Funds Total Fund Balances: Nonspendable: Inventory $ 5,168 $ $ $ $ $ $ $ 5,168 Prepaid items 17,311 17,311 Restricted: Capital Projects 19,678 19,678 Debt Service 116,003 19,091 12,306 147,400 Highways and Streets 2,422,099 2,422,099 Development Fees 990,714 990,714 Committed: Rainy Day 2,915,640 2,915,640 Public Art 112,164 112,164 Downtown Strategy 1,038,340 1,038,340 Economic Development 101,485 101,485 Tourism 9,192 9,192 Capital Projects 4,342,555 4,342,555 Local Court Enhancement 376,814 376,814 Assigned: Capital Projects 874,692 1,489,426 2,364,118 Environmental 824,536 824,536 Vehicle Replacement 922,833 278,381 1,201,214 Equipment Replacement 583,128 583,128 Unassigned: 1,863,722 1,863,722 Total fund balances $ 7,294,658 $2,700,480 $ 116,003 $ 19,091 $ 12,306 $ 5,831,981 $ 3,360,759 $ 19,335,278 Page 54 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 3 – CASH AND INVESTMENTS Arizona Revised Statutes authorize the Town to invest public monies in the State Treasurer’s local government investment pools, the County Treasurer’s investment pool, obligations of the U.S. Government and its agencies, obligations of the state and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. The statutes do not include any requirements for credit risk, custodial credit risk, concentration of credit risk, interest rate risk, or foreign currency risk for the Town’s investments. Custodial Credit Risk – Deposits. Custodial credit risk is the risk that in the event of bank failure the Town’s deposits may not be returned to the Town. The Town does not have a deposit policy for custodial credit risk. At year end, the carrying amount of the Town’s deposits was $2,001,320 and the bank balance was $2,323,279. At year end, $1,823,279 of the Town’s deposits were covered by collateral held by the pledging financial institution in the Town’s name. The remaining amount is covered by FDIC. Fair Value Measurements. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset.  Level 1 inputs are quoted prices in active markets for identical assets  Level 2 inputs are significant other observable inputs  Level 3 inputs are significant unobservable inputs Valuation Techniques. Equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing techniques. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Real estate assets classified in Level 3 are valued by external appraisals and are generally obtained at least annually. The appraisals are performed using generally accepted valuation approaches by an independent appraiser. The State Treasurer’s pools are external investment pools, the Local Government Investment Pool (Pool 5) and Local Government Investment Pool-Government (Pool 7), with no regulatory oversight. The pools, as an investment company, are not registered with the Securities and Exchange Commission. The activity and performance of the pools are reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pools approximates the value of the participant’s shares in the pool and the participants’ shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. Page 55 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 3 – CASH AND INVESTMENTS All investments in which the fair value hierarchy is applicable are measured at fair value on a recurring basis. At year end, cash and investments as of June 30, 2019, are classified in the accompanying financial statements as follows: Carrying amount of investments $ 17,222,768 Carrying amount of cash deposits 2,001,320 Cash on hand 1,600 Total pooled cash and investments $ 19,225,688 At year end, the Town’s investments consisted of the following: Investment Maturities (in Years) Credit Rating Investment Type Category Fair Value Less than 1 1-5 S&P Moody’s U.S. Government and Agency Notes Level 1 $ 4,903,031 $ 4,679,456 $ 223,575 AA+ Aaa Corporate and Foreign Bonds Level 2 2,736,822 1,088,159 1,648,663 AA-AA+ Baa1-Aaa Commercial Paper Level 2 248,785 248,785 A-1+ P-1 Certificates of Deposit Level 2 1,118,964 699,784 419,180 A-1,AA- P-1,Aa2 $ 6,716,184 $ 2,291,418 State Treasurer’s Investment Pool 7 Not applicable 8,215,166 44 days average maturities Total $ 17,222,768 Interest Rate Risk. Interest rate risk is the risk that changes in interest rates may reduce the market value of Town investments. In accordance with its investment policy, the Town manages its exposure to declines in fair values by the following:  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. Page 56 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 3 – CASH AND INVESTMENTS  Credit Risk. Credit risk is the risk of default of debt by an issuer or counterparty to an investment. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in ARS §35-323. 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 a weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisers with which the Town will do business. Custodial Credit Risk – Investments. Custodial credit risk is the risk that in the event of depository financial institution failure, the Town’s deposits may not be returned to the Town. The Town’s investment in the State Treasurer’s investment pool represents a proportionate interest in the pool’s portfolio; however the Town’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of Credit Risk. Concentration of credit risk is the risk of loss from over concentration of investments. In accordance with its investment policy, the Town diversifies its investment portfolio to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities. With the exception of U.S. Treasury notes and securities and authorized pools, the investment policy establishes a maximum percentage of 30 percent in insured or collateralized certificates of deposit; 20 percent in certificates of deposit registry services; 30 percent in commercial paper; and 30 percent in bonds, debentures, or notes. Investment Type Fair Value Percent of Town Investments U.S. Government and Agency Notes $ 4,903,031 28.5% Corporate and Foreign Bonds 2,736,822 15.9 Commercial Paper 248,785 1.4 Certificates of Deposit 1,118,964 6.5 State Treasurer’s investment pool 7 8,215,166 47.7 $ 17,222,768 NOTE 4 – RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of intergovernmental receivables. Intergovernmental receivables, net of allowance for uncollectibles, as of year-end for the Town’s individual major funds consisted entirely of receivables due from the State. Page 57 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 5 – CAPITAL ASSETS A summary of capital asset activity at year end is as follows: Governmental Activities Beginning Balance Increase Decrease Ending Balance Capital assets, not being depreciated: Land $ 23,571,668 $ 6,118,700 $ $ 29,690,368 Artwork 2,525,900 48,000 2,573,900 Construction in progress 4,060,072 3,976,079 6,913,023 1,123,128 Total capital assets, not being depreciated 30,157,640 10,142,779 6,913,023 33,387,396 Capital assets, being depreciated: Infrastructure 147,196,425 2,401,250 149,597,675 Buildings and building improvements 18,774,262 4,809,156 23,583,418 Improvements other than buildings 15,149,782 15,149,782 Vehicles, machinery and equipment 4,352,063 192,375 242,498 4,301,940 Total capital assets being depreciated 185,472,532 7,402,781 242,498 192,632,815 Less accumulated depreciation for: Infrastructure (95,162,593) (4,024,675) (99,187,268) Buildings and building improvements (5,736,417) (455,719) (6,192,136) Improvements other than buildings (10,290,241) (602,726) (10,892,967) Vehicles, machinery and equipment (2,181,232) (249,360) 242,498 (2,188,094) Total accumulated depreciation (113,370,483) (5,332,480) 242,498 (118,460,465) Total capital assets, being depreciated, net 72,102,049 2,070,301 74,172,350 Governmental activities capital assets, net $ 102,259,689 $12,213,080 $ 6,913,023 $ 107,559,746 Depreciation expense was charged to functions/programs as follows: Governmental activities: General government $ 173,822 Development services 16,721 Public safety 261,401 Public works 3,967,255 Culture and recreation 913,281 Total depreciation expense $ 5,332,480 Page 58 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 5 – CAPITAL ASSETS Construction Commitments – At June 30, 2019, the Town has the following active construction commitments: Governmental Activities Project Spent-to-Date Remaining Commitment 4 Peaks Playground Upgrades $ 58,455 $ 31,545 Unpaved Alley Paving 14,658 15,000 Fountain Hills Boulevard Widening 49,235 19,765 AOTF/La Montana Improvements 73,216 74,919 Fountain Hills Boulevard Shoulder Paving 154,264 38,378 Total commitments $ 349,828 $ 179,607 NOTE 6 – BONDS PAYABLE Bonds payable at year end consisted of the following general obligation and revenue bonds. The bonds are both callable and noncallable with interest payable semiannually. Purpose Original Amount Issued Interest Rates Remaining Maturities Outstanding Principal June 30, 2019 Due Within One Year Governmental activities: General Obligation Bonds: General Obligation Bonds, Series 2014 $7,565,000 2% 7/1/19-20 $ 1,615,000 $ 1,615,000 Private Placement General Obligation Bonds: Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2015 2,300,000 1.76% 7/1/19-21 795,000 395,000 Private Placement Revenue Bonds: Municipal Facilities Revenue Refunding Bonds, Series 2015 1,880,000 1.62% 7/1/19-20 300,000 300,000 Total $ 2,710,000 $ 2,310,000 Page 59 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 6 – BONDS PAYABLE Annual debt service requirements to maturity on the bonds payable at year end are summarized as follows: Governmental Activities Year ending June 30, Principal Interest 2020 $ 2,310,000 $ 67,302 2021 400,000 7,040 Total $ 2,710,000 $ 74,342 Private Placements The Town has outstanding bonds from private placements reported as governmental activities of $300,000. The Municipal Facilities Revenue Refunding Bonds contain a provision that the Town must maintain excise taxes coverage of two and one-half times debt service. In the event the Town does not maintain this coverage, the Town will impose additional excise taxes. The Town does not have a line of credit associated with the bonds. The Eagle Mountain Community Facilities District has outstanding bonds from private placements reported as governmental activities of $795,000. There are no specific provisions regarding default on the Eagle Mountain Community Facilities District debt.   Pledged Revenues The Town has pledged excise tax revenues to repay a total of $300,000 in outstanding Municipal Facilities Revenue Refunding Bonds. For the current fiscal year, the net revenues available to service the debt were $19,765,936. For the fiscal year ended June 30, 2019, the debt principal and interest paid on this debt was $380,854 (two percent of pledged revenues). The total principal and interest remaining to be paid on the bonds is $304,860. Page 60 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 7 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental activities: Bonds payable: General obligation bonds $ 3,495,000 $ $ 1,880,000 $ 1,615,000 $ 1,615,000 Private placement general obligation bonds 1,180,000 385,000 795,000 395,000 Private placement revenue bonds 670,000 370,000 300,000 300,000 Premium 136,835 68,417 68,418 Total bonds payable 5,481,835 2,703,417 2,778,418 2,310,000 Compensated absences payable 520,460 310,352 333,042 497,770 334,411 Governmental activity long-term Liabilities $ 6,002,295 $ 310,352 $ 3,036,459 $ 3,276,188 $ 2,644,411 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS At year end, interfund balances were as follows: Interfund transfers: At year end, interfund transfers were as follows: Transfers out Transfers in General Fund Capital Projects Fund Non-Major Governmental Funds Total HURF Fund $ $ 200,000 $ $ 200,000 Municipal Property Corporation Debt Service Fund 381,554 381,554 Capital Projects Fund 2,159,113 565,458 2,724,571 Non-Major Governmental Funds 200,000 166,407 366,407 Total $ 2,740,667 $ 200,000 $ 731,865 $ 3,672,532 Page 61 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The General Fund transferred $1,659,113 to Capital Projects Fund for the excess revenues over expenditures per the Town’s Financial Policy; $381,554 to Municipal Property Corporation Debt Service Fund for debt service costs; $200,000 to Environmental Fund for funding operations of that fund; and $500,000 to Facilities Replacement Fund for funding facilities replacement. The Open Space Development Fee Fund transferred $565,458 to Capital Projects Fund for the Adero Canyon Trailhead project. The Capital Projects Fund transferred $200,000 to Highway User Fund for pavement maintenance costs. The Economic Development Fund transferred $166,407 to the Tourism Fund to provide funding for operating costs of the tourism program. NOTE 9– CONTINGENT LIABILITIES Compliance – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial. Lawsuits – The Town is a party to a number of various types of lawsuits, many of which normally occur in governmental operations. The ultimate outcome of the actions is not determinable; however, Town management believes that the outcome of these proceedings, either individually or in the aggregate, will not have a materially adverse effect on the accompanying financial statements. NOTE 10 – 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 (Pool). The Pool is made up of various towns and cities within Arizona that operate a common risk management and insurance program. The Pool is structured such that member premiums are based on an actuarial review that will provide adequate reserves to allow the Pool to meet its expected financial obligations. The Pool has the authority to assess its’ members additional premiums should reserves and annual premiums be insufficient to meet the Pool’s obligations. Page 62 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 10 – RISK MANAGEMENT The Town joined the Arizona Municipal Workers’ Compensation Pool (Pool) together with other governments in the state for risks of loss related to workers’ compensation claims. The Pool is a public entity risk pool currently operating as a common risk management and insurance program for towns and cities in the State. The Town is responsible for paying a premium, based on an experience rating formula that allocates pool expenditures and liabilities among members. The Town continues to carry commercial insurance for all other risks of loss, including employee health, dental, and vision insurance. There were no settlements that exceeded insurance coverage in any of the past three years. NOTE 11 – 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 contribution rates are 11 percent for both the employee and the Town. The payroll for the Town employees covered by this plan for the year ended June 30, 2019, was $3,150,216. The Town’s total payroll was $3,707,584. 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 and the returns earned on investment of those contributions. 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 on a pro rata basis for five years. Town Council has the authority to establish and amend benefit terms and to establish and amend the contribution rates. Page 63 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 NOTE 11 – RETIREMENT PLANS 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. During the fiscal year, the Town’s required and actual contributions amounted to $346,524. The employees’ contributions totaled $346,524. Employees may also contribute to the ICMA Retirement Corporation 457 plan on a voluntary basis (with the exception of one contract employee that is limited to 11 percent of earnings); there is no employer match for those contributions. During the fiscal year, employees contributed $201,863 to that plan. The Town contributed $8,351 for the contract employee’s 457 account. 