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HomeMy WebLinkAboutFY12 PAFRTown of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2011-2012, ending June 30, 2012 Page 3 Page 5 Page 7 Page 9 Page 8 2011-2012 Financial Overview Net Assets Property Taxes Community Profile Capital Investments The height of desert living. 2011-2012 Popular Annual Financial Report Members of the Administra- tion Department, Finance Divi- sion, are pleased to present the Town of Fountain Hills first ever Popular Annual Financial Report for the fiscal year ended June 30, 2012. This report is intended to present an accessible overview of the Town’s financial position and policies, and its commitment to providing responsive services and programs in a fiscally re- sponsible manner. We share with you details of how the Town’s revenue is generated, where the dollars are spent, and how the local economy impacts Fountain Hills’ overall financial status. Above all, our goal is to provide you with an opportunity to better understand the many financial aspects that affect your local government. The financial information provided here is drawn from detailed information found within the fiscal year 2011-2012 Comprehensive An- nual Financial Report (CAFR). The financial statements were prepared in conformance with Generally Accepted Accounting Principles (GAAP) and audited by an independent account- ing firm, receiving an unqualified (or clean) opinion. The numbers contained within the CAFR were obtained by employing the basis of accounting as prescribed by the Governmental Accounting Standards Board (GASB). In short, the highest standards of accounting principles have been utilized to ensure full finan- cial disclosure and accountability. Recognition of this commitment is evidenced by the Town attaining the Certificate of Achievement for Ex- cellence in Financial Reporting for 15 consecu- tive years, and the Distinguished Budget Presen- tation Award for 11 consecutive years. These awards are presented by the Government Finance Officer’s Association of the United States and Canada. While the numbers in this Popular Report come from an audited source, they are presented in an abridged, unaudited non-GAAP format. Citizens who wish to review audited GAAP- basis financial statements can refer to the Town’s 2011-2012 CAFR, which is available online at www.fh.az.gov/reports.aspx. or for purchase from the Finance Division. Members of the Finance Division and staff across the organization are proud to serve this fine community. We hope that the 2011-2012 Popular Annual Financial Report serves its pur- pose and helps assure you that every effort is made to manage the community’s resources wisely for the benefit of all. Julie A. Ghetti, MPA, CPA, CGFM Deputy Town Manager/Finance Director Page 2 Welcome The height of desert living. 2011-2012 Popular Annual Financial Report MONIES IN As a governmental entity, the Town uses fund accounting, or self-balancing sets of accounts segre- gated for specific activities. Governmental funds are used to account for tax supported activities and the Town receives the funding it needs to provide services to the community from a variety of sources. The table below presents a summary of governmental revenues by primary type for fiscal years 2011-2012 and 2010-2011, in order to present a picture of typical revenues from year to year. The recession and weak economic conditions nationwide contributed to a decrease in revenues of $1,223,787 or 7.2% compared to 2011. Investment earnings have increased with a revised invest- ment policy. Intergovernmental revenue is shared from the State and distributed based on popula- tion, which declined with the 2010 census. Page 3 2011-2012 Financial Overview In this section, we present an overview of monies in and monies out for the Town of Fountain Hills for the fiscal year ended June 30, 2012. REVENUE TYPE DEFINTIONS Taxes - Sales - the Town charges a local sales tax of 2.6% on most goods purchased in the Town. This tax is in addition to the State of Arizona rate of 6.6% and the Maricopa County rate of .7%, for a total sales tax rate of 9.9%. Taxes - Property - the Town does not charge a primary property tax, only a secondary property tax. The secondary tax is for debt repayment on voter approved bonds (specifically the Library/Museum and open space). Taxes - Franchise - revenue received from utility (telecommunications) companies for the right to operate within the Town. Intergovernmental - these are revenues received from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax and vehicle license tax. Fines and Forfeitures - these are revenues received from court fines. Licenses and Permits - includes building permit fees, business and animal license fees, fire inspections, etc. Charges for Services - these