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HomeMy WebLinkAboutFY15 PAFRTown of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2014-2015 ending June 30, 2015 Page 3 Page 5 Page 8 Page 12 Page 10 Community Profile 2014-2015 Financial Overview Net Position Awards Property Taxes The height of desert living. 2014-2015 Popular Annual Financial Report Members of the Administration Department, Finance Division, are pleased to present the Town of Fountain Hills Popular Annual Finan- cial Report for the fiscal year ended June 30, 2015. This report is intended to present an ac- cessible overview of the Town’s financial po- sition and policies, and its commitment to pro- viding responsive 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 opportu- nity 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 2014-2015 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 Stan- dards Board (GASB). While the numbers in this Popular Report come from an audited source, they are pre- sented in an abridged, unaudited non-GAAP format. Citizens who wish to review audited GAAP-basis financial statements can refer to the Town’s 2014-2015 CAFR, which is avail- able online at www.fh.az.gov/170/Financial- Reports-Budgets. Members of the Finance Division and staff across the organization are proud to serve this fine community. We hope that the 2014-2015 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. 2014-2015 Popular Annual Financial Report Profile of Fountain Hills, Arizona The Town of Fountain Hills is a planned, fam- ily-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 cat- tle holdings in Arizona. The land was pur- chased by Robert McCulloch in the late 1960s and 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, and bordering northeast Scottsdale, Fountain Hills is sur- rounded by the 3,500-foot 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 1,575 feet at the fountain, 2,130 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 22,489 based on the 2010 census. On June 5, 2006, the Town of Fountain Hills became twenty square miles and about 10% 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 devel- opment of the land will occur over the next dec- ade. Annexing this property into the Town en- sures 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 oppor- tunity to demonstrate that it is truly the best place to live in the valley. The Town offers a wide range of living accom- modations, from small community condomini- ums to large custom homes. Fountain Hills also offers recreational, cultural and retirement pro- grams that address the needs and lifestyles of active families as well as older adults. The com- munity consists of primarily residential prop- erty; of the total 20.32 square miles of land, only 2.6% of the total is zoned commercial and/ or industrial, 22.9% is preserved 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 Stat- utes. The Town was incorporated on December 5, 1989, with the governmental and administra- tive affairs of the Town operating under the Council-Manager form of government. The Town Council is responsible for the adoption of local ordinances, budget adoption, development of citizen advisory committees and hiring the Town Manager. The Town Manager is respon- sible for implementation of the policies of the Town Council and administering the Town’s operations through three department directors and approximately 52 full-time-equivalent (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.az.gov/pafr. Page 3 The height of desert living. 2014-2015 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 pub- lic works); construction and maintenance of streets and infrastructure, municipal court, rec- reational activities, community center, senior services and cultural 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 sepa- rate 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, Eagle Mountain Community Facilities District and Fountain Hills Municipal Property Corporation are in- cluded in the financial reports of the Town. The annual budget serves as the foundation for the Town of Fountain Hills’ financial planning and control. The Town Council formally adopts the budget and legally allocates, or ap- propriates, available monies for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, these funds have appropriated budgets. On or before the second meeting in April, the Town Manager submits to the Town Council a pro- posed budget for the fiscal year commencing the following July 1. The budget includes pro- posed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 30, the close of the Town of Fountain Hills’ fiscal year. The budget is legally enacted through passage of a resolution and is prepared by fund and department. The resolution sets the limit for total expenditures during the fiscal year. The Town Manager may authorize trans- fers from and within personnel and from oper- ating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessi- tated by a natural or man-made disaster as pre- scribed in the State Constitution, Article 9, Section 20. Page 4 Principal Employers 2014 Fountain Hills Unified School District No. 98 193 Fountain View Village 140 Rural Metro Corporation 111 Firerock Country Club 100 Safeway Stores 86 The height of desert living. 