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HomeMy WebLinkAboutFY20 PAFR 2019-2020 Popular Annual Financial Report Page Page 3 Page 5 Page 8 Page 12 Page 10 Community Profile 2019-2020 Financial Overview Net Position Awards & Community Property Taxes Page 2 Town of Fountain Hills The Town of Fountain Hills is pleased to pre- sent its Popular Annual Financial Report for the fiscal year ended June 30, 2020. This re- port is intended to present an accessible over- view of the Town’s financial position and pol- icies, and its commitment to providing re- sponsive services and programs in a fiscally responsible 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 2019-2020 Comprehensive An- nual Financial Report (CAFR). The financial statements were prepared in conformance with generally accepted accounting principles 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 ac- counting as prescribed by the Governmental Accounting Standards Board (GASB). While the numbers in this Popular Annual Financial 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 2019-2020 CAFR, which is available on the Financial Reports & Budgets page of www.fh.az.gov. Members of the Finance Division, and staff across the organization, are proud to serve this fine community. We hope that the 2019- 2020 Popular Annual Financial Report serves its purpose and helps assure you that every effort is made to manage the community’s resources wisely and for the benefit of all. David Pock, CPA, CGFM Finance Director Welcome 2019-2020 Popular Annual Financial Report Page 3 Community Profile The Town of Fountain Hills is a master planned community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the late 1960s and the community was 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 Moun- tains 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 approximate- ly 500 feet above Phoenix. Over the past twenty-six plus years, Fountain Hills has grown from 10,190 residents to a town of 25,200 in 2019. On June 5, 2006, the Town of Fountain Hills became twenty square miles and about ten percent larger by annex- ing 1,300 acres of State Trust Land. The pro- cess to annex the State Trust Land occurred over a two and one-half year period and de- velopment of the land will begin during 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. The Town offers a wide range of living ac- commodations, from small condominium complexes to large custom homes. Fountain Hills also offers recreational and cultural pro- grams and services that contribute to a high quality of life for its residents. The communi- ty 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 pre- served as open space and 51.0% is residential. The Town of Fountain Hills is an Arizona Municipal Corporation, acting as a general law town as prescribed in the Arizona Re- vised 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 govern- ment. The Mayor is a member of the Town Council who is directly elected by the voters for a two-year term and chairs the Town Council meetings. The members of the Coun- cil 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 re- sponsible for implementation of the policies of the Town Council and overall management of the Town through approximately 61 FTE employees. The Presiding Judge, Town Attor- ney and Town Prosecutor are under the direc- tion of the Town Council. This Popular Annual Financial Report is also available on the Financial Reports & Budgets page of www.fh.az.gov. Page 4 Town of Fountain Hills Town Government 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 zoning); public works (including construction and maintenance of streets and infrastructure); municipal court; recreational ac- tivities; commu- nity center; sen- ior services and cultural events. The Town does not maintain or operate any util- ities or other operations that would require the establish- ment of enter- prise funds. The financial reporting entity (the Town) includes all the funds of the primary government (i.e., the Town of Fountain Hills as legally defined) as well as all of its component units. The compo- nent units consist of legally separate entities 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 op- erations and are included as part of the prima- ry government. Accordingly, the Cotton- woods Maintenance District, the Eagle Moun- tain Community Facilities District, and the Fountain Hills Municipal Property Corpora- tion 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 for- mally adopts the budget and appropriates funding for the General Fund, Excise Tax Funds, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds. Therefore, these funds have appropriated budgets. On or before the second Town Council meet- ing in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1st. The budget includes proposed expendi- tures 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’s fiscal year. The budget is legally en- acted through passage of a resolution and is prepared by fund and department. The resolution sets the limit for total expendi- tures during the fiscal year. The Town Man- ager may authorize transfers within a depart- ment, including those within personnel and from operating capital to services or supplies. Additional expenditures may be authorized 2019-2020 Popular Annual Financial Report Page 5 MONIES IN As a governmental entity, the Town uses fund accounting that is segregated for specific activities. Governmental funds are used to account for tax sup- ported activities, and the Town re- ceives the funding it needs to provide services to the community from a vari- ety of sources. The table to the right presents a summary of governmental revenues by primary type for the three past fiscal years. Online sales tax col- lections and intergovernmental reve- nues contributed to an overall increase in revenues of $895,153, or 3.4%, compared to 2019. 