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 2018-19 or as of the close of the fiscal year. Page 64 REQUIRED SUPPLEMENTARY INFORMATION Page 65 $ 8,693,264 $ 8,693,264 $ 9,198,866 $ 505,602 $ 5,282,559 $ 6,197,217 $ 7,294,658 $ 1,097,441 Variance with Final Budget Positive (Negative) (1,672,613) 1,276,332 (178,891) 198,890 57,789 654,328 256,679 1,735,000 2,948,945 (13,500) (1,659,113) 246,441 386,808 284,200 16,477 (21,610) 756 352,895 13,556 (29,619) 122,497 (125,660) 157,415 1,213,945 (2,740,667) 123,365 7,171,293 49,486 477,635 7,873,036 14,637,548 2,864,032 39,100 (2,779,767) 3,719,337 4,153,699 68,863 2,825,398 858,957 2,188,071 2,154,581 325,550 81,836 5,499,303 181,105 217,656 120,340 166,055 17,501,580 (1,068,054) (1,152,967) 7,350,184 Actual 423,947 1,413,507 280,801 (84,913) 52,600 (1,120,654) 47,253 2,574,879 3,479,726 1,105,398 616,326 8,129,715 16,372,548 210,724 95,159 246,000 8,640 16,287,635 2,438,781 82,592 (1,152,967) 6,435,526 Final 374,461 935,872 237,768 5,485,747 16,372,548 (84,913) 52,600 (1,120,654) (1,068,054) 47,253 82,592 3,918,227 4,211,488 3,519,726 1,065,398 2,574,879 8,129,715 246,000 8,640 16,287,635 2,438,781 342,027 656,326 Fund balances (deficits), end of year Budgeted Amounts Original 374,461 935,872 237,768 5,485,747 210,724 95,159 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Culture and recreation Total public safety Total expenditures Administration Municipal court Excess (deficiency) of revenues over expenditures Non departmental Expenditures: Capital outlay Mayor and council Current - General government Public safety Fire and emergency Law enforcement Total general government Development services Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL YEAR ENDED JUNE 30, 2019 Revenues: Sales taxes Franchise taxes Licenses and permits Leases and rents 43,033 1,035,577 Public works 1,035,577 823,223 212,354 263,431 342,027 3,918,227 4,211,488 See accompanying notes to this schedule. Page 66 Revenues: Sales taxes Intergovernmental Charges for services Other Investment earnings Total revenues Expenditures: Current - Public works Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Budgeted Amounts Original $ 796,063 2,619,995 100,000 25,000 2,400 3,543,458 5,541,496 5,541,496 (1,998,038) 200,000 200,000 (1,798,038) 3,382,918 $1,584,880 Final $ 796,063 2,619,995 100,000 25,000 2,400 3,543,458 5,035,896 130,600 5,166,496 (1,623,038) 200,000 200,000 (1,423,038) 3,382,918 $1,959,880 Actual $ 883,932 2,741,035 63,446 91,634 3,780,047 4,495,263 167,222 4,662,485 (882,438) 200,000 200,000 (682,438) 3,382,918 $2,700,480 Variance with Final Budget Positive (Negative) $ 87,869 121,040 (100,000) 38,446 89,234 236,589 540,633 (36,622) 504,011 740,600 740,600 $740,600 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HIGHWAY USER REVENUE YEAR ENDED JUNE 30, 2019 See accompanying notes to this schedule. Page 67 Revenues: Intergovernmental Total revenues Expenditures: Current - General government Capital outlay Total expenditures Changes in fund balances Fund balances, beginning of year Fund balances, end of year Budgeted Amounts Original $1,188,800 1,188,800 1,123,800 65,000 1,188,800 $ Final $338,800 338,800 273,800 65,000 338,800 $ Actual $91,211 91,211 55,000 36,211 91,211 $ Variance with Final Budget Positive (Negative) $(247,589) (247,589) 218,800 28,789 247,589 $ TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GRANTS YEAR ENDED JUNE 30, 2019 See accompanying notes to this schedule. Page 68 TOWN OF FOUNTAIN HILLS, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2019 NOTE 1 – BUDGETARY BASIS OF ACCOUNTING 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 budget 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, Highway User Revenue, Excise Tax, 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. Page 69 (This page intentionally left blank) Page 70 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Page 71 ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Other liabilities Total liabilities Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances Special Revenue $ 2,391,548 8,760 22,882 57 2,688 $2,425,935 $ 48,998 6,528 364 55,890 19,678 1,525,831 824,536 2,370,045 $2,425,935 Capital Projects $ 990,714 $990,714 $ 990,714 990,714 $990,714 Total Non-Major Governmental Funds $ 3,382,262 8,760 22,882 57 2,688 $3,416,649 $ 48,998 6,528 364 55,890 1,010,392 1,525,831 824,536 3,360,759 $3,416,649 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE JUNE 30, 2019 Page 72 Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues Expenditures: Current - General government Public safety Public works Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Special Revenue $ 6,749 441,966 486,924 70,127 2,227 10,143 48,504 1,066,640 263,945 506,247 235,303 1,005,495 61,145 366,407 (166,407) 200,000 261,145 2,108,900 $2,370,045 Capital Projects $ 140,191 22,760 162,951 7,632 33,161 40,793 122,158 (565,458) (565,458) (443,300) 1,434,014 $990,714 Total Non-Major Governmental Funds $ 6,749 441,966 627,115 70,127 2,227 10,143 71,264 1,229,591 263,945 7,632 506,247 268,464 1,046,288 183,303 366,407 (731,865) (365,458) (182,155) 3,542,914 $3,360,759 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE YEAR ENDED JUNE 30, 2019 Page 73 (This page intentionally left blank) Page 74 NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Downtown Strategy Fund – accounts for the portion of Town sales tax committed by the Town Council for the development of the downtown area. Economic Development Fund – accounts for the portion of Town sales tax committed by the Town Council for economic development and tourism. Tourism Fund – accounts for the portion of Town sales tax committed by the Town Council as well as any grants received for all tourism activities. Local Court Enhancement Fund – accounts for a local court surcharge, committed for court enhancement. Environmental Fund – accounts for all funds received from collection of the environmental fee. Cottonwoods Maintenance Fund – accounts for all funds restricted to pay for maintenance of the Cottonwoods Maintenance District. Capital Projects Funds Facilities Replacement Fund – accounts for all funds assigned for the maintenance and repair of facilities and equipment. Development Fees Fund – accounts for restricted development fees collected from building permits. Page 75 ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Other liabilities Total liabilities Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances Downtown Strategy $ 1,032,397 4,379 2,688 $1,039,464 $ 1,124 1,124 1,038,340 1,038,340 $1,039,464 Economic Development $ 90,616 17,516 $108,132 $ 1,404 4,937 306 6,647 101,485 101,485 $108,132 Tourism $ 15,837 $15,837 $ 5,449 1,165 31 6,645 9,192 9,192 $15,837 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2019 Page 76 Local Court Enhancement $ 376,726 987 $377,713 $ 872 27 899 376,814 376,814 $377,713 Environmental $ 855,526 8,760 $864,286 $ 39,324 426 39,750 824,536 824,536 $864,286 Cottonwoods Maintenance $ 20,446 57 $20,503 $ 825 825 19,678 19,678 $20,503 Totals $ 2,391,548 8,760 22,882 57 2,688 $2,425,935 $ 48,998 6,528 364 55,890 19,678 1,525,831 824,536 2,370,045 $2,425,935 Page 77 Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues Expenditures: Current - General government Public works Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Downtown Strategy $ 88,393 28,231 116,624 38,204 38,204 78,420 78,420 959,920 $1,038,340 Economic Development $ 353,573 1,340 354,913 224,051 224,051 130,862 (166,407) (166,407) (35,545) 137,030 $101,485 Tourism $ 70,127 2,223 1,646 73,996 235,303 235,303 (161,307) 166,407 166,407 5,100 4,092 $9,192 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2019 Page 78 Local Court Enhancement $ 10,143 876 11,019 1,690 1,690 9,329 9,329 367,485 $376,814 Environmental $ 486,924 4 15,997 502,925 501,717 501,717 1,208 200,000 200,000 201,208 623,328 $824,536 Cottonwoods Maintenance $ 6,749 414 7,163 4,530 4,530 2,633 2,633 17,045 $19,678 Totals $ 6,749 441,966 486,924 70,127 2,227 10,143 48,504 1,066,640 263,945 506,247 235,303 1,005,495 61,145 366,407 (166,407) 200,000 261,145 2,108,900 $2,370,045 Page 79 Total revenues Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Expenditures: Current - General government Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Downtown Strategy Budget $ 79,607 1,260 80,867 40,885 40,885 39,982 39,982 959,920 $999,902 Actual $ 88,393 28,231 116,624 38,204 38,204 78,420 78,420 959,920 $1,038,340 Variance - Positive (Negative) $ 8,786 26,971 35,757 2,681 2,681 38,438 38,438 $38,438 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2019 Page 80 Economic Development Budget $ 318,425 240 318,665 264,812 264,812 53,853 (166,407) (166,407) (112,554) 137,030 $24,476 Actual $ 353,573 1,340 354,913 224,051 224,051 130,862 (166,407) (166,407) (35,545) 137,030 $101,485 Variance - Positive (Negative) $ 35,148 1,100 36,248 40,761 40,761 77,009 77,009 $77,009 Tourism Budget $ 83,000 180 83,180 239,258 239,258 (156,078) 166,407 (13,500) 152,907 (3,171) 4,092 $921 Actual $ 70,127 2,223 1,646 73,996 235,303 235,303 (161,307) 166,407 166,407 5,100 4,092 $9,192 Variance - Positive (Negative) $ (12,873) 2,223 1,466 (9,184) 3,955 3,955 (5,229) 13,500 13,500 8,271 $8,271 (Continued) Page 81 Total revenues Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Expenditures: Current - General government Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Local Court Enhancement Budget $ 52,000 240 52,240 50,515 30,000 80,515 (28,275) (28,275) 367,485 $339,210 Actual $ 10,143 876 11,019 1,690 1,690 9,329 9,329 367,485 $376,814 Variance - Positive (Negative) $ (41,857) 636 (41,221) 48,825 30,000 78,825 37,604 37,604 $37,604 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2019 Page 82 Environmental Budget $ 493,668 1,800 495,468 709,326 709,326 (213,858) 200,000 200,000 (13,858) 623,328 $609,470 Actual $ 486,924 4 15,997 502,925 501,717 501,717 1,208 200,000 200,000 201,208 623,328 $824,536 Variance - Positive (Negative) $ (6,744) 4 14,197 7,457 207,609 207,609 215,066 215,066 $215,066 Cottonwoods Maintenance Budget $ 6,642 72 6,714 5,101 5,101 1,613 1,613 17,045 $18,658 Actual $ 6,749 414 7,163 4,530 4,530 2,633 2,633 17,045 $19,678 Variance - Positive (Negative) $ 107 342 449 571 571 1,020 1,020 $1,020 (Continued) Page 83 Total revenues Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Expenditures: Current - General government Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Totals Budget $ 6,642 398,032 493,668 83,000 52,000 3,792 1,037,134 356,212 714,427 239,258 30,000 1,339,897 (302,763) 366,407 (179,907) 186,500 (116,263) 2,108,900 $1,992,637 Actual $ 6,749 441,966 486,924 70,127 2,227 10,143 48,504 1,066,640 263,945 506,247 235,303 1,005,495 61,145 366,407 (166,407) 200,000 261,145 2,108,900 $2,370,045 Variance - Positive (Negative) $ 107 43,934 (6,744) (12,873) 2,227 (41,857) 44,712 29,506 92,267 208,180 3,955 30,000 334,402 363,908 13,500 13,500 377,408 $377,408 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2019 Page 84 (This page intentionally left blank) Page 85 Total revenues Revenues: Property taxes Investment earnings Expenditures: Debt service - Principal retirement Interest on long-term debt Fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year General Obligation Debt Service Budget $ 1,986,373 1,200 1,987,573 1,880,000 92,250 600 1,972,850 14,723 14,723 58,282 $73,005 Actual $ 2,011,868 18,703 2,030,571 1,880,000 92,250 600 1,972,850 57,721 57,721 58,282 $116,003 Variance - Positive (Negative) $ 25,495 17,503 42,998 42,998 42,998 $42,998 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL ALL DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2019 Page 86 Eagle Mountain Debt Service Budget $ 409,786 240 410,026 385,000 20,768 200 405,968 4,058 4,058 12,400 $16,458 Actual $ 409,114 3,344 412,458 385,000 20,767 405,767 6,691 6,691 12,400 $19,091 Variance - Positive (Negative) $ (672) 3,104 2,432 1 200 201 2,633 2,633 $2,633 Municipal Property Corporation Debt Service Budget $ 840 840 370,000 10,854 1,010 381,864 (381,024) 381,554 381,554 530 5,516 $6,046 Actual $ 7,090 7,090 370,000 10,854 1,000 381,854 (374,764) 381,554 381,554 6,790 5,516 $12,306 Variance - Positive (Negative) $ 6,250 6,250 10 10 6,260 6,260 $6,260 (Continued) Page 87 Total revenues Revenues: Property taxes Investment earnings Expenditures: Debt service - Principal retirement Interest on long-term debt Fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Totals Budget $ 2,396,159 2,280 2,398,439 2,635,000 123,872 1,810 2,760,682 (362,243) 381,554 381,554 19,311 76,198 $95,509 Actual $ 2,420,982 29,137 2,450,119 2,635,000 123,871 1,600 2,760,471 (310,352) 381,554 381,554 71,202 76,198 $147,400 Variance - Positive (Negative) $ 24,823 26,857 51,680 1 210 211 51,891 51,891 $51,891 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL ALL DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2019 Page 88 (This page intentionally left blank) Page 89 ASSETS Cash and investments Total assets LIABILITIES AND FUND BALANCES Fund balances: Restricted Total fund balances Total liabilities and fund balances Development Fees $990,714 $990,714 $990,714 990,714 $990,714 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - NON-MAJOR CAPITAL PROJECTS FUND JUNE 30, 2019 Page 90 Revenues: Licenses and permits Investment earnings Total revenues Expenditures: Current - Public safety Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Development Fees $ 140,191 22,760 162,951 7,632 33,161 40,793 122,158 (565,458) (565,458) (443,300) 1,434,014 $990,714 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2019 Page 91 Total revenues Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Expenditures: Current - General government Public safety Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Capital Projects Budget $ 461,465 990,000 7,224 1,458,689 43,263 83,400 1,917,506 455,000 4,827,349 7,326,518 (5,867,829) (200,000) (200,000) (6,067,829) 5,780,363 $(287,466) Non-GAAP Actual $ 966,359 54,212 158,048 1,178,619 2,720 34,228 388,492 4,215,558 4,640,998 (3,462,379) 2,224,571 (200,000) 2,024,571 (1,437,808) 5,780,363 $4,342,555 Variance - Positive (Negative) $ 504,894 (990,000) 54,212 150,824 (280,070) 40,543 83,400 1,883,278 66,508 611,791 2,685,520 2,405,450 2,224,571 2,224,571 4,630,021 $4,630,021 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2019 Page 92 Facilities Replacement Fund Budget $ 3,600 3,600 975,296 975,296 (971,696) 500,000 500,000 (471,696) 1,378,443 $906,747 Non-GAAP Actual $ 9,600 38,411 48,011 437,028 437,028 (389,017) 500,000 500,000 110,983 1,378,443 $1,489,426 Variance - Positive (Negative) $ 9,600 34,811 44,411 538,268 538,268 582,679 582,679 $582,679 Development Fees Budget $ 142,581 660 143,241 11,244 49,291 60,535 82,706 82,706 1,434,014 $1,516,720 Actual $ 140,191 22,760 162,951 7,632 33,161 40,793 122,158 (565,458) (565,458) (443,300) 1,434,014 $990,714 Variance - Positive (Negative) $ (2,390) 22,100 19,710 3,612 16,130 19,742 39,452 (565,458) (565,458) (526,006) $(526,006) (Continued) Page 93 Total revenues Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Expenditures: Current - General government Public safety Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Totals Budget $ 461,465 142,581 990,000 11,484 1,605,530 43,263 94,644 2,892,802 504,291 4,827,349 8,362,349 (6,756,819) 500,000 (200,000) 300,000 (6,456,819) 8,592,820 $2,136,001 Non-GAAP Actual $ 966,359 140,191 63,812 219,219 1,389,581 2,720 7,632 471,256 421,653 4,215,558 5,118,819 (3,729,238) 2,724,571 (765,458) 1,959,113 (1,770,125) 8,592,820 $6,822,695 Variance - Positive (Negative) $ 504,894 (2,390) (990,000) 63,812 207,735 (215,949) 40,543 87,012 2,421,546 82,638 611,791 3,243,530 3,027,581 2,224,571 (565,458) 1,659,113 4,686,694 $4,686,694 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2019 Page 94 STATISTICAL SECTION 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. Note: For locally assessed property (i.e., excluding mines, utilities, etc.) Proposition 117, approved by voters in 2012, amended the Arizona Constitution to require that all property taxes after fiscal year 2014-15 be based upon property values limited to five percent in annual growth. The aggregate assessed value of all taxable properties within a taxing jurisdiction (i.e., after applying assessment ratios based on the use of a property), including property values with a growth limit, is currently referred to as net limited assessed value and formerly as primary assessed value. In accordance with Proposition 117, this value is used for all taxing purposes beginning with fiscal year 2015-16. Aggregate assessed value without a growth limit is currently referred to as net full cash assessed value and formerly as secondary assessed value. This value remains the value utilized for determining debt capacity limits. Page 95 2010 2011 2012 2013 Governmental activities: Net investment in capital assets 95,467,509$ 92,579,483$ 92,006,103$ 89,800,560$ Restricted 11,396,116 4,385,595 5,951,416 5,721,744 Unrestricted 12,321,090 22,598,669 21,064,267 20,612,758 Total governmental activities net position 119,184,715$ 119,563,747$ 119,021,786$ 116,135,062$ Source: The source of this information is the Town's financial records. Fiscal Year ended June 30 Town of Fountain Hills, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Page 96 2014 2015 2016 2017 2018 2019 89,713,260$ 95,325,824$ 95,647,990$ 94,909,703$ 96,777,854$ 104,781,328$ 5,480,867 6,310,810 4,530,239 4,471,661 4,589,526 3,646,449 19,186,823 15,180,582 17,232,506 17,578,068 16,244,169 15,258,797 114,380,950$ 116,817,216$ 117,410,735$ 116,959,432$ 117,611,549$ 123,686,574$ Fiscal Year ended June 30 Page 97 2010 2011 2012 2013 Expenses Governmental activities: General government 3,720,236$ 2,876,848$ 3,119,113$ 2,909,443$ Development services 1,612,287 1,572,202 1,442,613 1,633,361 Public works 5,202,285 5,567,973 4,718,047 5,712,817 Public safety 6,293,323 5,963,067 5,820,136 6,100,131 Culture and recreation 2,927,848 2,840,154 2,754,731 2,779,294 Interest on long-term debt 950,484 851,957 779,576 567,043 Total governmental activities expenses 20,706,463 19,672,201 18,634,216 19,702,089 Program Revenues Governmental activities: Fines, fees and charges for services: General government 474,434 337,279 272,469 380,926 Development services 236,377 344,821 322,984 377,483 Public safety 59,806 65,568 63,926 63,824 Public works 266,706 77,409 95,201 112,521 Culture and recreation 338,357 339,341 303,508 288,745 Operating grants and contributions 1,666,498 1,614,462 1,285,656 1,266,906 Capital grants and contributions 632,617 2,273,414 1,392,706 150,535 Total governmental activities program revenues 3,674,795 5,052,294 3,736,450 2,640,940 Net (Expenses)/Revenues (17,031,668) (14,619,907) (14,897,766) (17,061,149) General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes 1,928,028 1,349,079 1,453,405 1,385,147 Sales taxes 7,644,440 8,013,480 7,787,489 7,957,163 Franchise taxes 285,881 322,659 332,130 334,668 State shared revenues 6,000,923 5,217,140 4,515,511 4,979,183 Investment earnings 22,831 28,456 88,877 69,998 Miscellaneous 129,740 68,125 178,393 300,899 Special item - Donation of capital assets - - - - Total governmental activities 16,011,843 14,998,939 14,355,805 15,027,058 Changes in Net Position Governmental activities (1,019,825)$ 379,032$ (541,961)$ (2,034,091)$ Source: The source of this information is the Town's financial records. Town of Fountain Hills, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Ended June 30 Page 98 2014 2015 2016 2017 2018 2019 2,432,965$ 2,479,365$ 2,516,966$ 3,142,722$ 3,431,752$ 3,318,477$ 1,237,717 2,074,611 2,253,208 1,364,378 1,460,967 867,725 6,630,875 4,963,979 6,476,688 7,904,577 7,380,663 10,263,244 6,958,056 6,816,152 7,178,890 7,563,898 7,567,012 8,142,069 2,760,690 2,822,954 3,124,523 3,375,414 3,311,648 3,767,996 472,999 698,542 241,694 178,749 118,552 57,054 20,493,302 19,855,603 21,791,969 23,529,738 23,270,594 26,416,565 215,943 337,655 298,737 837,163 295,716 280,312 531,193 693,670 1,257,492 1,062,094 1,314,915 1,143,871 74,887 86,641 90,345 155,454 155,973 90,774 250,421 236,706 48,688 216,724 52,465 10,214 340,353 339,158 321,189 393,028 497,914 1,151,500 1,307,738 1,431,017 1,615,973 1,699,931 1,737,958 1,850,676 144,570 2,874,796 381,011 494,328 304,951 181,939 2,865,105 5,999,643 4,013,435 4,858,722 4,359,892 4,709,286 (17,628,197) (13,855,960) (17,778,534) (18,671,016) (18,910,702) (21,707,279) 1,449,646 904,660 2,569,504 2,296,199 2,263,623 2,476,546 8,459,267 8,983,049 9,395,667 9,415,151 10,311,577 11,491,123 349,414 352,673 360,320 367,119 421,682 423,947 5,326,332 5,713,235 5,813,678 6,057,278 6,396,667 6,514,470 123,311 150,358 219,058 55,127 158,860 554,549 166,115 188,251 13,826 28,839 10,410 202,969 - - - - - 6,118,700 15,874,085 16,292,226 18,372,053 18,219,713 19,562,819 27,782,304 (1,754,112)$ 2,436,266$ 593,519$ (451,303)$ 652,117$ 6,075,025$ Fiscal Year Ended June 30 Page 99 Fiscal Year ended June 30 2010 General fund Reserved 3,235,811$ Unreserved, designated 333,796 Unreserved, undesignated 3,418,799 Total general fund 6,988,406$ All other governmental funds Unreserved, designated 159,484$ Unreserved, undesignated reported in: Special revenue funds 4,498,523 Capital projects funds 10,020,336 Debt service funds 1,182,834 Total all other governmental funds 15,861,177$ 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$ 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. Fiscal Year ended June 30 Town of Fountain Hills, Arizona Fund Balances — Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Page 100 2015 2016 2017 2018 2019 6,975$ 9,272$ 5,872$ 13,490$ 5,168$ 10,655 4,123 16,868 21,945 17,311 2,634,923 2,652,357 2,714,135 2,893,850 3,027,804 1,872,492 1,701,086 1,743,768 2,101,574 2,380,653 4,369,457 5,853,806 2,696,999 2,140,434 1,863,722 8,894,502$ 10,220,644$ 7,177,642$ 7,171,293$ 7,294,658$ 1,645,000$ -$ -$ -$ -$ 656 5,055 474 - - 10,066,786 4,500,044 4,432,710 4,571,263 3,579,891 1,079,780 1,366,081 8,576,250 7,248,890 5,868,386 5,444,124 5,943,364 1,784,761 2,340,683 2,592,343 18,236,346$ 11,814,544$ 14,794,195$ 14,160,836$ 12,040,620$ Fiscal Year ended June 30 Page 101 2010 2011 2012 2013 Revenues Taxes 9,818,985$ 9,704,054$ 9,577,321$ 9,713,445$ Licenses and permits 399,094 312,367 194,976 570,904 Leases and rents 215,520 227,195 206,018 213,871 Intergovernmental 7,672,037 7,165,103 6,035,448 6,323,047 Charges for services 464,036 388,635 405,663 162,086 Other 129,740 72,125 178,393 300,899 Fines and forfeitures 297,030 236,221 223,673 187,251 Special assessments - - - - Investment earnings 22,831 28,456 88,877 69,998 Total revenues 19,019,273 18,134,156 16,910,369 17,541,501 Expenditures Current: General government 3,186,368 2,575,975 2,887,321 2,699,109 Development services 1,669,449 1,564,615 1,421,787 1,643,757 Public works 973,746 1,123,230 1,054,930 2,058,990 Public safety 6,200,227 5,772,800 5,869,445 6,022,269 Culture and recreation 2,007,737 1,871,446 1,794,332 1,791,018 Capital outlay 1,254,223 1,043,304 884,323 453,002 Debt service: Principal 2,460,000 2,114,999 1,965,000 2,280,000 Interest 825,988 729,077 639,135 554,860 Other debt service 16,869 15,254 55,752 12,183 Total expenditures 18,594,607 16,810,700 16,572,025 17,515,188 Excess (deficiency) of revenues over (under) expenditures 424,666 1,323,456 338,344 26,313 Other Financing Sources (Uses) Transfers in 1,127,776 431,880 2,470,027 1,279,397 Transfers out (1,127,776) (431,880) (2,470,027) (1,279,397) Issuance of refunding bonds - - - - Issuance of long-term debt - - - - Bond Premium - - - - Payment to refunded bonds escrow agent - - - - Total other financing sources (uses) - - - - Net change in fund balances 424,666$ 1,323,456$ 338,344$ 26,313$ Expenditures for capitalized assets 532,461$ 389,082$ 1,333,785$ 467,691$ Debt service as a percentage of noncapital expenditures 18.3% 17.4% 17.5% 16.7% Source: The source of this information is the Town's financial records. Fiscal Year Ended June 30 Town of Fountain Hills, Arizona Statement of Revenues, Expenditures and Changes in Fund Balances Last Ten Fiscal Years (modified accrual basis of accounting) Page 102 2014 2015 2016 2017 2018 2019 10,271,737$ 10,240,382$ 12,299,285$ 12,069,714$ 13,019,341$ 14,342,801$ 891,782 1,043,382 1,372,045 1,310,973 2,004,386 2,040,622 252,584 269,753 258,165 284,090 282,531 280,801 6,677,518 9,770,048 7,559,436 7,917,651 8,266,028 8,401,676 161,376 176,541 197,109 351,476 254,122 181,105 134,114 188,251 147,662 153,438 207,697 347,141 170,995 186,456 209,380 257,727 182,997 130,483 - - - - - - 123,311 150,358 219,058 55,127 158,860 554,549 18,683,417 22,025,171 22,262,140 22,400,196 24,375,962 26,279,178 2,194,845 2,275,124 2,324,026 2,713,548 3,195,936 3,147,063 1,774,983 2,073,990 2,217,814 1,275,147 1,397,249 858,957 3,085,559 1,275,779 2,498,714 3,954,450 3,420,317 7,880,668 6,890,770 6,675,874 7,034,887 7,420,032 7,402,227 6,295,989 1,921,939 1,962,585 2,240,865 2,484,940 2,375,758 2,845,027 1,750,465 8,799,068 6,471,382 1,693,265 4,317,214 4,487,854 2,415,000 1,850,000 4,260,000 2,675,000 2,720,000 2,635,000 460,811 454,957 308,106 244,986 185,164 123,871 12,188 243,585 2,005 2,180 1,805 1,600 20,506,560 25,610,962 27,357,799 22,463,548 25,015,670 28,276,029 (1,823,143) (3,585,791) (5,095,659) (63,352) (639,708) (1,996,851) 1,838,453 2,519,774 562,044 5,194,138 4,543,728 3,672,532 (1,838,453) (2,519,774) (562,044) (5,194,138) (4,543,728) (3,672,532) - 4,180,000 - - - - - 7,565,000 - - - - - 342,086 - - - - - (4,085,000) - - - - - 8,002,086 - - - - (1,823,143)$ 4,416,295$ (5,095,659)$ (63,352)$ (639,708)$ (1,996,851)$ 2,385,168$ 9,067,254$ 6,394,346$ 1,696,612$ 4,293,214$ 4,465,837$ 15.9% 15.4% 21.8% 14.1% 14.0% 11.6% Fiscal Year Ended June 30 Page 103 Fiscal Year Ended June 30 Property Tax Sales Tax Franchise Tax Total 2010 1,888,664 7,644,441 285,881 9,818,986 2011 1,367,915 8,013,480 322,659 9,704,054 2012 1,457,702 7,779,219 332,130 9,569,051 2013 1,421,615 7,957,162 334,668 9,713,445 2014 1,463,056 8,459,267 349,414 10,271,737 2015 904,660 8,983,050 352,673 10,240,383 2016 2,543,298 9,395,667 360,320 12,299,285 2017 2,287,444 9,415,151 367,119 12,069,714 2018 2,286,081 10,311,578 421,682 13,019,341 2019 2,427,731 11,491,123 423,947 14,342,801 Source: The source of this information is the Town's financial records. Town of Fountain Hills, Arizona Governmental Activities - Tax Revenues by Source Last Ten Fiscal Years (modified accrual basis of accounting) Page 104 Net Assessed Net Total Estimated Taxable Value as a Assessed Direct Actual Percentage of Taxable Tax Taxable Estimated Actual Fiscal Year Value*Rate**Value*Taxable Value 2010 651,694,135$ 0.2300$ 5,729,894,491$ 11.37% 2011 576,401,885 0.1639 5,068,665,363 11.37% 2012 452,236,007 0.2258 4,096,551,487 11.04% 2013 377,816,392 0.2657 3,422,463,416 11.04% 2014 365,963,182 0.2773 3,359,684,579 10.89% 2015 403,330,477 0.1151 3,722,794,676 10.83% 2016 402,223,763 0.5246 3,744,585,506 10.74% 2017 423,688,665 0.4472 3,965,824,715 10.68% 2018 444,639,625 0.4259 4,166,589,970 10.67% 2019 494,576,905 0.3382 4,697,728,014 10.53% Source: The source of this information is the Arizona Department of Revenue's Abstract of the Assessment Roll and the Town's financial records. *Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. ** Per $100 of assessed taxable value. Town of Fountain Hills, Arizona Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Page 105 Net LimitedPercentage of Net Full CashPercentage ofAssessedTotal Net Limited AssessedTotal Net Full CashTaxpayerValueRankAssessed ValueValueRankAssessed ValueEPCOR - Chaparral City Water Company3,954,960 10.80%Toll Brothers AZ Construction Company3,468,980 2RCS-Park Place 1 LLC3,130,090 30.63%Hunter Retail LLC2,574,306 40.52%WSL Fountain View Investors V, LLC2,146,527 50.43%3,196,512 30.49%Whitestone Fountain Hills, LLC1,992,049 60.40%MJFFH7 LLC1,303,065 7Fountain Hills Invest Co., LLC1,275,998 80.26%Target Corporation1,275,552 90.26%2,442,337 70.37%Smith's Food & Drug Centers Inc.1,250,532 10 0.25%Inland Western Fountain Hills Four Peaks LLC4,423,956 10.68%EN LLC4,145,795 20.64%Chapparal City Water Company 3,173,730 40.49%Pacific FH Resort LLC2,680,400 50.41%J & R Holdings XX LLC2,563,874 60.39%Adero Canyon LLC2,373,520 80.36%Sun Tech Development, LLC2,299,593 90.35%Qwest Corporation 1,799,828 100.28%Totals22,372,059$ 3.55%29,099,545$ 4.46%Source: The source of this information is the Maricopa County Assessor's Office.Note: On November 6, 2012, voters approved Proposition 117, an amendment to theArizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2015-2016), both primary andsecondary taxes are levied against the net assessed limited property valuation. The net assessed full cashproperty valuation is used for determining the Town’s bonding capacity and as the ceiling for net limitedassessed property valuation.Town of Fountain Hills, ArizonaPrincipal Property TaxpayersJune 30, 2019 and 201020192010Page 106 Current Percent of Delinquent Ratio of Total Fiscal Total Tax Current Taxes Tax Total Tax Tax Collections Year Tax Levy Collections Collected Collections Collections to Total Tax Levy 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% 20,255 1,434,737 99.2% 2013 1,429,285 1,401,654 98.1% 18,833 1,420,487 99.4% 2014 1,449,884 1,426,612 98.4% 18,448 1,445,060 99.7% 2015 892,104 881,170 98.8%6,995 888,165 99.6% 2016 2,532,115 2,502,995 98.8% 19,374 2,522,369 99.6% 2017 2,278,728 2,241,482 98.4% 29,635 2,271,117 99.7% 2018 2,272,027 2,230,328 98.2% 31,692 2,262,020 99.6% 2019 2,404,250 2,369,262 98.5%- 2,369,262 98.5% Source: The source of this information is the Maricopa County Treasurer's Office. Town of Fountain Hills, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Page 107 2010 2011 2012 2013 Sales category: Construction 538,562$ 567,135$ 600,403$ 567,589$ Transportation/utilities 1,424,828 1,388,075 1,409,349 1,402,734 Wholesale/retail 3,556,292 3,567,986 3,601,904 3,598,895 Restaurants/bars 509,624 559,931 575,704 645,258 Real estate, rental & leasing 650,400 731,758 678,326 720,023 Services 241,685 276,566 274,521 310,303 Other 723,050 922,029 639,012 712,360 Total 7,644,441$ 8,013,480$ 7,779,219$ 7,957,162$ Note: Other includes all state and local sales tax audit adjustments. Source: The source of this information is the Town's financial records. Fiscal Year Ended June 30 Town of Fountain Hills, Arizona Taxable Sales by Category Last Ten Fiscal Years (modified accrual basis of accounting) Page 108 2014 2015 2016 2017 2018 2019 783,064$ 935,694$ 918,717$ 730,164$ 1,408,332$ 1,932,716$ 1,375,623 1,405,768 1,327,441 1,288,153 1,309,928 1,290,585 3,653,181 4,214,119 4,815,582 4,982,218 5,235,992 5,464,247 655,654 682,180 742,540 811,985 829,857 893,595 782,453 617,348 552,856 636,834 745,171 842,233 342,079 604,618 779,753 852,675 747,834 1,025,548 867,213 523,323 258,779 113,122 34,464 42,200 8,459,267$ 8,983,050$ 9,395,667$ 9,415,151$ 10,311,578$ 11,491,124$ Fiscal Year Ended June 30 Page 109 Fiscal Year Ended Town Maricopa State Total June 30 Rate County Rate Tax Rate 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% 2015 2.60% 0.70% 5.60% 8.90% 2016 2.60% 0.70% 5.60% 8.90% 2017 2.60% 0.70% 5.60% 8.90% 2018 2.60% 0.70% 5.60% 8.90% 2019 2.60% 0.70% 5.60% 8.90% Source: The source of this information is the Arizona Department of Revenue. Town of Fountain Hills, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Page 110 Community Municipal HighwayFiscal Year General Facilities Property User Special Total DebtEnded Obligation District Corporation Revenue Assessment Outstanding PerJune 30Bonds*Bonds**Bonds*BondsBondsDebtCapita20105,415,000$ 3,630,000$ 8,920,000$ 130,000$ -$ 18,095,000$ 796$ 20114,595,000 3,370,000 7,885,000 - - 15,850,000 705 20123,755,000 3,090,000 7,040,000 - - 13,885,000 611 20132,900,000 2,800,000 5,905,000 - - 11,605,000 503 20142,000,000 2,495,000 4,695,000 - - 9,190,000 394 20159,517,086 2,300,000 3,525,000 - - 15,342,086 651 20167,678,669 1,935,000 1,400,000 - - 11,013,669 461 20175,680,252 1,560,000 1,030,000 - - 8,270,252 338 20183,631,835 1,180,000 670,000 - - 5,481,835 223 20191,683,418 795,000 300,000 - - 2,778,418 113 Source: The source of this information is the Town's financial records and the U.S. Bureau of Economic Analysis.* All bond amounts presented are net of original issuance discounts and premiums.** All bond amounts presented are net of original issuance discounts and premiums.The Town is not obligated for repayment of the Eagle Mountain Community Facilities District general obligation bonds.Population data can be found in the Schedule of Demographic and Economic Statistics.Governmental ActivitiesTown of Fountain Hills, ArizonaRatios of Outstanding Debt by TypeLast Ten Fiscal YearsPage 111 Fiscal YearGeneral Obligation Bonds*Less: Amounts Restricted for PrincipalNet General Obligation BondsEstimated Actual Taxable Value of PropertyPercentage of Estimated Actual Taxable Value of PropertyNet General Obligation Bonded Debt per CapitaNet General Obligation Bonded Debt per Net Limited Assessed ValuationMunicipal Property Corporation Bonds*Net Municipal Property Corporation Debt per Capita Total Revenues-All Sources 2010 9,045,000 177,751 8,867,249 5,729,894,491 0.15% 390 1.36% 7,878,646 347 18,958,595 2011 7,965,000 83,081 7,881,919 5,068,665,363 0.16%350 1.37% 6,993,694 311 18,248,326 2012 6,845,000 94,380 6,750,620 4,096,551,487 0.16%297 1.49% 4,300,489 189 17,184,895 2013 5,700,000 82,184 5,617,816 3,422,463,416 0.16%244 1.49% 3,561,814 154 17,723,994 2014 4,495,000 87,949 4,407,051 3,359,684,579 0.13%189 1.20% 2,721,933 117 18,891,967 2015 11,817,086 420,782 11,396,304 3,722,794,676 0.31%483 2.83% 1,764,338 75 22,161,316 2016 9,613,669 576,281 9,037,388 3,744,585,506 0.24%378 2.25% 1,088,117 46 22,262,139 2017 7,240,252 343,697 6,896,555 3,965,824,715 0.17%282 1.63% 860,437 35 22,400,196 2018 4,811,835 83,185 4,728,650 4,166,589,970 0.11%192 1.06% 664,484 27 24,375,962 2019 2,478,418 196,412 2,282,006 4,697,728,014 0.05%93 0.46% 287,694 12 24,375,962 Source: The source of this information is the Department of Revenue and the Town's financial records.* All bond amounts presented are net of original issuance discounts and premiums. The Town is not obligatedfor repayment of the Eagle Mountain Community Facilities District general obligation bonds.Population data can be found in the Schedule of Demographic and Economic Statistics.Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (FiscalYear 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used fordetermining the Town’s bonding capacity and as the ceiling for net limited assessed value.Town of Fountain Hills, ArizonaRatios of General Bonded Debt OutstandingLast Ten Fiscal YearsPage 112 Estimated Estimated Share of Percentage Overlapping Outstanding Debt Applicable Debt Overlapping: Maricopa County -$ 1.15% -$ Maricopa County Community College District 380,740,000 1.15% 4,378,510 Maricopa County Special Healthcare District 497,125,000 1.15% 5,716,938 East Valley Institute of Technology - 2.59% - Fountain Hills Unified School District 8,800,000 96.22% 8,467,360 Total Overlapping Debt 18,562,808 Direct: Town of Fountain Hills, Arizona* General Obligation Bonds 1,684,418 Revenue Bonds 300,000 Eagle Mountain Community Facilities District** 795,000 Total Direct Debt 2,779,418 Total direct and overlapping debt 21,342,226$ Source: The source of this information is the Town's records, the State and County Abstract of the Assessment Roll, the Arizona Department of Revenue Report of Indebtedness and the applicable governmental unit. * All bond amounts are net of original issuance discounts and premiums. ** The Town is not obligated for repayment of the Eagle Mountain Community Facilities District general obligation bonds. Note: The estimated percentage of debt outstanding applicable to the Town is calculated based on the Town's net limited assessed valuation as a percentage of the net limited 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 Direct and Overlapping Governmental Activities Debt as of June 30, 2019 Governmental Unit Page 113 2010 2011 2012 2013 2014 6% Debt Limit Debt limit 39,101,648$ 34,584,113$ 27,134,160$ 22,668,984$ 21,957,791$ Total net debt applicable to limit - - - - - Legal debt margin 39,101,648$ 34,584,113$ 27,134,160$ 22,668,984$ 21,957,791$ Total debt applicable to the limit as a percentage of debt limit - - - - - 20% Debt Limit Debt limit 130,338,827$ 115,280,377$ 90,447,201$ 75,563,278$ 73,192,636$ Total net debt applicable to limit 5,415,000 4,595,000 3,755,000 2,900,000 2,000,000 Legal debt margin 124,923,827$ 110,685,377$ 86,692,201$ 72,663,278$ 71,192,636$ Total debt applicable to the limit as a percentage of debt limit 4% 4% 4% 4% 3% Source: The source of this information is the Town's financial records. Note: All amounts presented are net of original issuance discounts and premiums. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Town of Fountain Hills, Arizona Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year Ended June 30 Page 114 2015 2016 2017 2018 2019 24,199,829$ 28,325,296$ 30,651,126$ 31,459,192$ 32,400,042$ - - - - - 24,199,829$ 28,325,296$ 30,651,126$ 31,459,192$ 32,400,042$ --- - - 80,666,095$ 94,417,653$ 102,170,422$ 104,863,974$ 108,000,140$ 9,175,000 7,405,000 5,475,000 3,495,000 1,615,000 71,491,095$ 87,012,653$ 96,695,422$ 101,368,974$ 106,385,140$ 11% 8% 5% 3% 1% Fiscal Year Ended June 30 Page 115 Net full cash assessed valuation 540,000,698 Water, Sewer, Artificial Lighting, Parks, Open Space, Recreational Facility Improvements, Public Safety, Law Enforcement, Fire and Emergency Facilities, Street and Transportation Facilities Debt limit - 20% of net full cash assessed valuation 108,000,140$ Net debt applicable to limit 1,615,000 20% legal debt margin 106,385,140 All Other General Obligation Bonds Debt limit - 6% of net full cash assessed valuation 32,400,042 Net debt applicable to limit - 6% legal debt margin 32,400,042 Total legal debt margin 138,785,182$ Source: The source of this information is the Maricopa County Assessor's Office and the Town's financial records. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Town of Fountain Hills, Arizona Calculation of Legal Debt Margin as of June 30, 2019 Page 116 Fiscal Year Ended Pledged June 30 Principal Interest Total Revenues Coverage 2010 985,000 416,886 1,401,886 14,008,592 10.0 2011 1,035,000 386,630 1,421,630 13,489,416 9.5 2012 1,085,000 327,312 1,412,312 12,995,685 9.2 2013 1,150,000 285,287 1,435,287 13,397,842 9.3 2014 1,225,000 234,176 1,459,176 14,313,158 9.8 2015 2,545,000 184,500 2,729,500 15,583,484 5.7 2016 480,000 32,740 512,740 16,250,673 31.7 2017 370,000 22,680 392,680 16,815,224 42.8 2018 360,000 16,686 376,686 18,194,833 48.3 2019 370,000 10,854 380,854 19,765,936 51.9 Source: The source of this information is the Town's financial records. Town of Fountain Hills Revenue Bond Coverage Last Ten Fiscal Years Municipal Facilities Corporation Revenue Bonds Page 117 2009 2010 2011 2012 2013 Population 22,736 22,489 22,741 23,070 23,318 Per capita personal income 38,918$ 40,672$ 44,660$ 47,260$ 48,244$ Median age 48.9 53.9 53.9 53.9 53.0 Public school enrollment 2,203 2,103 1,981 1,886 1,820 Town of Fountain Hills unemployment rate 4.5% 4.8% 6.7% 5.6% 6.0% Land use Total acres 13,005.7 13,005.7 13,005.7 13,005.7 13,005.7 Total square miles 20.32 20.32 20.32 20.32 20.32 Vacant lots 1,253 1,226 1,218 1,209 1,196 Number of units Housing 12,927 12,983 12,990 12,977 12,991 Lodging 4 4 4 4 4 Restaurants 52 53 56 56 54 Shopping centers 19 20 20 20 20 Schools Public 4 4 4 3 3 Preschool 4 4 4 6 7 Charter 1 1 1 1 1 Vocational - - - - - Sources: The sources of the "Per Capita Personal Income", "Median Age" and "Unemployment Rate" information are Sites USA (2009-2017) and ESRI (beginning in 2018). The source of the "Population" is the U.S. Census Bureau July 1, 2018 estimate. 