2014-2015 Popular Annual Financial Report MONIES IN As a governmental entity, the Town uses fund accounting, or self-balancing sets of accounts segregated for specific activities. Governmental funds are used to account for tax supported ac- tivities and the Town receives the funding it needs to provide services to the community from a variety of sources. The table below presents a sum- mary of governmental revenues by primary type for fiscal years 2014-2015, 2013-2014 and 2012-2013, in order to present a picture of typical revenues from year to year. The improving national and local economy contributed to an increase in revenues of $3,341,754 or 17.9% compared to 2014. Intergovernmental reve- nue includes income and sales tax shared from the State and distributed based on population, as well as grants—these revenues saw increases consistent with a recovering economy. Building activity increased re- sulting in an increase in Licenses and Permits. Page 5 2014-2015 Financial Overview In this section, we present an overview of monies in and monies out for the Town of Fountain Hills for the fiscal year ended June 30, 2015. REVENUE TYPE DEFINITIONS Taxes - Sales - the Town charges a local sales tax of 2.6% on most goods purchased in the Town. This tax is in addition to the State of Arizona rate of 5.6% and the Maricopa County rate of .7%, for a total sales tax rate of 8.9%. Taxes - Property - the Town does not charge a primary property tax, only a secondary prop- erty tax. The secondary tax is for debt repay- ment on voter approved bonds (specifically the Community Center and open space). Taxes - Franchise - revenue received from utility (telecommunications) companies for the right to operate within the Town. Intergovernmental - these are revenues re- ceived from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax, vehi- cle license tax, and grants. Fines and Forfeitures - these are revenues received from court fines. Licenses and Permits - includes building permit fees, business and animal license fees, fire inspections, etc. Charges for Services - these are revenues received from services and/or programs pro- vided by the Town such as recreation pro- grams. Leases and Rents - rental fees for use of the Community Center as well as fees from leases for cellular telephone towers. Investment Revenue - revenue received from interest on invested monies. Other - these are revenues that do not fit un- der another classification. Revenues 2015 2014 2013 Taxes: Sales 8,983,049$ 8,459,267$ 7,957,163$ Property 904,660 1,463,056 1,421,614 Franchise 352,673 349,414 334,668 Intergovernmental 9,770,048 6,677,518 6,323,047 Fines and Forfeitures 186,456 170,995 187,251 Licenses and Permits 1,043,382 891,782 570,904 Charges for Services 176,541 161,376 162,086 Leases and Rents 269,753 252,584 213,871 Investment Revenue 150,358 123,311 69,998 Other 188,251 134,114 300,899 Total Revenues 22,025,171$ 18,683,417$ 17,541,501$ Governmental Funds Three Year Revenues Summary by Type The height of desert living. 2014-2015 Popular Annual Financial Report Page 6 MONIES OUT The three-year comparison for Town expenditures shows an increase in the overall cost of operations. Overall, 2015 total Governmental Fund expen- ditures were $5,104,402, or 24.9% more than in 2014. The Town con- tracts for law enforcement and fire and emergency medical services— these contracts include automatic ne- gotiated increases which are reflected in the Public Safety category. High- ways and Streets expenditures de- creased due to the postponement of pavement maintenance to allow for an accumulation of ad- ditional funding needed for the next fiscal year. Capital Outlay increased due to the continua- tion of the Shea Boulevard Widening project and the start of the Saguaro Boulevard Recon- struction projects paid for with voter-approved bonds. Debt service includes the annual princi- pal and interest payment for outstanding bonds. 2014-2015 Financial Overview - continued General Government 9% Public Safety 26% Highways and Streets 5% Culture and Recreation 8% Development Services 8% Debt Service 10% Capital Outlay 34% FY 2015 Expenditures Expenditures 2015 2014 2013 General Government 2,275,124$ 2,194,845$ 2,699,109$ Public Safety 6,675,874 6,890,770 6,022,269 Highways and Streets 1,275,779 3,085,559 2,058,990 Culture and Recreation 1,962,585 1,921,939 1,791,018 Development Services 2,073,990 1,774,983 1,643,757 Debt Service 2,548,542 2,887,999 2,847,043 Capital Outlay 8,799,068 1,750,465 453,002 Total Expenditures 25,610,962$ 20,506,560$ 17,515,188$ Governmental Funds Three Year Expenditures Summary by Type The height of desert living. 2014-2015 Popular Annual Financial Report EXPENDITURE TYPE DEFINITIONS  General Government - functions serving Town operations as a whole, including: Town Council, Town Man- ager, 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 de- partments.  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 capi- tal improvement activities. Page 7 Operating Funds Expenditures Budget and Actual Last Five Fiscal Years (In Millions) 2014-2015 Financial Overview - continued $10 $11 $12 $13 $14 $15 2015 2014 2013 2012 2011Millions Years Budget Actual The height of desert living. 