2019-2020 Financial Overview REVENUE TYPE DEFINITIONS  Taxes: Sales - the Town charges a local sales tax of 2.9% 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 0.7%, for a total sales tax rate of 9.2%. 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 open space, the Community Center, and Saguaro Boulevard). Franchise - revenue received from utility (telecommunications) companies for the right to operate within the Town.  Licenses and Permits - includes building permit fees, business license fees, fire in spections, etc..  Leases and Rents - rental fees for use of the Town facilities as well as fees from leases for cellular telephone towers.  Intergovernmental - these are revenues received from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax, vehicle license tax, and state grants.  Charges for Services - these are revenues received from services and/or programs provided by the Town such as recreation programs.  Other - these are revenues that do not fit under another classification.  Fines and Forfeitures - these are revenues received from court fines.  Investment Earnings - revenue received from interest on invested monies. 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, 2020. $- $5 $10 $15 $20 $25 $30 2020 2019 2018Millions Years Other Charges for Services Investment Revenue Fines and Forfeitures Leases and Rents Licenses and Permits Intergovernmental Taxes Revenues Page 6 Town of Fountain Hills MONIES OUT The three-year comparison for Town expenditures shows an decrease in the total cost of opera- tions for 2020. Overall, 2020 total Governmental Fund expenditures were less than 2019 by $1,880,305, or –6.6%. The Town contracts for law enforcement and fire and emergency medi- cal services—these contracts include automatic negotiated increases which are reflected in the Public Safety category. Public Works includes Streets and Highways expenditures, which has increased since 2018 due to more pavement maintenance activities. Debt Service includes the annual principal and interest payment for out- standing bonds. Capital Outlay decreased slight- ly in 2020 due in a large part to completion of the new fire station, Four Peaks Park, and the Ade- ro Canyon Trail in 2019. 2019-2020 Financial Overview - continued General Government 12.4% Development Services 3.0% Public Safety 32.5% Public Works 22.9% Culture & Recreation 9.9% Debt Service 9.0% Capital Outlay 10.3% FY 2020 Expenditures Expenditures 2020 2019 2018 General Government 3,280,191$ 3,147,063$ 3,195,936$ Development Services 797,513 858,957 1,397,249 Public Safety 8,566,058 7,880,668 7,402,227 Public Works 6,046,298 6,295,989 3,420,317 Culture and Recreation 2,609,842 2,845,027 2,375,758 Debt Service 2,379,299 2,760,471 2,906,969 Capital Outlay 2,716,523 4,487,854 4,317,214 Total Expenditures 26,395,724$ 28,276,029$ 25,015,670$ Governmental Funds Three Year Expenditures Summary by Type 2019-2020 Popular Annual Financial Report Page 7 Operating Funds* Expenditures Last Five Fiscal Years (In Millions) 2019-2020 Financial Overview - continued EXPENDITURE TYPE DEFINITIONS  General Government - functions serving Town operations as a whole, including: Town Council, Town Manager, Town Clerk, Finance, Administrative Services, Information Technology, Town Attorney, and Town Prosecutor.  Public Safety - encompasses the contracted services for Law Enforcement and Fire and Emergency Medical Services departments.  Public Works - represents the Street and Facilities divisions, 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 capital improvement activities. $- $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 2020 2019 2018 2017 2016Millions Years Budget Actual Budget-to-Actuals * Includes general fund, public art fund, and vehicle replacement fund Page 8 Town of Fountain Hills Net Position The Statement of Net Position presents information on all of the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. Net position is broken-down into three categories: Net Investment in Capital Assets, Restricted, and Unrestricted. These categories focus on the accessibility of the underlying assets. ASSETS represent what the Town owns. Current and other as- sets include cash, in- vestments, and receiv- ables (money due to the Town). Capital assets are land, build- ings, infrastructure, vehicles, machinery, and equipment. Capi- tal