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 the information is not available. * Information obtained is based on calendar years; therefore, the latest information obtained was from 2018. Calendar Year Town of Fountain Hills, Arizona Demographic and Economic Statistics Last Ten Calendar Years Page 118 2014 2015 2016 2017 2018* 23,573 23,899 24,482 24,583 24,987 46,619$ 48,240$ 50,162$ 60,531$ 55,525$ 53.7 53.8 53.7 53.5 58.6 1,692 1,619 1,506 1,444 1,380 5.4% 2.4% 1.9% 1.6% 5.1% 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 1,165 1,247 1,209 1,175 1,172 12,981 13,002 13,130 13,176 13,558 4 4 4 4 4 43 46 50 52 54 20 20 20 20 20 3 3 3 3 3 7 7 7 7 5 1 1 1 1 1 - - - 1 1 Calendar Year Page 119 Percentage Number of of Total Town Number of Employer Employees Rank Employment Employees Rank Fountain Hills Unified School District No. 98 152 1 3.4% 285 1 Fountain View Village 120 2 2.7% Rural Metro Corporation 110 3 2.5% Safeway Stores 110 4 2.5% 110 5 Target Stores 100 5 2.2% 130 3 Firerock Country Club 100 6 2.2% Bashas 70 7 1.6%70 8 Eagle Mountain Golf Club 70 8 1.6%70 10 Palm Valley Golf Club 60 9 1.3% Golf International Inc 60 10 1.3% Fry's Food Stores -80 7 Sunrise Senior Living - Monks Construction 190 2 MCO Properties, Inc.125 4 Town of Fountain Hills 82 6 Sunridge Canyon Golf Course 70 9 Totals 952 21.3% 1,212 Total Town employment 4,474 Source: The source of this information is the Maricopa Association of Governments. * Data for 2019 was not available. 2018* Town of Fountain Hills, Arizona Principal Employers Prior Fiscal Year and Nine Years Ago 2009 Page 120 2010201120122013201420152016201720182019Municipal court5.00 5.00 5.00 5.00 4.00 3.63 3.63 3.63 3.63 3.63 Administration13.25 11.25 11.58 11.68 10.56 11.33 11.63 12.25 13.45 13.70 Public works9.80 9.80 10.80 Development services35.75 23.25 20.25 18.75 16.25 16.30 16.30 7.50 8.50 7.50 Community services27.10 21.63 21.53 21.18 20.18 21.06 20.76 20.76 20.56 20.56 Total 81.10 61.13 58.36 56.61 50.99 52.32 52.32 53.94 55.94 56.19 Source: The source of this information is the Town's financial records.Town of Fountain Hills, ArizonaAuthorized Full-time Equivalent Government Employees by FunctionLast Ten Fiscal YearsFiscal Year Ended June 30Page 121 Function/Program2010201120122013201420152016201720182019Municipal CourtCases filed 3,520 2,584 2,173 1,740 1,649 1,738 1,593 2,014 1,277 891 Hearings/Trials held1,089 738 731 703 1,665 1,585 1,564 1,844 676 801 AdministrationFTEs per 1,000 residents3.6 2.7 2.6 2.5 2.2 2.2 2.2 2.2 2.3 2.2 Registered voters - general election15,511 none 16,074 none N/A 16,213 none 16,387 none 16,775 Voter turnout - general election50% none 34% none N/A 38% none 41% none 51%Development ServicesBuilding permits issued411 350 346 457 445 443 410 509 468 576 Building inspections conducted1,936 1,546 1,257 1,395 2,131 2,448 2,129 2,704 3,707 4,795 Number of code violation cases1,024 843 804 746 716 752 713 669 654 655 Number of zoning cases7 14 7 10 41 65 72 50 41 11 Community ServicesNumber of Community Center bookings3,396 3,315 3,236 3,196 3,383 3,439 3,124 3,764 4,395 3,857 Number of participants in recreational programs 1,960 1,759 1,833 1,789 2,291 2,249 2,910 3,773 3,794 3,489 Number of Senior Services members1,105 1,205 1,208 1,118 1,189 1,273 1,326 1,335 1,220 1,313 Number of home delivered meals10,169 9,742 8,419 6,941 4,799 4,035 3,497 3,920 3,093 3,562 Law Enforcement (contracted)Physical arrests679 645 522 545 743 445 220 220 214 67 Traffic violations2,959 1,909 1,366 1,296 1,379 1,539 1,215 1,803 1,053 1,248 Fire & Emergency Medical (contracted)Total incident responses2,875 3,179 3,082 3,136 2,956 3,166 3,191 3,425 3,659 4,073 Average response time (in minutes)4:32 3:46 3:50 3:53 3:37 3:57 3:25 3:33 3:32 3:51Source: The source of this information is the Town's financial records.Note: N/A indicates that the information is not available.Fiscal Year Ended June 30Town of Fountain Hills, ArizonaOperating Indicators by FunctionLast Ten Fiscal yearsPage 122 2010201120122013201420152016201720182019Public safetyNumber of fire stations2 2 2 2 2 2 2 2 2 2 Public worksStreets (centerline miles) 178.9 178.9 178.9 178.9 178.9 178.9 178.9 178.9 180.0 180.0 Streets (lane miles)390 390 390 390 390 390 390.5 390.5 391.5 391.5 Pedestrian lighting34 34 34 34 34 85 91 91 91 91 Traffic signals13 13 13 13 13 13 13 13 13 13 Parks and recreationAcreage-developed parks 116 116 116 116 116 119 119 119 119 119 Playgrounds7 7 7 7 7 7 7 7 7 9 Baseball/softball diamonds 6 6 6 6 6 6 6 6 6 6 Soccer/football fields7 7 7 7 7 7 7 7 7 7 Community centers1 1 1 1 1 1 1 1 1 1 Preserve acreageN/A N/A740 740 740 807.2 807.2 807.2 807.2 889.2 Miles of trailsN/A N/A 4.3 10.43 10.43 15.8 15.8 18.5 18.5 18.5 Source: The source of this information is the Town's facilities records.Note: N/A indicates the information is not available.Town of Fountain Hills, ArizonaCapital Assets Statistics by FunctionLast Ten Fiscal YearsFiscal Year Ended June 30Function/ProgramPage 123 (This page intentionally left blank) Page 124 Town of Fountain Hills 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 480-816-5100 www.fh.az.gov - linkedin.com/company/town-of-fountain-hills -facebook.com/TownofFountainHills -twitter.com/fhazgov ITEM 6. A. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Consent Submitting Department: Public Works Prepared by: Randy Harrel, Town Engineer Staff Contact Information: John Wesley, Development Services Director Request to Town Council Regular Meeting (Agenda Language):  CONSIDERATION OF  adopting Resolution 2019-56, abandonment of a portion of the 20' Public Utility and Drainage Easement at the westerly side of Plat 203, Block 7, Lot 1 (16326 E. Kingstree Blvd.), as recorded in Book 149, Page 29, records of Maricopa County, Arizona. (EA 2019-17) Staff Summary (Background) Applicant: Michael Mollere Owner: Same Property Location: Same This item on the Town Council's agenda is a proposal to abandon a portion of the pre-incorporation 20' Public Utility and Drainage Easement at the west side of Plat 203,Block 7, Lot 1.  All of the utilities have approved of abandonment of this easement, except that SRP has requested to retain the southerly 15' of this easement due to their existing Pulling Enclosure box located there. The applicant has submitted a Building Permit application (BP 2019-464) for a new garage very near this easement area (including some grading, paved driveway, retaining wall, and drainage pipe within the easement area proposed to be abandoned.)  Staff has reviewed the site to determine any on-site drainage issues in addition to the Town's general interest in the easement. There is no need for the Town to retain the drainage easement proposed to be abandoned, with the understanding that the owners of Lot 1 are required to pass the developed flows generated by the upstream lots across their property. Related Ordinance, Policy or Guiding Principle N/A Risk Analysis N/A Recommendation(s) by Board(s) or Commission(s) N/A N/A Staff Recommendation(s) Staff recommends approval of Resolution 2019-56, abandonment of a portion of the 20' Public Utility and Drainage Easement at the westerly side of Plat 203, Block 7, Lot 1. SUGGESTED MOTION MOVE to adopt Resolution 2019-56. Attachments Aerial Photo Map  Vicinity Map  Exhibit A Map  Resolution 2019-56  Form Review Inbox Reviewed By Date Town Clerk Elizabeth A. Burke 11/07/2019 01:15 PM Development Services Director John Wesley 11/07/2019 01:25 PM Town Attorney Aaron D. Arnson 11/12/2019 04:31 PM Town Manager Grady E. Miller 11/12/2019 05:25 PM Form Started By: Randy Harrel Started On: 10/23/2019 07:44 AM Final Approval Date: 11/12/2019  DEVELOPMENT SERVICESAERIAL PHOTO MAPAll that is Ari zon a F O UNTAIN HILLST O W N OF INC. 1989LEGEND:FRISCO DRABANDON 20'P.U.E. & D.E.15'PARCEL "E"KINGSTREE BLVDRETAIN 15'X20'PUE & DE BEELI N E H W Y SHEA BLVDPALISADES BLVDSAGUARO BLVD SAGUARO BLVDPALI S A D E S B L V D PALISA D E S B L V D S A G U A R O B L V DFOUNTAIN HILLS BLVDMcDOWEL L M O U N T A I N R D FOUNTAIN H ILLS BLVDSUNRIDGE DREL L A G O B L V D AVEN U E O F T H E FOU N T A I N S PANORAMA DRFIREROCK COUNTRYCLUB DR EA G L E M O U N T A I N PK W YCRESTVIEW DRPALOMINO SIERR A M A D R E GRANDE B L V DGOLDEN EAGLE BLVD VICINITY MAP TOWN OF FOUNTAIN HILLS NORTH SCALE: 1" = 3500'All that i s A r iz o naFOU N T A IN HI L LSTOWN OFINC. 1989TOWN HALL DEVELOPMENT SERVICES DEPARTMENT SCOTTSDALE McDOWELL MOUNTAIN PARK FORT McDOWELL YAVAPAI NATIONSALT RIVER PIMA MARICOPA INDIAN COMMUNITY TOWN BOUNDARY SCOTTSDALE 16326 E KINGSTREE BLVD RESOLUTION 2019-56 A RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, ABANDONING WHATEVER RIGHT, TITLE, OR INTEREST IT HAS IN A PORTION OF THE 20’ PUBLIC UTILITY AND DRAINAGE EASEMENTS LOCATED AT THE WESTERLY SIDE OF PLAT 203, BLOCK 7, LOT 1, AS RECORDED IN BOOK 149, PAGE 29, RECORDS OF MARICOPA COUNTY, ARIZONA. (EA 2019-17) WHEREAS, the Mayor and Council of the Town of Fountain Hills (the “Town Council”), as the governing body of real property located in the Town of Fountain Hills (the “Town”), may require the dedication of public streets, sewer, water, drainage, and other utility easements or rights-of-way within any proposed subdivision; and WHEREAS, the Town Council has the authority to accept or reject offers of dedication of private property by easement, deed, subdivision, plat or other lawful means; and WHEREAS, all present utility companies have received notification of the proposed abandonment. NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS, as follows: SECTION 1. That a portion of the twenty foot (20’) public utility and drainage easement, at the westerly side of Plat 203, Block 7, Lot 1, (16326 E. Kingstree Blvd) Fountain Hills, as recorded the Office of the County Recorder of Maricopa County, Arizona, Book 149 of Maps, Page 29, and as shown in Exhibit A, are hereby declared to be abandoned by the Town. Certain lots within this subdivision are subject to lot-to-lot drainage runoff. The property owner is required to pass the developed flows generated by the upstream lots across their property. SECTION 2. That this Resolution is one of abandonment and disclaimer by the Town solely for the purpose of removing any potential cloud on the title to said property and that the Town in no way attempts to affect the rights of any private party to oppose the abandonment or assert any right resulting there from or existing previous to any action by the Town. PASSED AND ADOPTED BY the Mayor and Council of the Town of Fountain Hills, November 19, 2019. FOR THE TOWN OF FOUNTAIN HILLS: ATTESTED TO: _________________ Ginny Dickey, Mayor Elizabeth Burke, Town Clerk REVIEWED BY: APPROVED AS TO FORM: Grady E. Miller, Town Manager Aaron Arnson, Town Attorney ITEM 6. B. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Consent Submitting Department: Community Services Prepared by: Linda Ayres, Recreation Manager Staff Contact Information: Rachael Goodwin, Community Services Director Request to Town Council Regular Meeting (Agenda Language):  CONSIDERATION OF  approving an Extension of Premises application submitted by Sarah Meredith representing S & C Meredith LLC / DBA Alamo Saloon located at 11807 N Saguaro Blvd, Fountain Hills, AZ 85268 for a private party on December 14, 2020 from 6:00 p.m. to 1:30 a.m.  Staff Summary (Background) The purpose of this item is to obtain Council's approval regarding the special event liquor license application submitted by Sarah Meredith representing S &C Meredith LLC/ DBA Alamo Saloon for submission to the Arizona Department of Liquor. This extension of premises permit is being requested for the purpose of holding a private party on the premises. The application was reviewed by staff for compliance with Town ordinances, and staff recommends approval of this special event liquor license application as submitted. Related Ordinance, Policy or Guiding Principle A.R.S. §4-203.02; 4-244; 4-261 and R19-1-228, R19-1-235, and R19-1-309 Risk Analysis NA Recommendation(s) by Board(s) or Commission(s) NA Staff Recommendation(s) Staff recommends approval of this application. SUGGESTED MOTION MOVE to approve the application for extension of premises. Attachments Liquor App Extension of Premises  Form Review Inbox Reviewed By Date Community Services Director Rachael Goodwin 11/06/2019 03:59 PM Town Attorney Aaron D. Arnson 11/12/2019 04:34 PM Town Manager Grady E. Miller 11/12/2019 05:25 PM Form Started By: Linda Ayres Started On: 11/05/2019 08:18 AM Final Approval Date: 11/12/2019  ITEM 6. C. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Consent Submitting Department: Administration Prepared by: Elizabeth A. Burke, Town Clerk Staff Contact Information: Grady E. Miller, Town Manager Request to Town Council Regular Meeting (Agenda Language):  CONSIDERATION OF  adopting Resolution 2019-57 approving an Intergovernmental Agreement with the Salt River Pima Maricopa Indian Community relating to Proposition 202 funding. Staff Summary (Background) Proposition 202 (Gaming Compact with the State of Arizona) was a ballot measure passed by the Arizona voters in the 2002 state general election and codified in A.R.S. §5-601.02. This legislation allows for distribution of funds to be solicited by cities, towns, and counties for their programs from Arizona Indian Tribes for government services that benefit the general public, which include public safety, mitigation of impacts of gaming, and the promotion of commerce and economic development. The Compact permits the Nation to allocate 12% of the fees it pays to the State to cities, towns and counties in the State of Arizona. Many non-profits also request this funding as "pass through dollars" from cities, towns, and counties to support programs within their communities. Because the legislation required that the funds be solicited by a municipality or county, the Town Council approved Resolution 2004-34 on July 1, 2004, which adopted the Town's policy and procedures relating to the Proposition 202 application process for the procurement of funds on behalf of various entities (i.e. as a pass through for funds). The Salt River Pima Maricopa Indian Community has awarded the Town $30,000 for calendar year 2020.   Related Ordinance, Policy or Guiding Principle Section 12 of the Gaming Compact 2002 and A.R.S.§ 5-601.02; Fountain Hills Resolution 2004-34. Risk Analysis N/A Recommendation(s) by Board(s) or Commission(s) N/A Staff Recommendation(s) Staff recommends adoption of this resolution approving the IGA. SUGGESTED MOTION MOVE to adopt Resolution 2019-57. Attachments Res 2019-57  Form Review Inbox Reviewed By Date Finance Director David Pock 11/13/2019 10:10 AM Town Attorney Aaron D. Arnson 11/13/2019 10:33 AM Town Manager Grady E. Miller 11/13/2019 10:57 AM Form Started By: Elizabeth A. Burke Started On: 11/13/2019 09:40 AM Final Approval Date: 11/13/2019  RESOLUTION 2019-57 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, APPROVING AN INTERGOVERNMENTAL AGREEMENT WITH THE SALT RIVER PIMA MARICOPA INDIAN COMMUNITY RELATING TO PROPOSITION 202 FUNDING ENACTMENTS: BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS as follows: SECTION 1. The Intergovernmental Agreement between the Town of Fountain Hills and the Salt River Pima Maricopa Indian Community relating to Proposition 202 funding for promotion of tourism and other public programs (the "Agreement") is hereby approved in substantially the form and substance attached hereto as Exhibit A, incorporated herein by reference. SECTION 2. The Mayor, the Town Manager, the Town Clerk and the Town Attorney are hereby authorized and directed to cause the execution of the Agreement and to take all steps necessary to carry out the purpose and intent of this Resolution. PASSED AND ADOPTED by the Mayor and Council of the Town of Fountain Hills, Arizona, this 19th day of November, 2019. FOR THE TOWN OF FOUNTAIN HILLS: ATTESTED TO: _______ Ginny Dickey, Mayor Elizabeth A. Burke, Town Clerk REVIEWED BY: APPROVED AS TO FORM: Grady E. Miller, Town Manager Aaron D. Arnson, Town Attorney 2475916.2 Contract No. INTERGOVERNMENTAL AGREEMENT BETWEEN THE SALT RIVER PIMA MARICOPA INDIAN COMMUNITY AND THE TOWN OF FOUNTAIN HILLS This Intergovernmental Agreement (“Agreement) is entered into by and between the Salt River Pima-Maricopa Indian Community (“SRPMIC”), a Federally-Recognized Indian Tribe, and the Town of Fountain Hills (the “Town”), pursuant to Section 12 Payment of Regulatory Costs; Tribal Contributions (“Section 12”) of the SRPMIC and State of Arizona Gaming Compact 2002 (“Compact”) and Article VII, § 1(h) of the SRPMIC Constitution and A.R.S. §5-601.02. RECITALS 1. The SRPMIC and the Town may enter into an agreement with one another for the distribution of a portion of 12% of the SRPMIC annual contribution (“Contribution”) under Section 12 of the Compact to cities, towns, or counties that benefit the general public or promote commerce and economic development pursuant to A.R.S. §5- 601.02. 2. The SRPMIC is authorized by Article VII, Section 1(h) of the Constitution of SRPMIC to consult, negotiate, contract and conclude and perform agreements with Federal, state, local governments and Indian Tribes, as well as any person, association, partnership, corporation, government or other private entity. 3. The Town is authorized by A.R.S. § 11-951 through § 11-954 to enter into intergovernmental agreements with other governmental agencies including Indian Tribes. 