2014-2015 Popular Annual Financial Report The Town’s Net Position The Statement of Net Posi- tion presents information on all the Town’s assets and li- abilities, with the difference between the two reported as net position. Over time, in- creases and decreases in net position may serve as a use- ful indicator of whether the financial position of the Town is improving or dete- riorating. Net position is categorized by activity type. Governmental activities in- clude services largely funded through revenues such as sales tax and charges for ser- vices. ASSETS represent what the Town owns. Current and other assets include cash, investments, and receivables (money due to the Town). Capital assets are land, buildings, infrastructure, ve- hicles, machinery, and equipment. They are 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). Non-current liabilities represent compensated absences and debt that the Town must pay back and is broken out into the current year and fu- ture years. NET POSITION may serve, over time, as useful indicators of a government’s financial posi- tion and consists 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 (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 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 (13%) of net position is unrestricted as to pur- Page 8 2015 2014 2013 ASSETS Current and Other Assets 30,103,343$ 26,489,337$ 28,460,597$ Capital Assets Non-Depreciable 29,930,540 27,334,347 26,223,288 Depreciable (net)75,321,571 73,728,913 77,222,272 Total Assets 135,355,454 127,552,597 131,906,157 LIABILITIES Current and Other Liabilities 2,897,349 3,717,336 3,820,104 Long-Term Liabilities Due Within One Year 4,545,644 2,164,879 2,449,599 Due in More Than One Year 11,095,245 7,289,432 9,501,392 Total Liabilities 18,538,238 13,171,647 15,771,095 NET POSITION Net Investment in Capital Assets 95,325,824 89,713,260 89,800,560 Restricted 6,310,810 5,480,867 5,721,744 Unrestricted 15,180,582 19,186,823 20,612,758 Total Net Position 116,817,216$ 114,380,950$ 116,135,062$ Statement of Net Position The height of desert living. 2014-2015 Popular Annual Financial Report Page 9 Revenues by Category Last Five Fiscal Years Fund Accounting Fund Accounting State and local govern- ments, such the Town, employ fund account- ing whereby assets and liabilities are grouped according to the pur- pose for which they are to be used. Each group- ing, or fund, operates as a separate self - balancing set of ac- counts. The General Fund is the chief oper- ating fund of the Town and General Fund ex- penditures account for 49% of governmental expenditures. Special revenue funds group revenues raised for a specific purpose. Capital project funds account for the acquisition or construction of major capital facilities. These in- tended uses can be demonstrated by viewing the components of governmental fund balances. The fund balance is an important com- ponent of fiscal planning and fac- tors into the Town’s debt rating, and has been maintained during the recession due to the Town Council’s commitment to fund on -going services with on-going revenues. $- $5 $10 $15 $20 $25 2015 2014 2013 2012 2011Millions Years Other Investment Revenue Charges for Services Leases and Rents Licenses and Permits Fines and Forfeitures Intergovernmental Taxes General Fund 33% HURF 6% Capital Projects Fund 40% General Obligation Debt Service Fund 1% Municipal Property Corporation Debt Service Fund 7% Non-Major Government al Funds 13% Fund Balances as of June 30, 2015 The height of desert living. 2014-2015 Popular Annual Financial Report Page 10 One of the biggest bills resi- dents face each year is tied to the property they own. Prop- erty tax in Fountain Hills is administered by Maricopa County, and is based on prop- erty value (ad valorem) and typically included with the resi- dent’s monthly mortgage pay- ment. As the table indicates, only a small portion (6.2%) of your property taxes go to the Town of Fountain Hills—this portion pays for the annual payment on the bonds ap- proved by voters for open space and the Community Center building. 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 4.1% of total revenues. Property Taxes The primary property tax revenue pays for the basic operating 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 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 $350,000 would pay approxi- mately $2,942 ($350,000 x 10% divided by 100 x 8.4060). $-$0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Maricopa County State Equalization Tax Maricopa County Community College Maricopa County Flood Control District Maricopa County Library District Fire Assistance District Central Arizona Water Conservation Maricopa Special Health Care District Fountain Hills Sanitary District East Valley Institute of Technology Fountain Hills Unified Schools #98 Town of Fountain Hills Composition of Property Tax Entity Primary Rate Secondary Rate Maricopa County 1.3609$ -$ State Equalization Tax 0.5054 - Maricopa County Community College 1.2628 0.2312 Maricopa County Flood Control District - 0.1592 Maricopa County Library District - 0.0556 Fire Assistance District - 0.0116 Central Arizona Water Conservation - 0.1400 Maricopa Special Health Care District - 0.3021 Fountain Hills Sanitary District - 0.8771 East Valley Institute of Technology - 0.0500 Fountain Hills Unified Schools #98 1.9688 0.9567 Town of Fountain Hills - 0.5246 Total 5.0979$ 3.3081$ Property Tax Levy - Fiscal Year 2014-2015 The height of desert living. 