assets are further broken down as non- depreciable (land, art, and construction in progress) and depre- ciable (all other capital assets). LIABILITIES represent what the Town owes. Current and other liabilities consist of payables (money due from the Town) that are due within one year. Long-term liabilities represent debt that the Town must pay back over multiple years. If any portion of long-term debt is due within one year, that portion is reported in current liabilities. NET POSITION is the residual amount remaining after liabilities are subtracted from assets. The changes reported in net position may be used to evaluate the financial condition of the Town; however, attention should be paid to the movement within categories and not just the total net position. The Town’s largest category (84%) reflects investment 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 (2%) 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 restriction is the State’s requirement that revenues from the gasoline tax 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 purpose. 2020 2019 2018 ASSETS Current and Other Assets 23,329,463$ 20,419,804$ 23,821,565$ Capital Assets, net 104,404,331 107,559,746 102,259,689 Total Assets 127,733,794 127,979,550 126,081,254 LIABILITIES Current and Other Liabilities 3,338,678 3,661,199 5,475,597 Long-Term Liabilities 236,576 631,777 2,994,108 Total Liabilities 3,575,254 4,292,976 8,469,705 NET POSITION Net Investment in Capital Assets 104,004,331 104,781,328 96,777,854 Restricted 2,766,041 3,646,449 4,589,526 Unrestricted 17,388,168 15,258,797 16,244,169 Total Net Position 124,158,540$ 123,686,574$ 117,611,549$ Statement of Net Position 2019-2020 Popular Annual Financial Report Page 9 Fund Accounting Fund Balance State and local govern- ments, such as the Town, employ a system called fund accounting. This system groups as- sets and liabilities 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 accounts for 45.9% of the total fund balance. Capital project funds account for the acquisi- tion or construction of major capital facilities, as well as facilities replacement. Other purposes can be determined by reviewing the fund balances of the individual funds. The fund balance is an important compo- nent of fiscal planning and factors into the Town’s debt rating. The Town’s debt rating (Aa2 as rated by Moody’s) has been maintained, even during the Great Recession, due to the Town Council’s commitment to fund on-going services with on-going revenues. General Fund 45.9% Capital Projects Fund 29.7% Non-Major Governmental Funds 15.6% Streets (HURF) 8.0% Debt Service Funds 0.8% Fund Balances as of June 30, 2020 Page 10 Town of Fountain Hills One of the biggest bills resi- dents face each year is tied to the property they own. Property tax in Fountain Hills is collect- ed by the Maricopa County Treasurer, and is based on the property’s value (ad valorem) as determined by the Maricopa County Assessor. As the charts indicate, only a small portion (4%) of your property taxes go to the government of the Town. This portion pays for the annual payment on the bonds approved by voters. The major- ity of your property taxes sup- port other separate entities within the Town, including Fountain Hills Unified School District, Fountain Hills Sani- tary District, and various Maricopa County districts. For the fiscal year, property taxes repre- sented $2,086,768 or 7.7% of total revenues received by the Town. Property taxes are calculated by Maricopa County using the assessed value of all property locat- ed within the Town. For residential property, the tax is calculated using 10% of the assessed valuation of the real property, dividing by 100 and multiplying by the total tax rate (currently $7.8760). For example, a residential property with an assessed value of $300,000 would pay approximately $2,363 in taxes ($300,000 x 10% divided by 100 x $7.8760). Property Taxes Education 56% Maricopa County 18%Sanitary District 13% Other 9% Town of Fountain Hills 4% Taxes for a $300,000 Home Total Property Tax = $2,363 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 Fire District Assistance Maricopa County Library District Central Arizona Water Conservation Maricopa County Flood Control District Maricopa Special Health District Town of Fountain Hills Fountain Hills Sanitary District Maricopa County Education/Schools Composition of Property Tax 2019-2020 Popular Annual Financial Report Page 11 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 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. DEBT POLICY The Town’s Debt Policy provides a set of cri- teria to help determine when it is best to fund capital projects using existing revenues, issu- ing bonds or seeking loans. The Town has an Aa2 bond rating from Moody’s Investors Ser- vice for its general obligation bonds. This rat- ing allows the Town to receive very competi- tive interest rates when issuing debt. REPAYMENT OF OUTSTANDING DEBT The repayment of debt is funded using second- ary property tax and general fund revenues. DEBT MARGIN 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 General