4. The SRPMIC desires to convey to the Town a portion of its annual 12% local revenue- sharing contribution (“Contribution”) required to be paid to local governments. NOW THEREFORE, in consideration of the foregoing recitals, which are incorporated herein, and the covenants and promises set forth below, the SRPMIC and the Town hereby mutually agree as follows: AGREEMENT 1. Purpose. The purpose of this Agreement is to set forth the rights and responsibilities of the parties with respect to the payment and distribution of the Contribution(s), as hereinafter defined. 2475916.2 2 2. Contribution: The SRPMIC shall provide the Contribution to the Town, in the amount of $ 30,000.00 following execution of this Agreement. The Contribution shall be used solely for the Town’s tourism program. Total Disbursement: $ 30,000.00 3. Payment and Use of Funds. a. Use of Funds for Purposes Other Than to Fulfill Agreement. The Town shall use the Contribution only for the express purpose contained herein. b. Inspection and Audit. To ensure compliance with this Agreement, the SRPMIC hereby reserves the right to inspect any and all records maintained by the Town with respect to this transaction upon seven (7) days prior, written notice to the Town. The Town shall allow the SRPMIC reasonable access to the records pertaining thereto. This section shall survive termination, cancellation, or revocations, whether whole or in part, of this Agreement for a period of one (1) year following the date of such termination, cancellation, or revocation. 4. Management of the Project. a. Use of Contributions and Recordkeeping. The Town shall have responsibility for disbursing the Contributions to the recipients in amounts consistent with this Agreement. Within a reasonable time following receipt of the Contributions from the SRPMIC, the Town shall use the Contributions in accordance with applicable Town policies and procedures governing the use of funds. The Town shall keep and maintain records relating to this Agreement. b. Responsibilities of the Town of Fountain Hills Following Disbursement of Contributions. The parties agree that the Town of Gilbert is merely acting as a conduit for distribution of funds to the recipients that are not departments, agencies or offices of the Town of Gilbert (“non-Town recipients”). Upon distribution of the Contributions to the non-Town recipients as specified in Section 2 of this Agreement, the Town of Gilbert shall have no further responsibility to the SRPMIC with respect to such funds or the use thereof by the non-Town recipients. Therefore, upon the Town of Gilbert’s payment of the Contributions to the non-Town recipients as provided in Section 2, the SRPMIC shall release the Town of Gilbert from any and all claims, demands, debts, liabilities, or obligations that may arise in the event that the non-Town recipients fail for any reason to expend the Contributions in accordance with Section 2. 2475916.2 3 The SRPMIC further agrees that the Town of Gilbert shall have no obligation to reimburse the SRPMIC the amount of the Contributions for any reason after the Town of Gilbert disburses the Contributions to the non-Town recipients and that the SRPMIC shall look solely to the non- Town recipients for repayment of the Contributions in the event the Contributions are not used for the intended purposes 5. Notices. Any notice, communication or modification shall be given in writing and shall be given by registered or certified mail or in person to the following individuals. The date of receipt of such notices shall be the date the notice shall be deemed to have been given. For the SRPMIC: Martin Harvier, President Salt River Pima Maricopa Indian Community 10005 E. Osborn Road Scottsdale, Arizona 85256 For the Town of Fountain Hills: [contact point] Town of Fountain Hills 16705 East Avenue of the Fountains Fountain Hills, Arizona 85268 6. Transactional Conflict of Interest. All parties hereto acknowledge that this Agreement is subject to cancellation by the Town pursuant to the provisions of Section 38-511, Arizona Revised Statutes. 7. Term and Termination of Agreement. a. Effective Date. This Agreement shall be effective on the date it is signed by the SRPMIC authorized representative. b. Term. This Agreement shall commence upon the Effective Date and shall terminate when the Contribution has been received and fully used by the Town, as specified in Section 2 of this Agreement. 8. Indemnification. a. Indemnification. Each party (as “Indemnitor”) shall indemnify, defend, and hold harmless the other party (as “Indemnitee”), its governing body, officers, departments, employees and agents from and against any and all 2475916.2 4 suits, actions, legal or administrative proceedings, claims, demands, liens, losses, fines or penalties, damages, liability, interest, attorneys, consultants and accountant fees or costs and expenses of whatsoever kind and nature (collectively referred to as “Claims”), but only to the extent that such Claims which result in vicarious/derivative liability to the other party resulting from or arising out of the negligence or willful misconduct of its employees or agents in performing the duties set forth in this Agreement. b. Severability. This section shall survive termination, cancellation, or revocation whether whole or in part, of this Agreement for a period of one (1) year from the date of such termination, cancellation or revocation unless a timely claim is filed under A.R.S. § 12-821.01, in which case this paragraph shall remain in effect for each claim and/or lawsuit filed thereafter, but in no event shall this paragraph survive more than five (5) years from the date of termination, cancellation or revocation of this Agreement. 9. Interpretation of Agreement. a. Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained herein, and all prior or contemporaneous agreements and understandings, oral or written, are hereby superseded and merged herein. b. Amendment. This Agreement shall not be modified, amended, altered, or changed except by written agreement signed by both parties. c. Construction and Interpretation. All provisions of this Agreement shall be construed to be consistent with the intention of the parties as expressed in the recitals contained herein. d. Relationship of the Parties. Neither party shall be deemed to be an employee or agent of the other party to this Agreement. e. Days. Days shall mean calendar days. f. Severability. In the event that any provisions of this Agreement or the application thereof is declared invalid or void by statute or judicial decision, such action shall have no effect on other provisions and their application which can be given effect without the invalid or void provision or application, and to this extent the provisions of the Agreement are severable. In the event that any provision of this Agreement is declared invalid or void, each party agrees to meet promptly upon request of the other party in an attempt to reach an agreement on a substitute provision. 2475916.2 5 10. Non-Waiver of Sovereign Immunity. Nothing in this Intergovernmental Agreement shall be construed to waive the Sovereign Immunity of the SRPMIC. IN WITNESS WHEREOF, the Town has caused this Intergovernmental Agreement to be approved by the Town Council, executed by its Mayor and attested to by its Town Clerk, pursuant to the above stated powers and authority, and the SRPMIC has caused this Intergovernmental Agreement to be executed by the SRPMIC Council and attested to by its President. This Agreement is effective upon signature of a duly appointed representative of the Salt River Pima-Maricopa Indian Community. IN WITNESS WHEREOF, the Parties have executed this Agreement. SALT RIVER TOWN OF FOUNTAIN HILLS, PIMA-MARICOPA INDIAN COMMUNITY, an Arizona Municipal Corporation: A Federally Recognized Indian Tribe: By:______________________________ By:___________________________ Name:_Martin Harvier ________ Name: Its: President_________________________ Its: Mayor Date: Date: ATTEST: ______________________________ [Insert name, title] 2475916.2 6 APPROVAL OF SRPMIC ATTORNEY The undersigned attorney acknowledges that s/he has reviewed the above Agreement on behalf of the Salt River Pima-Maricopa Indian Community, and has determined that this Agreement is in proper form and that execution hereof is within the powers and authority granted under the Constitution of the Salt River Pima-Maricopa Indian Community, Article VII, §1(h). This acknowledgement shall not constitute nor be construed as a waiver of the Sovereign Immunity of the Salt River Pima-Maricopa Indian Community. ________________________________ ______________________ General Counsel Date APPROVAL OF CITY ATTORNEY In accordance with the requirements of A.R.S. § 11-952(D), the undersigned attorney acknowledges that (i) s/he has reviewed the above Agreement on behalf of the Town of Fountain Hills and (ii) as to the Town of Fountain Hills only, has determined that this Agreement is in proper form and that execution hereof is within the powers and authority granted under the laws of the State of Arizona. By: _______________________________ _______________________ Town Attorney Date ITEM 6. D. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Consent Submitting Department: Administration Prepared by: Kukkola Sonia, Financial Services Technician Staff Contact Information: David Pock, Finance Director Request to Town Council Regular Meeting (Agenda Language):  CONSIDERATION OF  approving a Liquor License Application submitted by Kostas Sotirhos, owner of Alexanders Greek Kitchen, located at 13014 N. Saguaro Boulevard #101, Fountain Hills, AZ. This is for a series 12 (restaurant) license.  Staff Summary (Background) The purpose of this item is to obtain Council's recommendation regarding a liquor license application submitted by Kostas Sotirhos, owner of Alexanders Greek Kitchen for submission to the Arizona Department of Liquor. The application was reviewed by staff for compliance with Town ordinances.  Staff recommends approval of this liquor license application as submitted.  Related Ordinance, Policy or Guiding Principle A.R.S.§4-201; 4-202;4-203 &4-205 and R19-1-102 and R19-1-311. Risk Analysis N/A Recommendation(s) by Board(s) or Commission(s) N/A Staff Recommendation(s) Staff recommends approval of the application. SUGGESTED MOTION MOVE to approve the #12 liquor license application for Alexanders Greek Kitchen, located at 13014 N. Saguaro Boulevard #101, Fountain Hills, AZ Attachments LIQ LIC APPL  DEPT RECOMMENDATION  Form Review Inbox Reviewed By Date Finance Director Elizabeth A. Burke 11/13/2019 12:45 PM Town Attorney Elizabeth A. Burke 11/13/2019 12:45 PM Town Manager Elizabeth A. Burke 11/13/2019 12:45 PM Form Started By: Kukkola Sonia Started On: 11/13/2019 10:52 AM Final Approval Date: 11/13/2019  REDACTED REDACTED REDACTED REDACTED TOWN OF FOUNTAIN HILLS ADMINISTRATION DEPARTMENT INTER OFFICE MEMO TO: (as applicable) • Streets Division • Fire Department • Building Division • Community Services • Development Services • Law Enforcement • Licensing DATE: 10/30/19 FR: Sonia Kukkola, Financial Services Technician RE: Liquor License Application Attached is a Liquor License Application for staff review. Review the application, then mark or sign, indicating staff’s recommendation for approval (with or without stipulations) or denial. If staff’s recommendation is to deny and/or there are stipulations for approval, please attach a memo that specifies the reasoning and the memo will be forwarded on to the Town Council for their consideration of this application. Name of Organization: Alexander’s Gre ek Kitchen, 13014 N Saguaro Boulevard #101, Fountain Hills AZ 85268 Applicant: Kostas Sotirhos Date(s) of Event: N/A Date Application Received: 10/21/19 Town Council Agenda Date: 11/19/19 STAFF REVIEW AND RECOMMENDATION: Department/Division Staff Member Approved Denied N/A P & Z Marissa Moore X Community Services Linda Ayres X Peter Johnson Building Safety X Fire Department Jason Payne X Law Enforcement Larry Kratzer X Licensing Sonia Kukkola X Street Department Jeff Pierce X Attach report for denial or any recommendation requiring stipulations. ITEM 7. A. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Regular Agenda Submitting Department: Development Services Prepared by: John Wesley, Development Services Director Staff Contact Information: John Wesley, Development Services Director Request to Town Council Regular Meeting (Agenda Language):   PUBLIC HEARING AND CONSIDERATION OF adopting Ordinance#19-16, a text amendment to the Town of Fountain Hills Zoning Ordinance, Chapter 6, Sign Regulations, Sections 6.08 Zoning Districts Table, 6.08. M. and 6.08. Q. The amendments update the Zoning Districts Table with the new language, replace the existing language in Section 6.08 M. regarding Garage Sale Signs with new provisions for Residential Directory Signs and eliminate Section 6.08. Q. regarding Open House Signs.(Case #Z2019-06) (DUE TO A VARIETY OF FACTORS, STAFF IS REQUESTING THE PUBLIC HEARING REMAIN ON THE AGENDA, BUT BE CONTINUED TO THE DECEMBER 3, 2019, COUNCIL MEETING.) Staff Summary (background) In 2015 the U. S. Supreme Court, in a case known as Reed v. Town of Gilbert, ruled that local sign regulations could not be based on the content or the message presented on the sign.  Signs can only be regulated based on physical characteristics such as size, location, material, etc.   There are several examples in the Town’s sign ordinance where the regulations are based on the content of the sign.  Therefore, the Town has started a process to review and update the entire sign ordinance to be compliant with the Supreme Court ruling.   The most challenging area we have to address as part of this sign code update will be temporary signs.  Examples include garage sale signs, for sale signs, and open house signs.  Political signs would also fall in this category, but the State has pre-empted most local regulation of political signs.  Because of the regular issues staff has with the enforcement of the current code as it relates to temporary signs, particularly open house and garage sale signs, staff has decided to handle this specific issue ahead of the full sign code update.  We anticipate having the full sign code update completed by May 2020.   In the current ordinance, Section 6.08 M provides regulations for garage sale signs and Section 6.08 Q provides regulations for open house signs (see attached copies of these sections of the current ordinance).  The regulations are similar but not exactly the same.  To properly enforce the requirements of the code for these two signs, you must read the sign.  Therefore, these sign types are not in compliance with the Court ruling in Reed v. Town of Gilbert.  This creates a challenge to the enforcement of  these ordinance provisions.   Staff’s proposal is to delete the two current sign designations in the ordinance and replace them with one new sign type – Residential Directional Signs.  The new regulations are a combination of the requirements in the code today for the two types of signs.   The proposed regulations are: Residential Directional Signs.  Residential directional signs are portable, temporary signs that are placed on the ground or may be implanted into the ground without the use of any tools or equipment and can easily be picked up and carried by one person.  Residential directional signs are used to direct traffic to a home.  Residential directional signs must conform to the following requirements:  Each single-family lot, condominium unit, or model home may place one (1) sign anywhere on the property and each single-family home, condominium complex, or model home cluster may place one (1) additional sign at each turning movement beginning at the subject property leading out to a major street with a maximum of five (5) signs. 1. Must be placed at least one (1) foot behind the curb.  If no curb is present, signs shall be located at least one (1 foot from the edge of the paved portion of the public right-of-way.  Shall not be placed on sidewalks or within the center medians that divide portions of paved or unpaved roadways, provided however, that a sign may be placed in a median between a frontage road and the primary, parallel street where the primary street intersects with another roadway.  Signs must be placed so as to not create a sight visibility problem at the intersection. 2. No such sign shall be permitted within 150 feet of Shea Boulevard.3. Signs may only be displayed between the hours of 6 a.m. and 9 p.m.4. Maximum size shall not exceed six (6) square feet.5. Maximum height shall not exceed three (3) feet.6. Signs must be made of metal, plastic, or wood and be maintained in good condition.7. No sign may be attached to any utility pole or box, light pole, street sign, bus shelter or any structure within the public right-of-way. 8. Signs shall not damage any vegetation or rest against other objects or vegetation.9. Illumination is prohibited.10. To be compliant with the Supreme Court ruling, the proposed regulation only addresses issues of size, location, material, number, and time.  The ordinance does not regulate the message that can be on the sign.  Therefore, these signs can be used to direct people to any type of activity taking place on residential property.    The proposed new language clears up a problem with regards to Shea Boulevard.  Currently, garage sales signs may not be posted in the Shea Boulevard right-of-way and open house signs shall not be within 150 of the Shea right-of-way.  It is difficult for the average person to know where the Shea right-of-way is or be able to then measure the distance from the right-of-way.  The proposed code standardizes the distance and measures it from the curb which is easy to locate. There is one issue still remaining with regards to Shea.  While most subdivisions along Shea take their access from a street other than Shea (e.g. The Villas at Firerock are accessed from Firerock Country Club Dr.; Belera at Firerock is accessed from Belera Dr.) which provides a street other than Shea to place a sign to direct people into the subdivision, there is one subdivision, Palatial Estates, that accesses Shea Blvd. directly.  A request has been made to amend the proposed ordinance to allow this as an exception to the current language in the code.      Related Ordinance, Policy or Guiding Principle N/A Risk Analysis N/A Recommendation(s) by Board(s) or Commission(s) The Planning and Zoning Commission reviewed this ordinance at their October 3 and 17 meetings.  