are revenues received from services and/or programs provided by the Town such as recreation programs. Rents and Royalties - rental fees for use of the Community Center as well as fees from leases for cellular telephone towers. Investment Revenue - revenue received from interest on invested monies. Other - these are revenues that do not fit under another classification. $-$2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 Other Investment Revenue Rents and Royalties Charges for Services Licenses and Permits Fines and Forfeitures Intergovernmental Taxes 2011 2012 Revenues 2012 2011 Taxes: Sales 7,787,489$ 8,013,480$ Property 1,457,702 1,367,915 Franchise 332,130 322,659 Intergovernmental 6,035,448 7,165,103 Fines and Forfeitures 223,673 236,221 Licenses and Permits 194,976 312,367 Charges for Services 405,663 388,635 Rents and Royalties 206,018 227,195 Investment Revenue 88,877 28,456 Other 178,393 72,125 Total Revenues 16,910,369$ 18,134,156$ Governmental Funds Two Year Revenues Summary by Type The height of desert living. 2011-2012 Popular Annual Financial Report Page 4 MONIES OUT The two-year comparison below for Town expenditures shows a decrease in the overall cost of op- erations, primarily due to reduced spending in most departments - overall, 2012 total Governmental Fund expenditures were $238,675, or 1.4% less than in 2011. With the completion of a major capi- tal road project in 2011, the capital outlay category was 18% less than the previous year; Develop- ment Services includes public works projects that were deferred due to the economy. General Gov- ernment expenditures increased over the prior year as a result of the costs for the bi -annual election for Mayor and Town Council as well as expenditures for upgraded equipment for the Town’s public access television channel. EXPENDITURE TYPE DEFINTIONS General Government - functions serving Town operations as a whole, including: Town Council, Town Manager, Town Clerk, Finance, Human Resources, Information Technology, Town Attorney, and Town Prosecutor. Public Safety - encompasses the contracted services for Law Enforcement and Fire and Emergency Medical departments. Highways and Streets - represents the Street division. Culture and Recreation - encompasses the services, programs and facilities provided by Parks & Recreation, Community Center and Senior Services. Development Services - encompasses Engineering, Facilities, Planning, Building Safety, Code Compliance and Mapping and Graphics divisions. Capital Outlay - expenditures on the Town’s Capital Improvement Program projects. Debt Service - interest and other related costs affiliated with the Town’s issuance of debt to support various capital improve- ment activities. 2012 Financial Overview—continued Expenditures 2012 2011 General Government 2,887,321$ 2,575,975$ Public Safety 5,869,445 5,772,800 Highways and Streets 1,054,930 1,123,230 Culture and Recreation 1,794,332 1,871,446 Development Services 1,421,787 1,564,615 Debt Service 2,659,887 2,859,330 Capital Outlay 884,323 1,043,304 Total Expenditures 16,572,025$ 16,810,700$ Governmental Funds Two Year Expenditures Summary by Type The height of desert living. 2011-2012 Popular Annual Financial Report The Town’s Net Assets The Statement of Net Assets presents information on all the Town’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases and decreases in net assets may serve as a useful indicator of whether the financial position of the Town is improving or dete- riorating. Net assets are categorized by activity type. Governmental activities include services largely funded through revenues such as sales tax and charges for services. Net assets consist of three components. The largest portion (77%) reflects the Town’s investment in capital assets (land, buildings, infrastructure, vehicles, machinery and equipment), less any out- standing related debt used to acquire those assets. An additional portion of the Town’s net assets (5%) represents resources subject to restrictions on how they may be used. These legal restrictions are imposed by outside entities such as federal or state governments. An example of such a restric- tion is the gasoline tax. The State of Arizona charges the gasoline tax and shares some of it with communities. These revenues are legally restricted by the State to be used only for expenditure on street projects. Portions of net assets are also restricted to pay debt service and fund capital projects. The remainder of net assets is unrestricted as to purpose. Page 5 2012 2011 ASSETS Current and Other Assets 28,669,946$ 28,545,371$ Capital Assets Non-Depreciable 25,934,778 28,304,198 Depreciable (net)81,921,325 82,314,694 Total Assets 136,526,049 139,164,263 LIABILITIES Current and Other Liabilities 3,256,053 3,334,185 Long-Term Liabilities Due Within One Year 2,319,551 2,249,113 Due in More Than One Year 11,928,659 14,017,218 Total Liabilities 17,504,263 19,600,516 NET ASSETS Invested in Capital Assets, Net of Related Debt 92,006,103 92,579,483 Restricted 5,951,416 4,385,595 Unrestricted 21,064,267 22,598,669 Total Net Assets 119,021,786$ 119,563,747$ Net Assets Town of Fountain Hills The height of desert living. 