Obligation (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 $113.0 million in the 20% capacity and $33.9 million in the 6% capacity. The Town is currently not using any of its 20% capacity or 6% capacity since the remaining $400,000 in outstanding bonds belong to Eagle Mountain Community Facilities District. The final payment for those bonds will be made by June 30, 2021. Capital Investments DEBT TYPE DEFINITIONS General Obligation Bonds - long-term debt that is repaid from the Town’s assessment of a secondary property tax. Revenue Bonds - long-term debt that is repaid from a pledged Town revenue stream (i.e., Transaction Privilege Tax, Highway User Reve- nue Fund, etc.). Debt Type 2020 2019 General Obligation Bonds 400,000$ 2,410,000$ Revenue Bonds - 300,000 Premium - - Total Debt 400,000$ 2,710,000$ Two Year Outstanding Debt Summary All Funds Year ending June 30th Principal Interest 2020 2,310,000$ 67,302$ 2021 400,000 7,040 Total 2,710,000$ 74,342$ Page 12 Town of Fountain Hills Awards & Community One of the many features that make the Town of Fountain Hills so unique is the vast municipally-owned public art collection. More than 150 pieces of art comprise the col- lection that is located throughout the Town for all to enjoy. The collection includes sculptures, bronzes, murals, paintings, pho- tography, and more. The Fountain Hills Cul- tural and Civic Association offers regularly scheduled art walks to introduce the collec- tion to residents and visitors. Fountain Hills has dedicated itself to provid- ing award-winning community service pro- grams for residents of all ages. With numer- ous parks, fields, courts, meeting rooms, and conference facilities, everyone is sure to find an activity that is right for them. The Town also hosts various special events throughout the year, including celebrations for St. Pat- rick’s Day, the Fourth of July, Thanksgiving, and Christmas. The Town of Fountain Hills encourages in- volvement in government through volunteer- ism. Many community members volunteer their time and efforts to the Town of Foun- tain Hills and thereby enrich the community every day. Volunteers work within the Town to reduce the cost of delivering services to its residents all while having fun, meeting others and enjoying new challenges. Annually, Vol- unteers are recognized at the Volunteer of the Year Awards Ceremony. The Government Finance Officers Association (GFOA) awarded a Certificate of Achieve- ment for Excellence in Financial Reporting to the Town of Fountain Hills for its Compre- hensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2019. This was the 24th consecutive year that the government has received this prestigious award. In addition, the GFOA recognized the Town for its June 30, 2019 submission of its Popular Annual Financial Report (PAFR). The Award for Outstanding Achievement in Popular An- nual Financial Reporting is a prestigious na- tional award recognizing conformance with the highest standards for preparation of state and local government popular reports. The requirements are based on an evaluation of creativity, presentation, understandability, and reader appeal. This award is for the Town’s eighth submission of its PAFR. Finally, the Town also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2019. In order to qualify for the Distin- guished Budget Presentation Award, the gov- ernment’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 18th consecutive year that the Town has received the award. 2019-2020 Popular Annual Financial Report Page 13 Awards & Community - continued The Government Finance Officers Association of the United States and Canada has given an Award for Outstanding 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, 2019. Page 14 Town of Fountain Hills TOWN MANAGER Grady E. Miller DEPARTMENT DIRECTORS Town of Fountain Hills, Arizona TOWN COUNCIL Deputy Town Manager David Trimble Finance Director David Pock Community Services Director Rachael Goodwin Development Services Director John Wesley Economic Development Director James Smith Public Works Director Justin Weldy Town Clerk Elizabeth Burke Fire Chief Captain David Ott, Rural Metro Corpo- ration District Commander Captain Larry Kratzer, Maricopa County Sheriff’s Office Dis- trict Commander Presiding Judge Robert Melton Town Prosecutor Mark Iacovino The Law Offices of Mark Iacovino Town Attorney Aaron Arnson, Pierce Coleman PLLC This Popular Annual Financial Report (PAFR) is intended to summarize the financial information appearing in the fiscal year 2019-2020 Compre- hensive Annual Financial Report (CAFR). Both of these reports, as well as other useful financial information, can be found on the Financial Re- ports & Budgets page of www.fh.az.gov. 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 Arizona Legislature—District 23 U.S. Congress—District 6 Mayor Ginny Dickey Vice Mayor Mike Scharnow Councilmember Dennis Brown Councilmember Sherry Leckrone Councilmember Alan Magazine Councilmember David Spelich Councilmember Art Tolis -facebook.com/townoffountainhills -twitter.com/fhazgov -linkedin.com/company/town-of-fountain-hills