At their October 17 meeting they added language to the draft ordinance to allow the signs in the frontage road median.  The Commission voted 5-0 to recommend approval of the ordinance amendment. Staff Recommendation(s) Staff has some concern with the last amendment by the P&Z Commission to allow signs in the frontage road median.  Staff is working on a comprehensive update to the Sign Ordinance.  We do not know for sure at this time how we will handle temporary signs as a whole.  While it may end up being appropriate, staff would prefer to wait for the full sign ordinance update to be completed to add this provision. SUGGESTED MOTION MOVE to continue public hearing to December 3, 2019. Attachments Draft Ordinance  Form Review Inbox Reviewed By Date Town Manager Grady E. Miller 11/13/2019 09:51 AM Town Clerk Development Services Director (Originator) Town Attorney Town Manager Form Started By: John Wesley Started On: 10/21/2019 04:57 PM ORDINANCE NO. 19-16 AN ORDINANCE OF THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS, ARIZONA, AMENDING THE TOWN OF FOUNTAIN HILLS ZONING ORDINANCE, CHAPTER 6, SIGN REGULATIONS, AMENDING SECTION 6.08, SIGNS ALLOWED OR REQUIRED TABLE, REPLACING SECTION 6.08 M, GARAGE SALE SIGNS WITH A NEW SECTION RESIDENTIAL DIRECTIONAL SIGNS AND DELETING SECTION 6.08 Q OPEN HOUSE SIGNS. WHEREAS, the Mayor and Council of the Town of Fountain Hills (the “Town Council”) adopted Ordinance No. 93-22 on November 18, 1993, which adopted the Zoning Ordinance for the Town of Fountain Hills (the “Zoning Ordinance”); and WHEREAS, the Town Council desires to amend the Zoning Ordinance to revise Chapter 6, Signs, Section 6.08, Signs Allowed or Required, relating to garage sale and open house signs; and WHEREAS, the Town Council desires to amend the Zoning Ordinance to revise Chapter 6, Signs, Section 6.08, Signs Allowed or Required, to establish a new Residential Directional Yard Sign; and WHEREAS, in accordance with the Zoning Ordinance and pursuant to ARIZ. REV. STAT. § 9-462.04, public hearings regarding this ordinance were advertised in the September 11, 2019 and September 18, 2019 editions of the Fountain Hills Times; and WHEREAS, public hearings were held by the Fountain Hills Planning & Zoning Commission on September 26, 2019 and by the Town Council on October 15, 2019. NOW, THEREFORE, BE IT ORDAINED BY THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS as follows: SECTION 1. The recitals above are hereby incorporated as if fully set forth herein. SECTION 2. The Zoning Ordinance, Chapter 6, (Sign Regulations), Section 6.08 (Signs Allowed or Required), is hereby amended as follows: Zoning District Commercial Residential/ Open Space Recreation Industrial Lodging Total Aggregate Sign Area A N/A A A A-Frame Sign B N/A B B Awning/Canopy Sign C C C C Zoning District Commercial Residential/ Open Space Recreation Industrial Lodging Civic Organization Identification E E E E Comprehensive Sign Plans Z N/A Z Z Contractor Signs F F F F Directory Signs G G G G Electronic Message Center CC * CC N/A Event Banners, Balloons and Pennants D * D D Flag I I I I Freestanding Signs J N/A J J Fuel Price Signs K N/A N/A N/A Future Development Signs L L L L Garage Sale Signs RESIDENTIAL DIRECTIONAL SIGNS MN/A M MN/A MN/A Menu Board N N/A N/A N/A Multi-Tenant Building Identification Signs O N/A O O Neon Signs P N/A P P Open House Directional SignsRESERVED Q Q Q N/A Political and Ideological Signs R R R R Projecting Signs S N/A S S Real Estate Signs T T T T Shared Monument Signs J N/A J J Sign Walkers BB N/A N/A N/A Special Event Signage U U U U Street Addresses AA AA AA AA Subdivision Identification Signs J J J J Under-Canopy Signs V N/A V V Wall Signs W N/A W W Window Signs X N/A X X Window Decorations/Painting (Holiday Theme) Y Y Y Y * Specific Regulations Apply SECTION 3. The Zoning Ordinance, Chapter 6, (Sign Regulations), Section 6.08 M, is hereby amended as follows: M. Garage Sale Signs RESIDENTIAL DIRECTIONAL SIGNS. RESIDENTIAL DIRECTIONAL SIGNS ARE PORTABLE, TEMPORARY SIGNS THAT ARE PLACED ON THE GROUND OR MAY BE IMPLANTED INTO THE GROUND WITHOUT THE USE OF ANY TOOLS OR EQUIPMENT AND CAN EASILY BE PICKED UP AND CARRIED BY ONE PERSON. RESIDENTIAL DIRECTIONAL SIGNS ARE USED TO DIRECT TRAFFIC TO A HOME. RESIDENTIAL DIRECTIONAL SIGNS MUST CONFORM TO THE FOLLOWING REQUIREMENTSare allowed as follows: 1. Garage sales signs may only be used for garage sales, yard sales and carport sales as outlined in Section 8-3-3 of the Town Code.EACH SINGLE-FAMILY LOT, CONDOMINIMUM UNIT, OR MODEL HOME MAY PLACE ONE (1) SIGN ANYWHERE ON THE PROPERTY AND EACH SINGLE-FAMILY HOME, CONDOMINIUM COMPLEX, OR MODEL HOME CLUSTER MAY PLACE ONE (1) ADDITIONAL SIGN AT EACH TURNING MOVEMENT BEGINNING AT THE SUBJECT PROPERTY OUT TO A MAJOR STREET WITH A MAXIMUM OF FIVE (5) SIGNS. 2. Garage sale signs mMust be placed at least one (1) foot behind the curb. If no curb is present, signs shall be located at least one (1) foot from the edge of the paved portion of the public right-of-way. Garage sale signs sShall not be placed on sidewalks or within the center medians that divide portions of paved or unpaved roadways., PROVIDED, HOWEVER, THAT A SIGN MAY BE PLACED IN A MEDIAN BETWEEN A FRONTAGE ROAD AND THE PRIMARY, PARALLEL STREET WHERE THE PRIMARY STREET INTERSECTS ANOTHER ROADWAY. SIGNS MUST BE PLACED SO AS TO NOT CREATE A SIGHT VISIBILITY PROBLEM AT THE INTERSECTION. 3. No garage saleSUCH sign shall be permitted within 150 FEET the Shea Boulevard public right-of-way. 4. No garage sale sign shall be located within three hundred (300) feet along the same roadway, as measured along the public right-of-way line(s), as another sign bearing the same or substantially the same message.SIGNS MAY ONLY BE DISPLAYED BETWEEN THE HOURS OF 6 A.M. AND 9 P.M. 5. There shall not be more than five (5) garage sale signs to any destination.MAXIMUM SIZE SHALL NOT EXCEED SIX (6) SQUARE FEET. 6. Garage sale signs may only be displayed between sunrise and sunset. Signs remaining in public rights-of-way after sunset, or placed in rights-of-way prior to sunrise, shall be subject to confiscation and destruction by the Town.MAXIMUM HEIGHT SHALL NOT EXCEED THREE (3) FEET. 7. Maximum size shall not exceed four and one-half (4.5) square feet.SIGNS MUST BE MADE OF METAL, PLASTIC, OR WOOD AND BE MAINTAINED IN GOOD CONDITION. 8. Maximum height shall not exceed three (3) feet.NO SIGN MAY BE ATTACHED TO ANY UTILITY POLE OR BOX, LIGHT POLE, STREET SIGN, BUS SHELTER OR ANY STRUCTURE WITHIN THE PUBLIC RIGHT-OF- WAY. 9. Signs may only be constructed of wrought iron, sheet metal, plastic or of wood that is at least 3/8 of an inch thick.SIGNS SHALL NOT DAMAGE ANY VEGETATION OR REST AGAINST OTHER OBJECTS OR VEGETATION. 10. Garage Sale signs shall not be attached to any utility pole or box, light pole, street sign, bus shelter or any structure within the public right-of-way.ILLUMINATION IS PROHIBITED SECTION 4. The Zoning Ordinance, Chapter 6, (Sign Regulations), Section 6.08 Q, is hereby amended as follows: Q. RESERVEDOpen House Directional Signs are allowed only as follows: 1. Open house directional signs shall be used only to direct traffic to a residence for sale, lease or rent. 2. Maximum number of directional signs for each residence for sale, lease or rent shall be five (5). 3. Maximum area for each sign shall be six (6) square feet. 4. No sign may be greater than twenty-four (24) inches wide and thirty-six (36) inches tall. 5. Signs shall not be illuminated. 6. Sign must contain a directional arrow. 7. Signs shall be placed at least one (1) foot behind the curb. If no curb is present, signs shall be located at least one (1) foot from the edge of the paved portion of the public right-of-way. No sign is allowed on sidewalks or within the center medians that divide portions of paved or unpaved roadways. 8. No sign shall be placed within one hundred fifty (150) linear feet of the Shea Boulevard public right-of-way. 9. Signs must be made by a professional sign company. 10. Signs shall not be located within one hundred (100) linear feet of any sign advertising the same location. 11. Sign placement, other than as described above, may be approved by the Zoning Administrator or authorized designee. SECTION 5. If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any reason held to be unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. SECTION 5. The Mayor, the Town Manager, the Town Clerk and the Town Attorney are hereby authorized and directed to execute all documents and take all steps necessary to carry out the purpose and intent of this Ordinance. PASSED AND ADOPTED by the Mayor and Council of the Town of Fountain Hills, Arizona, November 19, 2019. FOR THE TOWN OF FOUNTAIN HILLS: ATTESTED TO: Ginny Dickey, Mayor Elizabeth A. Burke, Town Clerk REVIEWED BY: APPROVED AS TO FORM: Grady Miller, Town Manager Aaron D. Arnson, Town Attorney ITEM 7. B. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Regular Agenda Submitting Department: Development Services Prepared by: John Wesley, Development Services Director Staff Contact Information: John Wesley, Development Services Director Request to Town Council Regular Meeting (Agenda Language):  CONSIDERATION OF  Resolution 2019-52 approving a Development Agreement associated with the Daybreak P.A.D. rezoning located at the northeast corner of Palisades and Shea Boulevards. Staff Summary (Background) On October 1, 2019, the Town Council held a public hearing to review and consider the Minor General Plan Amendment, the Rezoning, and the associated Development Agreement for the proposed Daybreak development at Palisades and Shea.  The Council voted to approve the Minor General Plan Amendment and the Rezoning.  After some discussion, no action was taken on the Development Agreement.  The Council held an executive session on the draft Development Agreement on October 23, 2019. At that meeting the Council gave staff direction regarding points to be negotiated with the applicant in the Development Agreement.  An additional executive session was held on October 30, 2019, to review progress and give staff further direction. Due to the fact that the development agreement wasn't received in time for the public meeting on November 5, 2019, Mayor Dickey removed the development agreement from the November 5, 2019, Town Council meeting agenda.  The draft development agreement is attached which reflects the negotiations between the Town Attorney and representative of the proposed Daybreak development after November 5, 2019.    Related Ordinance, Policy or Guiding Principle N/A Risk Analysis N/A Recommendation(s) by Board(s) or Commission(s) N/A Staff Recommendation(s) Staff recommends approval of the Daybreak Development Agreement.     SUGGESTED MOTION MOVE to ADOPT/DENY Resolution 2019-52. Attachments Development Agreement  Daybreak PAD Narrative  Form Review Inbox Reviewed By Date Development Services Director (Originator)John Wesley 10/30/2019 05:13 PM Town Attorney Elizabeth A. Burke 10/31/2019 10:05 AM Town Manager Grady E. Miller 10/31/2019 10:06 AM Town Manager Grady E. Miller 11/13/2019 11:00 AM Form Started By: John Wesley Started On: 10/30/2019 05:02 PM Final Approval Date: 11/13/2019  DEVELOPMENT AGREEMENT BETWEEN THE TOWN OF FOUNTAIN HILLS AND HILLTOP VISTA PROPERTIES, LLC This Development Agreement (“Agreement”) dated November 19, 2019, (“Effective Date”) is between the Town of Fountain Hills, Arizona, an Arizona municipal corporation (the “Town”) and Hilltop Vista Properties, LLC, an Arizona limited liability company (the “Developer”), together, the “Parties.” RECITALS A. Developer has entered into a real estate purchase contract for the purchase of approximately 59.8 acres of real property located in Fountain Hills, Arizona, more particularly described on Exhibit A, attached and incorporated into this Agreement (the “Property”). B. Developer intends that the Property be developed for multi-family and related uses, including a portion for age-restricted multi-family units (the “Project”), according to the Site Plan that is attached to this Agreement as Exhibit B (the “Site Plan”) and the “Daybreak PAD” attached hereto as Exhibit C (the “PAD”), both of which are incorporated into this Agreement. C. The Town desires that the Property be developed and has determined that encouraging the development of the Property pursuant to this Agreement will result in significant planning, economic and other public purpose benefits to the Town and its residents by, among other things (i) the construction of public improvements, (ii) development of the Property in a manner consistent with the Town’s General Plan, (iii) an increase in sales tax revenues to the Town arising from or relating to the development of the Property and (iv) the creation of new jobs and otherwise enhancing the economic welfare of the residents of the Town. D. The Parties understand and acknowledge that the ultimate development of the Project on the Property is a project of such magnitude that the Developer requires assurances from the Town that the Project will be developed as contemplated by this Agreement. Developer intends to complete the acquisition of the Property and thereafter it is intended that the Project will be developed on the Property subject to and in accordance with the Site Plan and the PAD. The Parties further understand and acknowledge that the Town seeks assurances from the Developer that the Developer will complete certain Public Improvements necessary for the development of the Property in accordance with the Site Plan and the PAD. E. The Parties understand and acknowledge that this Agreement is a “Development Agreement’’ within the meaning of and entered into pursuant to the terms of ARIZ. REV. STAT. § 9-500.05, in order to facilitate the proper development of the Property by providing for, among other things (i) conditions, terms, restrictions and requirements for the Property by the Town and (ii) other matters related to the development of the Property. The terms of this Agreement shall constitute covenants running with the Property as more fully described in this Agreement, subject to the Closing Contingency, as defined in Section 7.2. 2 AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals, the promises contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties hereto agree as follows: 1. Incorporation of Recitals. The introduction and recitals are true and correct and incorporated by this reference as if fully set forth herein. 2. Term. The Developer, its successors and assigns, shall have the right to implement development on the Property in accordance with this Agreement for a period of 10 years from the Effective Date. If development of at least one phase of the Project is not commenced within this 10 year period, this Agreement shall automatically terminate as to the Property without the necessity of any notice, agreement or recording by or between the Parties (the “Term”); provided, however, that provisions of this Agreement that specifically survive the termination of this Agreement shall remain in full force and effect, subject only to the termination provisions herein specifically related thereto. For purposes of this Section 2, although grading of the Property may occur separately on one or both of the phases of the Project at any time, “development” shall mean the commencement of vertical construction beyond grading and foundation work for which a construction permit is issued. 3. PAD Rezoning. The PAD, which is attached as an exhibit to the Town Council’s approved ordinance that adopts the PAD rezoning, including all stipulations, alterations and conditions included as part of its approval is referred to herein as the “PAD Rezoning Ordinance.” The Parties agree and understand that all items submitted in the PAD application, and any letters, comments and other materials explaining or discussing that application and PAD Application brochure are of no force and effect, and that Developer and Town shall look solely to Town’s regulations, the PAD Rezoning Ordinance, and this Agreement with respect to the zoning regulations for the Property. To the extent any conflict arises as between the PAD Rezoning Ordinance, this Agreement, and the Town’s regulations, the PAD Rezoning Ordinance shall control first, then this Development Agreement, and then the Town’s regulations, in that order of precedence. 4. Amendment to Plat. The Property has been previously platted by the Fountain Hills Resort Final Plat, recorded in the Maricopa County Recorder's Office, Book 597 of Maps, Page 42 (the "Current Plat"), which includes certain restrictions, dedications, easements and other matters shown on the Current Plat. Pursuant to the Town of Fountain Hills Subdivision Ordinance, Article 2, § 2.07.A for Minor Plats, the owner of the Property shall process a Minor Replat prior to securing a building permit. The Town agrees to process the Minor Plat Amendment creating the new lots. 5. Matters Relating to Development of the Property. 5.1 Plan of Development. The PAD, the Daybreak Final Plat and this Agreement collectively constitute a “Plan of Development” which includes modifications to the Town of Fountain Hills Subdivision Ordinance (the “Subdivision Ordinance”) and Town of 3 Fountain Hills Zoning Ordinance (the “Zoning Ordinance”). It is the intent of the Parties that the Project be constructed in accordance with the Subdivision Ordinance and the Zoning Ordinance as amended by the terms of this Agreement (the “Zoning”). This Agreement is limited in scope in that its sole purpose is to allow for the limited set of modifications to the Subdivision Ordinance and Zoning Ordinance set forth herein. 5.2 Zoning. Concurrent with the execution and approval of this Agreement, the Town has approved the PAD Rezoning Ordinance and the PAD. 5.2.1 Timing of Vesting. The Zoning in the Property is hereby vested subject to the satisfaction of the Closing Contingency. 5.2.2 Vesting Defined. “Vested” means that for a period of 10 years after the Effective Date, the Town shall not, without Developer’s (or its successor’s) written consent, (i) change the Zoning, or (ii) amend a zoning classification or (iii) take any other action in a manner that would apply to the Property, where any such change, amendment, or action would reduce the density, permitted uses, or development standards provided for hereunder or otherwise in effect as of the date hereof. 