2011-2012 Popular Annual Financial Report Fund Accounting State and local governments, such the Town, employ fund accounting whereby assets and liabilities are grouped according to the purpose for which they are to be used. Each grouping, or fund, oper- ates as a separate self- balancing set of accounts. The General Fund is the chief operating fund of the Town and General Fund ex- penditures account for 71% of governmental expendi- tures. Special revenue funds group revenues raised for a specific purpose. Capital pro- ject funds account for the acquisition or construction of major capital facilities. These intended uses can be demon- strated by viewing the com- ponents of governmental fund balances. While the fund balance is an important component of fiscal planning and factors into the Town’s debt rating, it is anticipated that the bal- ance in the General Fund will decline over the next few years since expenditures are expected to rise at a faster pace than general revenue sources. The Town’s Net Assets—continued Page 6 General Fund 30% Capital Projects Fund 38% Municipal Property Corporation Debt Service Fund 11% Non-Major Governmental Funds 21% The height of desert living. 2011-2012 Popular Annual Financial Report Page 7 One of the biggest bills residents face each year is tied to the property they own. Property tax in Fountain Hills is administered by Maricopa County, and is based on property value (ad valorem) and typically included with the resident’s monthly mortgage payment. As the table indicates, only a small portion (3.5%) of your property taxes go to the Town of Fountain Hills—this portion pays for the annual payment on the bonds approved by voters for open space and the library/museum build- ing. The majority supports Fountain Hills schools, Fountain Hills Sanitary District, and various Maricopa County districts. Currently, property taxes represent one of the smallest and most stable sources of revenue for the Town at 8.6% of total revenues. Property Taxes The primary property tax reve- nue pays for the basic operat- ing costs of government and schools. The Town does not have a primary property tax for operations. Revenue from the secondary property tax pays for the an- nual debt payment on bonds that have been approved by voters and special taxing dis- tricts such as the Sanitary Dis- trict; the rate is set by the County. The rate is calculated using 10% of the assessed valuation of property (assigned by the County), dividing by 100 and mul- tiplying by the tax rate. For example, a residential property with an assessed value of $350,000 would pay approximately $2,678 ($350,000 x 10% divided by 100 x 7.6522). $-$0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Maricopa County State Equalization Tax Maricopa County Community College Maricopa County Flood Control District Maricopa County Library District Fire Assistance District Central Arizona Water Conservation Maricopa Special Health Care District Fountain Hills Sanitary District East Valley Institute of Technology Fountain Hills Unified Schools #98 Town of Fountain Hills Composition of Property Tax Entity Primary Rate Secondary Rate Maricopa County 1.2407$ State Equalization Tax 0.4717$ Maricopa County Community College 1.1563$ 0.2215$ Maricopa County Flood Control District 0.1780$ Maricopa County Library District 0.0492$ Fire Assistance District 0.0110$ Central Arizona Water Conservation 0.1000$ Maricopa Special Health Care District 0.1683$ Fountain Hills Sanitary District 0.7069$ East Valley Institute of Technology 0.0500$ Fountain Hills Unified Schools #98 2.2095$ 0.8234$ Town of Fountain Hills 0.2657$ Total 5.0782$ 2.5740$ The height of desert living. 2011-2012 Popular Annual Financial Report Page 8 How Capital Investments are Funded The Town’s capital outlay consists of investments in our roads, equipment, public facilities, and parks. Every year, the Town prepares and adopts an on going, Five -Year Capital Improvement Plan that provides for a comparable annual value of infrastructure improvement projects. Town Council and staff review and update the plan each year as part of the budget process. The projects are funded using a combination of grants and existing funds. The Town’s Debt Policy provides a set of criteria to help determine when it’s best to fund capital projects using existing revenues, issuing bonds or seeking loans. The Town has an Aa3 bond rating from Moody’s Investors Service for the