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HomeMy WebLinkAboutFY18 PAFRTown of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2017-2018 ended June 30, 2018 Page 3 Page 5 Page 8 Page 12 Page 10 Community Profile 2016-2017 Financial Overview Net Position Awards & Community Property Taxes The height of desert living. 2017-2018 Popular Annual Financial Report The Town of Fountain Hills is pleased to pre- sent its Popular Annual Financial Report for the fiscal year ended June 30, 2018. This re- port is intended to present an accessible over- view of the Town’s financial position and poli- cies, and its commitment to providing respon- sive services and programs in a fiscally respon- sible 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 oppor- tunity 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 2017-2018 Comprehensive An- nual Financial Report (CAFR). The financial statements were prepared in conformance with accounting principles generally accepted in the United States of America (GAAP) and audited by an independent accounting firm, receiving an unmodified (or clean) opinion. The numbers contained within the CAFR were obtained by employing the basis of accounting as pre- scribed by the Governmental Accounting Standards Board (GASB). While the numbers in this Popular Report come from an audited source, they are present- ed in an abridged, unaudited non-GAAP for- mat. Citizens who wish to review audited GAAP-basis financial statements can refer to the Town’s 2017-2018 CAFR, which is availa- ble online at www.fh.az.gov/CAFR. Members of the Finance Division and staff across the organization are proud to serve this fine community. We hope that the 2017-2018 Popular Annual Financial Report serves its purpose and helps assure you that every effort is made to manage the community’s resources wisely for the benefit of all. Craig Rudolphy CPA, CPFO, CGFM Finance Director Page 2 Welcome The height of desert living. 2017-2018 Popular Annual Financial Report Profile of Fountain Hills, Arizona The Town of Fountain Hills is a master planned community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the late 1960s and the community was designed by Charles Wood, Jr. (designer of Disneyland in southern California). The center- piece 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 Ya- vapai Nation on the east, the Salt River Pima - Maricopa Indian Community on the south, and by the McDowell Mountain Regional Park on the north. The elevation is 1,520 feet at the fountain, 3,000 feet on Golden Eagle Boule- vard, and is approximately 500 feet above Phoenix. Over the past twenty plus years, Fountain Hills has grown from 10,190 residents to a town of 23,899 in 2015. 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 fu- ture development will be of the highest quality under such Town’s standards as the cut-and-fill ordinance and strict zoning regulations. The Town offers a wide range of living accom- modations, from small condominium complex- es 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 pri- marily 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 industri- al, 23.3% is preserved as open space and 51.0% 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 Stat- utes. The Town was incorporated on Decem- ber 5, 1989, with the governmental and admin- istrative affairs of the Town operating under the Council-Manager form of government. The Mayor is a member of the Town Council who is directly elected by the 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 re- sponsible for the adoption of local ordinances, budget adoption, appointment of residents to citizen advisory committees and hiring the Town Manager. The Town Manager is respon- sible for implementation of the policies of the Town Council and overall management of the Town through department directors and approx- imately 56 FTE employees. The Presiding Judge, Town Attorney and Town Prosecutor are under the direction of the Town Council. This Popular Annual Financial Report may be accessed on the Town’s website, at www.fh.azgov/PAFR. Page 3 The height of desert living. 