5.2.3 Allowed Uses. At no time shall allowed uses include a licensed assisted living facility. 5.3 Density. 5.3.1 Maximum Number of Units. Pursuant to the PAD, Developer shall be permitted to develop, and the Town shall approve for development, a final plat and site plans for development of the Property for the number of multi-family units requested by Developer, provided there shall be no more than 400 multi-family units within the Property. 5.4 Subdivision Standards. The Town’s Subdivision Ordinance establishes the standards for location and installation of infrastructure within the Property (the “Subdivision Standards”). The Parties agree that certain variations from the Subdivision Standards are appropriate for development within the Property. Accordingly, the Parties hereby agree to the following variations from the Subdivision Standards: 5.4.1 Retaining Walls. The Town hereby approves retaining walls with a height of (a) six feet for cut slopes, without handrails and (b) eight feet for fill slopes, without handrails, unless (i) a sidewalk or pathway is within five feet of a retaining wall or (ii) a site roadway or parking area curb is either within ten feet of a retaining wall or is within 20’ of Palisades Boulevard, in which events a handrail shall be required. 5.4.2 Cuts and Fills. The prohibition in Subsection 5.03(D) of the Subdivision Ordinance against cuts in excess of 10 feet in height is hereby waived. The Parties agree that the cut and fill standards shall be modified as provided in the PAD. 5.4.3 Mountain Cut Standards. The Town has concurrently herewith approved the PAD which, where permissible in the reasonable judgment of Developer’s independent soils engineer, provides for exposed cut slopes equal to one and one-half foot 4 horizontal for every one foot vertical (1.5:1) (the “Mountain Cut Standards”). Grading standards shall follow the standards approved on the PAD. Notwithstanding the foregoing, un-retained slopes may be up to 2:1 for fill slopes. Un-retained slopes may exceed 10 feet for cut slopes so long as the natural material is stable as determined by Developer’s independent geotechnical engineer and Town Engineer. The Town agrees that the Subdivision Standards shall be further modified in conjunction with its approval of the final plat to allow development of the Property in accordance with the Mountain Cut Standards. 5.4.4 Sanitary Sewer. The sanitary sewer system for the Property will be designed to the specifications of the Fountain Hills Sanitary District and subject to approval by the Fountain Hills Sanitary District and review by the Town. 5.4.5 Water. The water systems for the Property shall be designed to specifications established by EPCOR and subject to approval by EPCOR and review by the Town. The Town shall have final approval relating to fire flow design, which shall conform to standard Fountain Hills code practices. 5.5 Zoning Standards. The standards for land use within the Property shall be as provided in the PAD (the “Zoning Standards”), which Zoning Standards are incorporated into and made a part of this Agreement. 5.6 Phasing Plan. The Developer shall use reasonable efforts to conform to the Phasing Plan with respect to the duration of construction as set forth in the PAD. 5.7 Miscellaneous Engineering Matters. The Town hereby approves (i) roadways, parking areas and driveways using CMP pipe to carry street flows; (ii) warranty curb replacement at five-foot intervals; (iii) roadways, parking areas and driveways with drop manholes, and (iv) other minor variations from Town policy, as set forth in this Agreement (the “Miscellaneous Matters”). Facilities for the collection of water shall be designed so as to retain safely and adequately the maximum expected storm water runoff volume equal to the difference between the predevelopment condition and the post development condition for a 100-year storm event. Detention basins shall be sized for specific drainage requirements for the Property. Detention basins need not be oversized, and no land area will be required to be set aside for additional uses. 6. Additional Obligations of the Parties. 6.1 Land Disturbance. Notwithstanding permitted disturbance according to a slope analysis per Article 5 of the Subdivision Ordinance, Developer agrees to increase acreage set aside for non-disturbance from 19 acres to 33 acres, which shall be within the hillside protection easement, as shown on the Daybreak Final Plat, and remain in its natural state. 6.2 Moratorium. The Town may not enact any moratorium, ordinance, resolution or other land-use rule or regulation or limitation on the rate, timing or sequencing of the development of the Property not in effect as of the date hereof, for a period of 10 years. 5 6.3 Utilities. Developer acknowledges that the Town, at the date of execution of this Agreement, provides no municipal utility services (except trash collection); has no control over the provision of services by other entities; and makes no representation with respect to the availability of such services provided by other entities. Notwithstanding the foregoing, the Town agrees that in the event it provides municipal utility services in the future, the To wn (i) shall make such services available to the Property on the same terms of availability as are applicable to other similar real property served by the Town, (ii) shall continue to provide such services as reasonably required in connection with development and use of the Property, and (iii) shall not adopt policies and procedures with respect to the provision of such services which would delay development of the Property. 7 Developer’s Obligations. Developer shall perform all of its duties as set forth in this Section 7.1 Zoning Adherence and Performance. Developer agrees that the development of the Project shall be in accordance with the PAD. 7.2 Closing Contingency. Developer agrees to use reasonable efforts to complete the acquisition of the Property (close escrow and confirm ownership) for development of the Project not later than 180 days after the Effective Date. The effectiveness of this Agreement is expressly conditioned upon Developer or an affiliate or assignee of Developer acquiring fee title to the Property (the “Closing Contingency”). If Developer or an affiliate or assignee of Developer does not acquire such fee title on or before 180 days after the Effective Date, then this Agreement shall automatically terminate. 7.3 Public Improvements. Developer shall design and construct all public improvements associated with the Project for street, sidewalk, traffic mitigation measures, and landscaping improvements to Palisades Boulevard as set forth in Exhibit C and as described in Exhibit D (“Public Improvements”). Upon completion and acceptance by the Town, Developer shall dedicate all such Public Improvements to the Town. 7.4 Phased Development. The Town acknowledges that Developer plans to develop the Property in up to two phases generally set forth on Exhibit E to this Agreement. 7.5 Security. 7.5.1 Performance Bond for Development. The Developer, at its expense, shall provide the Town with a performance bond in such form as reasonably required by the Town Attorney and Town Engineer in an amount equal to the estimated hard costs of the Public Improvements to ensure that the installation of Public Improvements necessary for development of the Property will be completed (the “Public Improvements Assurances”). The performance bond for any Public Improvements shall be required at the time permits are issued for the first phase of the Project. 7.5.2 Letter of Credit for Traffic Mitigation. The Developer, at its expense, shall provide the Town with a letter of credit in an amount equal to $150,000 (the “Letter of Credit”) to secure the obligation of the Developer to contribute to the cost of 6 construction and installation of a traffic signal at the intersection of Valley Vista Drive and the southern entry to the Project (the “Traffic Signal”) in accordance with the terms below. The Letter of Credit shall be required at the time the first certificate of occupancy is issued for the final phase of the Project and shall remain in effect for a period of up to three years from the date it is issued. Provided that the Town posts signs lowering the speed limit to 40 MPH on Palisades Boulevard between Shea Boulevard and the entrance to Westridge Village on or before the commencement of grading of the Project, the Developer, at the Town’s request, shall commission a traffic study at any time within two years following the issuance of the first certificate of occupancy for the final phase of the Project. If the traffic study concludes that there is a need for the Traffic Signal and the Town substantially completes construction of the Traffic Signal on or before the third anniversary of the issuance of the Letter of Credit, then the Town may draw upon the Letter of Credit to reimburse the Town for costs it expended to construct the Traffic Signal. If the traffic study concludes that there is not a need for the Traffic Signal or under any circumstances construction of the Traffic Signal is not substantially completed on or before the third anniversary of the Letter of Credit, then the Letter of Credit shall automatically terminate and the Developer shall have no further obligation pertaining to the Traffic Signal. 7.6 Third Party Review and Inspection. If expedited review of any plans is requested by Developer, upon receipt of such a request, the Town shall discuss the request with Developer and Town staff to determine who the Town will retain as its outside consultant to complete the expedited review. Once the Parties reasonably agree on (i) the applicable time frame for review, (ii) the applicable outside consultant, and (iii) the consultant’s total fees, Developer will be responsible to promptly pay the Town’s actual cost related to outsourcing as such costs are billed to the Town. The Town shall complete the review process as outlined above in a timely manner. 7.7 Dedication and Acceptance. Upon completion by Developer of any Public Improvements, the Developer shall promptly (A) notify the Town in writing of the presumptive completion of such Public Improvements and (B) dedicate to the Town, at no cost to the Town, such Public Improvements free and clear of all liens and encumbrances and in accordance with Town standards applicable to such dedication and acceptance. So long as such Public Improvements are constructed in accordance with Town standards, as verified by the inspection of the completed Public Improvements by the Town Engineer, all punch list items have been completed, and the Public Improvements are free of any liens and encumbrances, the Town shall accept the Public Improvements. The Town shall notify the Developer, in writing, of the Town’s acceptance of the Public Improvements within 30 days after notification and shall then promptly release the applicable Performance Bond. Subject to the warranty in Section 7.8, after acceptance of any Public Improvements, the Town shall maintain, repair and operate such Public Improvements at its own cost, which obligation shall survive any termination of this Agreem ent. Developer, at no cost to Town, shall dedicate, convey or obtain, as applicable all rights-of-way, rights of entry, easements and/or other use rights, wherever located, as useful or necessary for the operation and maintenance of the Public Improvements as required by the Town. 7.8 Warranty. Developer or its assignee shall give to the Town a one-year warranty for all Public Improvements, which warranty shall begin on the date that the Town accepts the Public Improvements as provided in Section 6.7. Any material deficiencies in 7 material or workmanship identified by Town staff during the one-year warranty period shall be brought to the attention of the Developer or its assignee that provided the warranty, which shall promptly remedy or cause to be remedied such deficiencies to the reasonable satisfaction of the Town Engineer. Continuing material deficiencies in a particular portion of the Public Improvements shall be sufficient grounds for the Town to require (A) an extension of the warranty as to that portion only for an additional 90 day period and (B) the proper repair of or the removal and reinstallation of, that portion of the Public Improvements that is subject to such continuing deficiencies. Regardless of whether the applicable warranty period has expired, the Developer agrees to repair any damage to the Public Improvements caused by Developer’s construction activities on the Property. Nothing contained herein shall prevent the Town or Developer from seeking recourse against any third party for damage to the Public Improvements caused by such third party, but Developer’s seeking such recourse shall not be cause for Developer to delay remediating any deficiencies. 7.9 Shuttle Service. Shuttle Service shall be provided for the age restricted portion of the Project. 7.10 Payment of Charges. Developer shall pay to the Town all applicable and lawful charges prior to the issuance of a construction permit, for platting, site plan, rezoning, permit, development, building inspection, and plan review fees imposed by the Town as of the Effective Date. Notwithstanding the foregoing, The Town hereby agrees to waive all fees pertaining to the application, review and approval of the PAD Stipulations, final plat approval and grading permits. 8 Cooperation and Alternative Dispute Resolution. 8.1 Representatives. To further the commitment of the Parties to cooperate in the implementation of this Agreement, upon the request of Developer or the Town, the Town and Developer shall each designate and appoint a representative to act respectively on behalf of the Town and its various departments and Developer, except as otherwise provided in this Agreement or by law. The initial representative for the Town shall be the Town Attorney, and the initial representative for Developer shall be Jeremy Hall or other party as identified by Developer from time to time. The representatives shall be available at all reasonable times to discuss and review the performance of the Parties to this Agreement and shall cooperate in order to facilitate any third-party action needed to complete the actions contemplated by this Agreement. 8.2 Impasse Procedure. If an impasse or dispute arises out of or relates to this Agreement, or the breach thereof, including without limitation the submittal, its interpretation or intent, or processing and approval of the final plat, the Parties agree to first try in good faith to settle the dispute by negotiation. In the event of any such negotiation, the Parties shall personally meet in an effort to resolve such dispute within 20 days of written request to do so by either the Town or Developer. 8.3 Default Cure. Upon a failure or unreasonable delay by any Party to perform or otherwise act in accordance with any term or provision of this Agreement, and failure of the procedures set forth in Sections 8.1 and 8.2 above, the other Party may give written notice 8 of default specifying the nature of the failure or delay and the manner in which it may be satisfactorily cured, if possible. In the event such failure or delay is not cured within 30 days after notice of nonperformance is given by the non-defaulting Party, such Party will be in default. In the event of such default, the non-defaulting Party may seek as its remedy, either the damages reasonably related to the breach or specific performance. If the nature of the defaulting Party’s nonperformance is such that it cannot reasonably be cured wit hin 30 days, then the defaulting Party will have such additional periods of time as may be reasonably necessary under the circumstances, provided the defaulting Party promptly (i) provides written notice to the non- defaulting Party and (ii) commences to cure its nonperformance and thereafter diligently continues to completion the cure of its nonperformance. In no event shall any such cure period exceed 90 days. 9 General. 9.1 Notices and Requests. Any notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if: (A) delivered to the Part y at the addresses set forth below; (B) deposited in the U.S. Mail, registered or certified, return receipt requested, to the address set forth below; or (C) to a recognized and reputable overnight delivery service, to the address set forth below: If to Town: Town of Fountain Hills 16705 East Avenue of the Fountains Fountain Hills, Arizona 85268 Attn: Grady Miller, Town Manager With a copy to: Pierce Coleman PLLC 4711 East Falcon Drive, Suite 111 Mesa, Arizona 85215 Attn: Aaron D. Arnson, Town Attorney If to Developer: Hilltop Vista Properties, LLC c/o Jeremy Hall 14550 N. Frank Lloyd Wright Boulevard Scottsdale, AZ 85260 jgh@phxinterests.com With a copy to: David V. Suson, Esq. 109 Cherrywood Bellaire, TX 77401 or at such other address, and to the attention of such other person or officer, as any Party may designate in writing by notice duly given pursuant to this Section. Notices shall be deemed received: (A) when delivered to the Party; (B) three business days after being placed in the U.S. Mail, properly addressed, with sufficient postage; or (C) the following business day after being given to a recognized overnight delivery service, with the person giving the notice paying all 9 required charges and instructing the delivery service to deliver on the following business day. If a copy of a notice is also given to a Party’s counsel or other recipient, the provisions above governing the date on which a notice is deemed to have been received by a Party shall mean and refer to the date on which the Party, and not its counsel or other recipient to which a copy of the notice may be sent, is deemed to have received the notice. 9.2 Amendment. No amendment or waiver of any provision in this Agreement will be binding (A) on the Town unless and until it has been approved by the Town Council and has become effective or (B) on Developer unless and until it has been executed by an aut horized representative of Developer. 