general obligation bonds and an A1 rating for the revenue bonds. These ratings allow the Town to receive very competitive interest rates when issuing debt. Capital Investments DEBT TYPE DEFINTIONS General Obligation Bonds - long-term debt that is repaid from the Town’s available resources. Revenue Bonds - long-term debt with repayment to come from a pledged Town revenue stream. The State imposes certain debt limitations of 20% and 6% of the net secondary assessed valua- tion of the Town. For projects involving water, sewer, artificial lighting, parks, open space, pub- lic safety, law enforcement, fire and emergency facilities, street and transportation facilities and recreation facilities, the Town can issue GO bonds up to 20%. For any other general purpose improvements, the Town may issue bonds up to the 6% limit. The Town’s available debt margin is $71.7 mil- lion in the 20% capacity and $22.7 million in the 6% capacity. The Town is currently using only 5% of the 20% capacity and nothing of the 6% capacity. Repayment of Outstanding Debt The repayment of debt is funded using secondary property tax and general fund revenues. Debt Margin Debt Type 2012 2011 General Obligation Bonds 6,845,000$ 7,965,000$ Revenue Bonds 7,040,000 7,885,000 Total Debt 13,885,000$ 15,850,000$ Two Year Debt Summary All Funds Year ending June 30,Principal Interest 2013 2,280,000$ 565,506$ 2014 2,415,000 470,431 2015 1,970,000 375,106 2016 2,830,000 233,806 2017 1,120,000 186,406 2018-2021 3,270,000 302,758 13,885,000$ 2,134,013$ The height of desert living. 2011-2012 Popular Annual Financial Report Profile of Fountain Hills, Arizona The Town of Fountain Hills is a planned, family- oriented community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the late 1960s and designed by Charles Wood, Jr. (designer of Disneyland in southern California). The centerpiece of Foun- tain Hills is one of the world's tallest man -made fountains, a focal point that attracts thousands of visitors each year. Located on 13,006 acres of land, and bordering northeast Scottsdale, Fountain Hills is sur- rounded by the 3,500-foot McDowell Mountains on the west, the Fort McDowell Indian Reserva- tion on the east, the Salt River Pima -Maricopa Indian Community on the south and by the McDowell Mountain Regional Park on the north. Elevation is 1,520 feet at the fountain, 3,000 feet on Golden Eagle Boulevard, and is 500 feet above Phoenix. Over the past twenty-three years, Fountain Hills has grown from 10,190 residents to a town of approximately 22,500 based on the 2010 census. On June 5, 2006, the Town of Fountain Hills be- came 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 develop- ment of the land will occur over the next decade. Annexing this property into the Town ensures that its future development will be of the highest quality under such Town’s standards as the cut - and-fill ordinance and strict zoning regulations. Fountain Hills will have an opportunity to dem- onstrate that it is truly the best place to live in the valley. The Town offers a range of living styles, from small community subdivisions to a number of large custom homes. Fountain Hills also offers recreational, cultural and retirement programs that address the needs and lifestyles of active families and adults. The community consists of primarily residential property; of the total 20.32 square miles of land, only 2.2% of the total is zoned commercial and/or industrial, 23.0% is reserved as open space and 51.3% is residential. The Town of Fountain Hills is an Arizona Mu- nicipal Corporation, acting as a general law town as prescribed in the Arizona Revised Statutes. The Town was incorporated on December 5, 1989, with the governmental and administrative affairs of the Town operating under the Council- Manager form of government. The Town Coun- cil is responsible, among other things, for the adoption of local ordinances, budget adoption, the development of citizen advisory committees and hiring the Town Manager. The Town Man- ager is responsible for implementation of the policies of the Town Council and administering the Town’s operations through three department directors and approximately 58 FTE employees. The Presiding Judge, Town Attorney and Town Prosecutor are under the direction of the Town Council. Page 9 The height of desert living. 