2017-2018 Popular Annual Financial Report The Government of Fountain Hills, Arizona The Town provides or administers a full range of services including public safety (law en- forcement, fire, animal control); development services (code enforcement, planning and zon- ing); public works (including construction and maintenance of streets and infrastructure); mu- nicipal court; recreational activities; communi- ty center; senior services and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise funds. The finan- cial report- ing entity (the Town) includes all the funds of the primary government (i.e., the Town of Fountain Hills as le- gally de- fined) as well as all of its com- ponent 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 pri- mary government. Accordingly, the Cotton- woods Maintenance District, the Eagle Moun- tain Community Facilities District, and the Fountain Hills Municipal Property Corporation are included in the financial report 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 appropriates funding for the General Fund, Excise Tax Funds, Special Revenue Funds, Debt Service Funds, and Cap- ital Projects Funds. Therefore, these funds have appropriated budgets. On or before the second Town Council meeting in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commenc- ing the following July 1. The budget includes proposed expenditures and the means of fi- nancing them. The Town Council is then re- quired to hold public hearings on the proposed budget and to adopt a final budget by June 30, the close of the Town’s fiscal year. The budget is legally enacted through passage of a resolu- tion and is prepared by fund and department. The resolution sets the limit for total expendi- tures during the fiscal year. The Town Manag- er may authorize transfers from and within per- sonnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expendi- tures directly necessitated by a natural or man - made disaster as prescribed in the State Consti- tution, Article 9, Section 20. Page 4 Principal Employers 2017 Fountain Hills Unified School District No. 98 149 Fountain View Village 120 Rural Metro Corporation 111 Firerock Country Club 100 Target Stores 98 The height of desert living. 2017-2018 Popular Annual Financial Report MONIES IN As a governmental entity, the Town uses fund ac- counting, or self-balancing sets of accounts segregated for specific activities. Governmental funds are used to account for tax supported activities and the Town re- ceives 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 pri- mary type for fiscal years 2017-2018, 2016-2017 and 2015-2016, in order to present a picture of typical rev- enues from year to year. The improving national and local economy contributed to an increase in revenues of $1,975,766 or 8.8% compared to 2017. Intergovern- mental revenue includes income and sales tax shared from the State and distributed based on population. This revenue figure again increased in 2018. Charges for services decreased from prior years, but revenue from investment earnings was significantly higher. The Property tax figure had very little change, but oth- er taxes increased more dramatically. Page 5 2017-2018 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, 2018. REVENUE TYPE DEFINITIONS 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 5.6% and the Maricopa County rate of .7%, for a total sales tax rate of 8.9%. Taxes - Property - the Town does not charge a primary property tax, only a second- ary property tax. The secondary tax is for debt repayment on voter approved bonds (specifically open space, the Community Cen- ter, and Saguaro Boulevard). Taxes - Franchise - revenue received from utility (telecommunications) companies for the right to operate within the Town. Licenses and Permits - includes building permit fees, business and animal license fees, fire inspections, etc.. Note that animal license fees are reverted to the County for upcoming fiscal years. Leases and Rents - rental fees for use of the Community Center as well as fees from leases for cellular telephone towers. Intergovernmental - these are revenues re- ceived from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax, vehi- cle license tax, and state grants. Charges for Services - these are revenues received from services and/or programs pro- vided by the Town such as recreation pro- grams. Other - these are revenues that do not fit un- der another classification. Fines and Forfeitures - these are revenues received from court fines. Investment Earnings - revenue received from interest on invested monies. Revenues 2018 2017 2016 Taxes: Sales 10,311,578$ 9,415,151$ 9,395,667$ Property 2,286,081 2,287,444 2,543,298 Franchise 421,682 367,119 360,320 Licenses and Permits 2,004,386 1,310,973 1,372,045 Leases and Rents 282,531 284,090 258,165 Intergovernmental 8,266,028 7,917,651 7,559,436 Charges for Services 254,122 351,476 197,109 Other 207,697 153,438 147,662 Fines and Forfeitures 182,997 257,727 209,380 Investment Earnings 158,860 55,127 219,058 Total Revenues 24,375,962$ 22,400,196$ 22,262,140$ Governmental Funds Three Year Revenues Summary by Type The height of desert living. 