9.3 Headings; References. The headings herein are inserted only as a matter of convenience and for reference and in no way define, limit or describe the meaning of any provision or the scope or intent of this Agreement nor in any way affect the terms and provisions hereof. 9.4 Time of the Essence. Time is of the essence with regard to performance under the terms and provisions of this Agreement, and any amendment, modification or revision thereof, with respect to the actions and obligations of each person bound by the terms hereof. 9.5 Attorneys’ Fees. If either Party commences an action against the other to interpret or enforce any of the terms of this Agreement or because of the breach by the other Party of any of the terms hereof, the losing Party shall pay to the prevailing Party reasonable attorney’s fees, costs and expenses, including expert witness fees, incurred in connection with the prosecution or defense of such action. For the purpose of this Agreement, the terms “attorney’s fees, costs and expenses” shall mean the fees and expenses of counsel to the Parties hereto, which may include printing, duplicating and other expenses, air freight charges, and billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. The term “attorneys’ fees, costs and expenses” also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any action or proceeding is brought with respect to the matter for which said fees and expenses were incurred. 9.6 Recordation. This Agreement shall be recorded in its entirety in the Maricopa County Recorder’s Office not later than 10 days after the sooner to occur of the date on which it is fully executed by the Developer and the Town or the date on which the Town is notified that the Closing Contingency has been satisfied.. 9.7 Choice of Law, Venue and Attorneys’ Fees. The laws of the State of Arizona shall govern any dispute, controversy, claim or cause of action arising out of or related to this Agreement. The venue for any such dispute shall be Maricopa County, Arizona, and each Party waives the right to object to venue in Maricopa County for any reason. Neither Party shall be entitled to recover any of its attorneys’ fees or other costs from the other Party incurred in any such dispute, controversy, claim, or cause of action, but each Party shall bear its own attorneys’ fees and costs, whether the same is resolved through arbitration, litigation in a court, or otherwise. 10 9.8 Good Standing; Authority. Each Party represents and warrants that it is duly formed and validly existing under the laws of the State of Arizona with respect to Developer, or a municipal corporation within Arizona with respect to the Town and that the individuals executing this Agreement on behalf of their respective Party are authorized and empowered to bind the Party on whose behalf each such individual is signing. 9.9 Assignment. The provisions of this Agreement are binding upon and shall inure to the benefit of the Parties, and all of their successors in interest and assignees of Developer, and/or sub-developers who may acquire an interest in all or a portion of the Property, if applicable. Developer may assign this Agreement in whole or in part. Upon any assignment of this Agreement, Developer shall be fully released from any obligations, duties and/or responsibilities under this Agreement, provided such obligations are assumed by the assignee. If Developer conveys an interest in only a portion of the Property and any proposed assignment is for less than all of Developer’s rights and responsibilities under this Agreement then the assign ee shall be responsible for the performance of each of the obligations in this Agreement to which the assignee succeeds as the developer of that portion of the Property and Developer shall be released from any obligations that are assigned, but shall remain responsible for the performance of any obligations that were not assigned. 9.10 Third Parties. No term or provision of this Agreement is intended to, or shall be for the benefit of any person or entity not a Party hereto, and no such other person or entity shall have any right or cause of action hereunder. 9.11 No Partnership. None of the terms or provisions of this Agreement shall be deemed to create a partnership between or among the Parties hereto in their respective businesses or otherwise, nor shall it cause them to be considered joint ventures or members of any joint enterprise or give them any right to act as an agent for another Party. 9.12 Waiver. No delay in exercising any right or remedy shall constitute a waiver thereof, and no waiver of any breach shall be construed as a waiver of any preceding or succeeding breach of the same or any other covenant or condition of this Agreement. No waiver shall be effective unless it is in writing and is signed by the Party asserted to have granted such waiver. 9.13 Further Documentation. The Parties agree in good faith to execute such further or additional instruments and documents and to take such further acts as may be necessary or appropriate to fully carry out the intent and purpose of this Agreement. 9.14 Fair Interpretation. The Parties have been represented by counsel in the negotiation and drafting of this Agreement and this Agreement shall be construed according to the fair meaning of its language. The rule of construction that ambiguities shall be resolved against the Party who drafted a provision shall not be employed in interpreting this Agreement. 9.15 Counterparts. This Agreement may be executed counterparts, each of which shall be an original but all of which shall constitute one and the same instrument. 11 9.16 Computation of Time. In computing any period of time under this Agreement, the date of the act or event from which the designated period of time begins to run shall not be included. The last date of the period so completed shall be included unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or holiday. The time for performance of any obligation or taking any action under this Agreement shall be deemed to expire at 5:00 p.m. (local time, Phoenix, Arizona) on the last day of the applicable time period provided herein. 9.17 Conflict of Interest. Pursuant to ARIZ. REV. STAT. § 38-503 and § 38-511, no member, official or employee of the Town shall have any personal int erest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to this Agreement which affects his or her personal interest or the interest of any corporation, partnership or association in which he or she is, directly or indirectly, interested. This Agreement is subject to cancellation pursuant to the terms of ARIZ. REV. STAT. § 38-511. 9.18 No Boycott of Israel. Developer certifies pursuant to ARIZ. REV. STAT. § 35-393.01(A) that it is not currently engaged in, and for the Term of this Agreement will not engage in, a boycott of Israel. 9.19 Severability. Every provision of this Agreement is and will be construed to be a separate and independent covenant. If any provision in this Agreement or the application of the same is, to any extent, found to be invalid or unenforceable, the remainder of this Agreement or the application of that provision to circumstances other than those to which it is invalid or unenforceable will not be affected by that invalidity or unenforceability. Each provision in this Agreement will be valid and will be enforced to the extent permitted by law and the Parties will negotiate in good faith for such amendments of this Agreement as may be necessary to achieve its intent, notwithstanding such invalidity or unenforceability. 9.20 Covenant of Good Faith. In exercising their rights and in performing their obligations pursuant to this Agreement, the Parties will cooperate with one another in good faith to ensure the intent of this Agreement can be attained. 9.21 Estoppel Certificate. Upon Developer’s written request, the Town will execute, acknowledge and deliver to Developer and all parties identified by Developer, including without limitation assignees, transferees, tenants, purchasers, investors, lenders, and mortgagees, a written statement certifying (A) that this Agreement is unmodified and in full force and effect (or, if there have been modifications, that this Agreement is in full force and effect, as modified, and stating modifications) and (B) whether there are any existing breaches or defaults by Developer then known to the Town under this Agreement, and if so, specifying the same. The Town will deliver the statement to Developer or such requesting party within 15 days after request. The Town acknowledges that any such assignee, transferee, tenant, purchaser, investor, lender, or mortgagee may rely upon such statement as true and correct. 9.22 Impossibility of Performance Due to Operation of Law. The Town shall not be deemed to be bound by, in violation of, or liable for any damages of any kind under this 12 Agreement if the Town is prevented from performing any of its obligations hereunder by the result of a referendum vote on Town Resolution No. 2019-39 and/or Town Ordinance No. 19-03. [SIGNATURES ON FOLLOWING PAGES] 13 “Town” TOWN OF FOUNTAIN HILLS an Arizona municipal corporation By: Ginny Dickey Mayor ATTEST: Elizabeth A. Burke, Town Clerk (ACKNOWLEDGMENT) STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA ) On _____________, 2019, before me personally appeared Ginny Dickey, the Mayor 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 she claims to be, and acknowledged that she signed the above document on behalf of the Town of Fountain Hills. Notary Public (Affix notary seal here) 14 “Developer” Hilltop Vista Properties, LLC By its manager, Phoenix Interests, LLC By: ________________________ Name: Jeremy Hall As Its: Principal Address: 4515 E. Palo Verdes Drive Phoenix, AZ 85018 (ACKNOWLEDGMENT) STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA ) On _____________, 2019, before me personally appeared Jeremy Hall, a principal of Phoenix Interests, LLC, 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 Phoenix Interests, LLC. Notary Public (Affix notary seal here) Exhibit A [Legal Description of the Property] Exhibit B [Site Plan - To be attached subsequent to execution and upon approval on or before December 1, 2020] Exhibit C PAD Exhibit D Public Improvements Exhibit E Phasing ITEM 7. C. TOWN OF FOUNTAIN HILLS STAFF REPORT    Meeting Date: 11/19/2019 Meeting Type: Town Council Regular Meeting Agenda Type: Regular Agenda Submitting Department: Community Services Prepared by: Rachael Goodwin, Community Services Director Staff Contact Information: Rachael Goodwin, Community Services Director Request to Town Council Regular Meeting (Agenda Language):  CONSIDERATION OF approving the installation of the sculpture titled, "Fountain of Light" on the west end of the Avenue of the Fountains across the street from Town Hall. Staff Summary (Background) The Public Art Committee has proposed the acquisition of a new art installment entitled “Fountain of Light” by artist Brian Schader. The sculpture is expected to have a base of 14 to 18 feet in diameter and an overall height of 45 feet. The sculpture is comprised of glass and galvanized steel and is designed to be lit internally. The committee has recommended installing this sculpture on the eastern end of the Avenue of the Fountains.  This item was brought before the Town Council on September 17, 2019, for review and consideration. At that meeting, the Town Council postponed action on the consideration of the sculpture until potential conflicts with the Dark Skies Ordinances and impacts to the planned International Dark Sky Discovery Center could be worked out between the Public Art Committee and the Dark Sky Discovery Center board of directors.   Based on the direction of the Town Council and the concerns noted, the Fountain of Light artist, along with members of the Public Art Committee worked with local lighting and telescope experts to evaluate the expected light output of the piece. Based on their models and calculations, the Fountain of Light is expected to remain below the 1250 lumen regulations and be in compliance with the Town ordinance. Further, the light scatter from the display was measured and is within acceptable limits for observatory telescope operations. A letter from the Dark Sky committee has been issued, offering acknowledgement of these tests and support for the installation. Previous details of the Fountain of Light are highlighted below:    During the reconstruction and renovation of the Avenue of the Fountain Plaza, a master plan was designed to include multiple nodes to install public art. These nodes were designed to fit the aesthetic of the plaza and have art thoughtfully placed throughout the winding pathway of the park. The proposed western location of the “Fountain of Light” sculpture does not align with the original art node layout, however, there is adequate space in the proposed location to accommodate this addition. Based on the size and suggested location of the sculpture, the western end of the median will require minor modifications to accommodate ADA accessibility requirements. modifications to accommodate ADA accessibility requirements.   Additional considerations for this piece include the base design, which will need to be commissioned and structurally designed, with review and approval by the Town Engineer. Additionally, irrigation lines within the Avenue of the Fountains Plaza will need to be rerouted and power accessibility will need to be developed.     “Fountain of Light” is not currently funded. The art project was tentatively approved by the Town Council on December 5, 2017 with the understanding that the public art committee had to come back to the Town Council and present one or more suitable locations for the installation of the sculpture.  The Public Art Committee will work with the artist to develop a fundraising strategy for the sculpture. The sculpture has an acquisition price of $125,000 with an additional $25,000 needed for the base.   Related Ordinance, Policy or Guiding Principle Town Zoning Ordinance, Chapter 8, Outdoor Lighting Control: 8.02: A. Shielding: 1. All outdoor light fixtures with light output greater than 2250 initial lumens shall be fully shielded. Fixtures with light output ranges from 1125 to 2250 initial lumens shall be at least partially shielded. 2. Correlated Color Temperature (CCT): In order to minimize the detrimental effects of blue light, the correlated color temperature (CCT) of any outdoor lighting fixture shall not exceed 3000K. Risk Analysis Ongoing maintenance costs are yet to be determined, structural engineering review is required for the base and overall installation. ADA accommodations will also be required. Recommendation(s) by Board(s) or Commission(s) Unanimous approval from the Public Art Committee.  Staff Recommendation(s) This piece has been approved by the Board of Directors of the Fountain Hills Cultural & Civic Association and Public Art Committee in 2013 and 2017 as well as Council approval on December 5, 2017 with the condition of finding the most meaningful and suitable location. SUGGESTED MOTION MOVE to accept "Fountain of Light" sculpture to be installed on the western end of the Avenue of the Fountains with conditions listed in the risk analysis. Attachments Dark Skies Letter  maps and renderings  Form Review Inbox Reviewed By Date Community Services Director (Originator)Rachael Goodwin 11/13/2019 10:06 AM Town Attorney Aaron D. Arnson 11/13/2019 10:32 AM Town Manager Grady E. Miller 11/13/2019 10:56 AM Form Started By: Rachael Goodwin Started On: 11/13/2019 09:34 AM Final Approval Date: 11/13/2019  International Dark Sky Discovery Center Fountain Hills Dark Sky Association November 6, 2019 Subject: Fountain of Light Sculpture Mayor Dickey, Council Members Brown, Leckrone, Magazine, Scharnow, Spelich, Tolis , The light output from a small glass sample of the Fountain of Light sculpture was evaluated by Mark Derksen. It was determined that with the lighting levels planned and the understanding that each glass section will be capped at the top, the light emittance would meet the requirements of the Town’s outdoor lighting ordinance and minimize the light escaping from the top of each glass section. Bruce Boyce determined the impact of light output on the planned International Dark Sky Discovery Center’s observatory and f ound that the observatory would not be adversely impacted. The above results have alleviated our primary concern of excessive light emittance. However, we recommend that provisions be made to incorporate a dimmer switch into the plans in the event that once the large structure is completed, it turns out to be brighter than anticipated. We have also been informed that the height of the sculpture has been slightly reduced; hence not exceeding the height of Town Hall by as much as was previously planned. Given the above, both the International Dark Sky Discovery Center Board and the Fountain Hills Dark Sky Association Board have no objection to the proposed Fountain of Light Sculpture. We applaud the work of the Public Art Committee that strives to enhance our community and we look forward to collaborating with them on future projects. Sincerely, Joe Bill, President International Dark Sky Discovery Center, Inc . And Co-chair, Fountain Hills Dark Sky Association Scope and Scale Foundation Dimensions: 14’ to 18’ in diameter and 5’ to 7’ tall. Sculpture Dimensions: 4’ x 4’ tapering to 3’ x 3’, and 41’ to 43’ tall. Overall Height: 46’ to 50’ tall Site Footprint and Impact •The Avenue master plan did not accommodate for a sculpture of this size or scope. •Proposed 18 ft base, indicated by length of measuring tape along the pavers. •The site must be modified to accommodate the base •Installation as currently proposed does not meat ADA requirements. Visual Height Comparison •An estimate of height for the “Fountain of Light” sculpture is 46 ft to 50 ft. •The pine trees on the east end of the plaza, featured in the background, are roughly 55 ft. •The height of the gabion basket and light fixture, featured in the foreground, is 9 ft. •The height of the new Park Place construction along the Avenue of roughly 54 ft. Additional Height and Width Comparisons Christmas tree display: •23 ft tree atop a 3 ft base. •Equivalent to roughly half of the height of the proposed “Fountain of Light” sculpture. •Christmas tree base is 12 ft in diameter. •Proposed base would be an additional 2 to 4 ft wider in diameter.