2011-2012 Popular Annual Financial Report Profile of Fountain Hills, Arizona—continued The Town provides or administers a full range of services including public safety (law enforce- ment, fire, animal control); development services (code enforcement, planning, and public works); construction and maintenance of streets and in- frastructure, municipal court, recreational activi- ties, community center, senior services and cul- tural events. The Town does not maintain utility or other operations. The financial reporting entity (the Town) in- cludes all the funds of the primary government (i.e., the Town of Fountain Hills as legally de- fined) as well as all of its component units. The component units consist of legally separate enti- ties for which the primary government is finan- cially accountable. Blended component units, although legally separate entities, are, in sub- stance, part of the primary government’s opera- tions and are included as part of the primary gov- ernment. Accordingly, the Cottonwoods Mainte- nance District, Eagle Mountain Community Fa- cilities District and Fountain Hills Municipal Property Corporation are included in the finan- cial reports of the Town. The annual budget serves as the foundation for the Town of Fountain Hills’ financial planning and control. The Town Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, these funds have ap- propriated budgets. On or before the second meeting in April, the Town Manager submits to the Town Council a proposed budget for the fis- cal 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 pro- posed budget and to adopt a final budget by no later than June 30, the close of the Town of Fountain Hills’ fiscal year. The budget is legally enacted through passage of a resolution and is prepared by fund and department. The resolution sets the limit for expenditures during the fiscal year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a depart- ment. Additional expenditures may be authorized for expenditures directly necessitated by a natu- ral or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. Page 10 The height of desert living. 2011-2012 Popular Annual Financial Report Profile of Fountain Hills, Arizona—continued Awards Fountain Hills has had its share of accolades. We have been named one of the “10 Great Places to Raise a Family in the U.S.” and have been recog- nized as “The Best Place to Live in the Phoenix Metropolitan Area.” We have also been listed as “The Best Affordable Suburb” in Arizona. These honors make us proud, and we continually strive to make our community an even better place to live. 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, 2011. This was the 15th con- secutive year that the government has received this prestigious award. In order to be awarded a Certificate of Achievement, the government pub- lished an easily readable and efficiently organ- ized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. In addition, the government also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year ending June 30, 2012. 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 11th consecutive year that the Town has received the award. Two hundred thirteen cities and towns, including Fountain Hills, earned recognition from national non-profit KaBOOM! as 2012 Playful City USA communities for their efforts to increase play opportunities for children. Hailing from 44 states, the 213 Playful City USA honorees range from six-time honorees such as Atlanta and San Francisco to 69 first-time recipients. These Play- ful City USA communities are making a commit- ment to play and physical activity by developing unique local action plans to increase the quantity and quality of play in their community. In doing so, some of the most innovative concepts and cost-effective programs are being developed in Playful City USA communities. Page 11 The height of desert living. 2011-2012 Popular Annual Financial Report TOWN MANAGER Ken Buchanan DEPARTMENT DIRECTORS Town of Fountain Hills, Arizona Town Officials TOWN COUNCIL Deputy Town Manager/ Finance Director Julie A. Ghetti Presiding Judge Mitchell S. Eisenberg Community Services Director Mark Mayer Development Services Director Paul Mood Fire Chief Scott LaGreca, Rural Metro Corporation District Commander Captain Joe Rodriquez, Maricopa County Sher- iff’s Office Town Prosecutor Iacovino & Kayler Town Attorney Andrew McGuire, Gust Rosenfeld, P.L.C. This Popular Annual Financial Report is in- tended to summarize the financial information appearing in the fiscal year 2011-2012 Compre- hensive Annual Financial Report (CAFR). Cop- ies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/reports.aspx and are available for purchase at the Administration De- partment. The data included in this review is not prepared in accordance with GAAP as only a portion of the Town’s financial statements are presented. TOWN HALL Telephone: 480-816-5100 16705 E. Avenue of the Fountains Fax: 480-837-3145 Fountain Hills, Arizona 85268 Website: www.fh.az.gov Page 12 Arizona Legislature—District 23 U.S. Congress—District 5 Mayor Ms. Linda Kavanagh Vice Mayor Mr. Henry Leger Councilmember Mr. Dennis Brown Councilmember Ms. Ginny Dickey Councilmember Mr. Tait Elkie Councilmember Ms. Cassie Hansen Councilmember Mr. Cecil Yates