2017-2018 Popular Annual Financial Report Page 6 MONIES OUT The three-year comparison for Town expenditures shows an in- crease in the overall cost of oper- ations. Overall, 2018 total Gov- ernmental Fund expenditures were greater than 2017 by $2,552,122, or 11.7%. The Town contracts for law enforcement and fire and emergency medical services—these contracts include automatic negotiated increases which are reflected in the Public Safety category. Public Works includes Streets and Highways expenditures, which increased in prior years due to pavement maintenance, but decreased in 2018. Debt Service includes the annual principal and interest payment for outstanding bonds. Capital Outlay increased in 2018 due in a large part to construction work on the new fire station and the Adero Canyon Trail. 2017-2018 Financial Overview - continued Expenditures 2018 2017 2016 General Government 3,195,936$ 2,713,548$ 2,324,026$ Development Services 1,397,249 1,275,147 2,217,814 Public Safety 7,402,227 7,420,032 7,034,887 Public Works 3,420,317 3,954,450 2,498,714 Culture and Recreation 2,375,758 2,484,940 2,240,865 Debt Service 2,906,969 2,922,166 4,570,111 Capital Outlay 4,317,214 1,693,265 6,471,382 Total Expenditures 25,015,670$ 22,463,548$ 27,357,799$ Governmental Funds Three Year Expenditures Summary by Type General Government 12.1% Development Services 5.7% Public Safety 33.0% Public Works 17.6% Culture and Recreation 11.1% Debt Service 13.0% Capital Outlay 7.5% FY 2018 Expenditures The height of desert living. 2017-2018 Popular Annual Financial Report EXPENDITURE TYPE DEFINITIONS  General Government - functions serving Town operations as a whole, including: Town Council, Town Manag- er, Town Clerk, Finance, Administrative Services, Information Technology, Town Attorney, and Town Prosecu- tor.  Public Safety - encompasses the contracted services for Law Enforcement and Fire and Emergency Medical Ser- vices departments.  Public Works - represents the Street division and Facilities, including Engineering.  Culture and Recreation - encompasses the services, programs and facilities provided by Parks & Recreation, Community Center and Senior Services.  Development Services - encompasses Planning, Building Safety, Code Compliance and Mapping and Graphics divisions.  Capital Outlay - expenditures on the Town’s Capital Improvement Program projects and Facilities Replacement.  Debt Service - interest and other related costs affiliated with the Town’s issuance of debt to support various capi- tal improvement activities. Page 7 Operating Funds Expenditures Budget and Actual Last Five Fiscal Years (In Millions) 2017-2018 Financial Overview - continued $10 $11 $12 $13 $14 $15 2018 2017 2016 2015 2014Millions Years Budget Actual The height of desert living. 2017-2018 Popular Annual Financial Report The Town’s Net Position The Statement of Net Po- sition presents infor- mation on all the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, in- creases and decreases in net position may serve as a useful indicator of whether the financial po- sition of the Town is im- proving or deteriorating. Net position is catego- rized by activity type. Governmental activities include services largely funded through revenues such as sales tax and charges for services. ASSETS represent what the Town owns. Current and other assets include cash, invest- ments, and receivables (money due to the Town). Capital assets are land, buildings, infrastruc- ture, vehicles, machinery, and equipment. Capital assets are further broken down as non - depreciable (land, art, and construction in progress) and depreciable (all other capital assets). LIABILITIES represent what the Town owes. Current and other liabilities consist of payables (money due from the Town to pay what it owes). Long-term liabilities represent debt that the Town must pay back and is broken out into the current year and future years. NET POSITION may serve, over time, as useful indicators of a government ’s financial po- sition and consist of three components. The largest portion (82%) reflects the Town ’s invest- ment in capital assets (land, buildings, infrastructure, vehicles, machinery and equipment), less any outstanding related debt used to acquire those assets. An additional portion of the Town’s net position (4%) 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 exam- ple of such a restriction 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 (14%) of net position is unrestricted as to pur- pose. Page 8 2018 2017 2016 ASSETS Current and Other Assets 23,821,565$ 24,037,642$ 23,190,907$ Capital Assets, net 102,259,689 103,179,955 106,661,659 Total Assets 126,081,254 127,217,597 129,852,566 LIABILITIES Current and Other Liabilities 5,475,597 4,588,747 4,025,377 Long-Term Liabilities 2,994,108 5,669,418 8,416,454 Total Liabilities 8,469,705 10,258,165 12,441,831 NET POSITION Net Investment in Capital Assets 96,777,854 94,909,703 95,647,990 Restricted 4,589,526 4,471,661 4,530,239 Unrestricted 16,244,169 17,578,068 17,232,506 Total Net Position 117,611,549$ 116,959,432$ 117,410,735$ Statement of Net Position The height of desert living. 