2014-2015 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 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. Construction projects, also known as construction -in-progress, include items such as the Shea Boulevard Widening and Saguaro Boulevard Recon- struction projects. 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 Aa2 bond rating from Moody’s Investors Service for the general obligation bonds and an Aa3 rating for the revenue bonds. These ratings allow 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 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 improvements, 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 $71.1 mil- lion in the 20% capacity and $24.2 million in the 6% capacity. The Town is currently using only 11% of the 20% capacity and nothing of the 6% capacity. Repayment of Outstanding Debt The repayment of debt is funded using secondary property tax and general fund revenues. Debt Margin Page 11 Debt Type 2015 2014 General Obligation Bonds 11,475,000$ 4,495,000$ Revenue Bonds 3,525,000 4,695,000 Total Debt 15,000,000$ 9,190,000$ Two Year Debt Summary All Funds Year ending June 30 Principal Interest 2016 4,328,417$ 308,106$ 2017 2,743,417 244,986 2018 2,788,417 185,092 2019 2,703,417 123,872 2020 2,378,418 67,302 2021 400,000 7,040 15,342,086$ 936,398$ The height of desert living. 2014-2015 Popular Annual Financial Report Fountain Hills, Arizona Awards Awards Fountain Hills has had its share of accolades. NerdWallet ranked Fountain Hills 15th among the best places to start a business in Arizona. Movoto ranked the Town as 3rd of the best Phoenix suburbs. The Arizona Parks and Recrea- tion Association bestowed the “Best of Special Event” award, recognizing the “Slide the City” event, hosted in Fountain Hills on April 25, 2015. This event brought more than 4,000 people into Fountain Hills to slide down a giant Slip-and-Slide style waterslide. These honors make the Town 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, 2014. This was the 19th 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 Generally Accepted Accounting Principles (GAAP) and applicable legal requirements. In addition, the government also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2014. 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 13th consecutive year that the Town has received the award. Also, the GFOA recognized the Town for its June 30, 2014, 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 stan- dards 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 third submission of its PAFR. Two hundred forty-one cities and towns, includ- ing Fountain Hills, earned recognition from na- tional non-profit KaBOOM! and the Humana Foundation as 2015 Playful City USA communi- ties for making play a priority in their communi- ties. From 42 states and the District of Columbia, the Playful City USA honorees range from nine- time honorees to first-time recipients. Playful City USA communities utilize play as an innova- tive solution to address a num- ber of challenges facing kids, families, and communities. In turn, these communities retain a competitive advantage by creat- ing healthier, more vibrant com- munities where families want to live and companies want to do business. Page 12 The height of desert living. 2014-2015 Popular Annual Financial Report Page 13 The Government Finance Officers Association of the United States and Canada has given an Award for Out- standing Achievement in Popular Annual Financial Reporting to the Town of Fountain Hills, Arizona for its Popu- lar Annual Financial Report for the fiscal year ending June 30, 2014. 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. Fountain Hills, Arizona Awards - continued The height of desert living. 2014-2015 Popular Annual Financial Report TOWN MANAGER Grady Miller DEPARTMENT DIRECTORS Town of Fountain Hills, Arizona Town Officials TOWN COUNCIL Finance Director Craig Rudolphy Community Services Director Mark Mayer Development Services Director Paul Mood Presiding Judge Robert Melton Fire Chief Captain Randy Roberts, Rural Metro Corporation District Commander Captain David Letourneau, Maricopa County Sheriff’s Office Town Prosecutor The Law Offices of Mark Iacovino 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 2014-2015 Compre- hensive Annual Financial Report (CAFR). Cop- ies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/170/Financial-Reports -Budgets. 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 Ms. Linda M. Kavanagh Vice Mayor Mr. Dennis Brown Councilmember Mr. Nick DePorter Councilmember Ms. Cassie Hansen Councilmember Mr. Henry Leger Councilmember Mr. Alan Magazine Councilmember Mr. Cecil A. Yates