2017-2018 Popular Annual Financial Report Page 9 Fund Accounting State and local govern- ments, such as the Town, employ fund accounting whereby assets and lia- bilities are grouped ac- cording to the purpose for which they are to be used. Each grouping, or fund, operates as a sepa- rate self-balancing set of accounts. The General Fund is the chief operat- ing fund of the Town and General Fund ac- counts for 33.6% of the total fund balance. Capi- tal project funds account for the acquisition or construction of major capital facilities as well as facilities replacement. These intended uses can be demonstrated by viewing the components of governmental fund balances. The fund bal- ance is an important component of fiscal planning and factors into the Town’s debt rating, and has been maintained during the Great Recession due to the Town Council’s commitment to fund on- going services with on- going revenues. Revenues by Category Last Five Fiscal Years $- $5 $10 $15 $20 $25 2018 2017 2016 2015 2014Millions Years Other Charges for Services Investment Revenue Fines and Forfeitures Leases and Rents Licenses and Permits Intergovernmental Taxes General Fund 33.6% HURF 15.9% Debt Service Funds 0.4%Capital Projects Fund 40.3% Non-Major Governmental Funds 9.9% Fund Balances as of June 30, 2018 The height of desert living. 2017-2018 Popular Annual Financial Report Page 10 One of the biggest bills resi- dents face each year is tied to the property they own. Property tax in Fountain Hills is admin- istered by Maricopa County, and is based on property value (ad valorem) and typically in- cluded with the resident’s monthly mortgage payment. As the table indicates, only a small portion (5.2%) of your property taxes go to the Town of Foun- tain Hills—this portion pays for the annual payment on the bonds approved by voters for open space, the Community Center building, and Saguaro Boulevard. The majority of the tax supports Fountain Hills schools, Fountain Hills Sanitary District, and vari- ous Maricopa County districts. Currently, property taxes represent one of the most stable sources of revenue for the Town at 10.2% of total revenues. Property Taxes A primary property tax revenue pays for the basic operating costs of government and schools. The Town does not have a primary property tax which can be used for operations. Revenue from the secondary property tax pays for the annual debt service payment on bonds that have been approved by voters and special taxing districts such as the Sanitary District; 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 multiplying by the tax rate. For example, a residential property with an assessed value of $300,000 would pay approxi- mately $2,471 in taxes ($300,000 x 10% divided by 100 x 8.2364). Entity Primary Rate Secondary Rate Maricopa County 1.4009$ -$ Education/Schools 3.3554 1.3933 Maricopa County Flood Control District - 0.1792 Maricopa County Library District - 0.0556 Fire District Assistance - 0.0107 Central Arizona Water Conservation - 0.1400 Maricopa Special Health District - 0.2941 Fountain Hills Sanitary District - 0.9815 Town of Fountain Hills - 0.4257 Total 4.7563$ 3.4801$ Property Tax Levy - Fiscal Year 2017-2018 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 Maricopa County Education/Schools Maricopa County Flood Control District Maricopa County Library District Fire District Assistance Central Arizona Water Conservation Maricopa Special Health District Fountain Hills Sanitary District Town of Fountain Hills Composition of Property Tax The height of desert living. 2017-2018 Popular Annual Financial Report 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 an annual amount of infrastructure improvement projects. Town Council and staff re- view 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 is best to fund capital projects using existing revenues, issuing bonds or seeking loans. The Town has an Aa2 bond rating from Moody’s Investors Service for the general obligation bonds. This rating allows the Town to receive very competitive interest rates when issuing debt. Capital Investments DEBT TYPE DEFINITIONS 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 assessed secondary valua- tion of the Town. For projects involving water, sewer, artificial lighting, parks, open space, rec- reation facility improvements, public safety, law enforcement, fire and emergency facilities, and street and transportation 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 $101.4 mil- lion in the 20% capacity and $31.5 million in the 6% capacity. The Town is currently using only 3% of the 20% capacity and none of the 6% ca- pacity. REPAYMENT OF OUTSTANDING DEBT The repayment of debt is funded using secondary property tax and general fund revenues. DEBT MARGIN Page 11 DEBT POLICY Year ending June 30 Principal Interest 2019 2,635,000$ 123,872$ 2020 2,310,000 67,302 2021 400,000 7,040 Total 5,345,000$ 198,214$ Debt Type 2018 2017 General Obligation Bonds 4,675,000$ 7,035,000$ Revenue Bonds 670,000 1,030,000 Premium 136,835 205,252 Total Debt 5,481,835$ 8,270,252$ Two Year Debt Summary All Funds The height of desert living. 2017-2018 Popular Annual Financial Report Awards & Community Fountain Hills has had its share of accolades. IFEA/Haas & Wilker- son (International Festi- vals & Events Associa- tion) awarded three of their coveted Pinnacle Awards to the Town, including Best Single Digital/Social Ad (Gold), Best Emergency Preparedness and Risk Management Plan for an Event (Gold), and Best Single Magazine Dis- play Ad (Silver). Also, the Fountain Hills Thea- ter was presented with quite a number of ariZoni awards. 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, 2017. This was the 22nd consecutive year that the government has re- ceived this prestigious award. In addition, the government also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2017. 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 opera- tions guide, and a communications device. This is the 16th consecutive year that the Town has received the award. Also, the GFOA recognized the Town for its June 30, 2017 submission of its Popular Annual Financial Report (PAFR). The Award for Out- standing Achievement in Popular Annual Finan- cial Reporting is a prestigious national award recognizing conformance with the highest stand- ards for preparation of state and local govern- ment popular reports. The requirements are based on an evaluation of creativity, presenta- tion, understandability, and reader appeal. This award is for the Town’s sixth submission of its PAFR. On June 16, 2018, MCSO District 7 deputies and command staff took part in “Coffee with a Cop” at the new Fountain Hills Starbucks. The event was standing room only with members of the public talking to deputies and asking law enforce- ment related questions. The community was given tips regarding crime preven- tion and given insight into the daily operations of the Maricopa County Sheriff’s Office. In all, it was a success- ful turnout for the Fountain Hills community and many questions were answered. The Town of Fountain Hills encourages involve- ment in government through volunteerism. Many community members volunteer their time and efforts to the Town of Fountain Hills and there- by enrich the community every day. Volunteers work within the Town reducing the cost to deliv- er services to its residents all while having fun, meeting others and enjoying new challenges! Annually, Volunteers are recog- nized at the Volunteer of the Year Awards Ceremony. Page 12 The height of desert living. 2017-2018 Popular Annual Financial Report Page 13 The Government Finance Officers Association of the United States and Canada has given an Award for Outstand- ing Achievement in Popular Annual Financial Reporting to the Town of Fountain Hills, Arizona for its Popular Annual Financial Report for the fiscal year ending June 30, 2017. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. Awards & Community - continued The height of desert living. 2017-2018 Popular Annual Financial Report TOWN MANAGER Grady E. Miller DEPARTMENT DIRECTORS Town of Fountain Hills, Arizona TOWN COUNCIL Finance Director Craig Rudolphy Administrative Services Director David Trimble Community Services Director Rachael Goodwin Development Services Director Robert Rodgers Economic Development Director Scott Cooper Public Works Director Justin Weldy Town Clerk Elizabeth Burke Fire Chief Captain David Ott, Rural Metro Corpo- ration District Commander Captain Henry Brandimarte, Maricopa County Sheriff’s Office Dis- trict Commander Presiding Judge Robert Melton Town Prosecutor Mark Iacovino The Law Offices of Mark Iacovino Interim Town Attorney Mitesh Patel, Dickin- son Wright PLLC This Popular Annual Financial Report is intend- ed to summarize the financial information ap- pearing in the fiscal year 2017-2018 Comprehen- sive Annual Financial Report (CAFR). Copies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/CAFR. 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 14 Arizona Legislature—District 23 U.S. Congress—District 6 Mayor Linda M. Kavanagh Vice Mayor Dennis Brown Councilmember Nick DePorter Councilmember Henry Leger Councilmember Alan Magazine Councilmember Art Tolis Councilmember Vacant -facebook.com/townoffountainhills -twitter.com/fhazgov -linkedin.com/company/town-of-fountain-hills