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HomeMy WebLinkAboutFY16 PAFRTown of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2015-2016 ending June 30, 2016 Page 3 Page 5 Page 8 Page 12 Page 10 Community Profile 2015-2016 Financial Overview Net Position Awards Property Taxes The height of desert living. 2015-2016 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, 2016. 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 2015-2016 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 2015-2016 CAFR, which is availa- ble online at www.fh.az.gov/financial-reports. Members of the Finance Division and staff across the organization are proud to serve this fine community. We hope that the 2015-2016 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. 2015-2016 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 designed by Charles Wood, Jr. (designer of Dis- neyland 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 22,489 in 2010. 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 0.7% of the total is zoned commercial and/or industri- al, 23.3% is preserved as open space and 51.1% 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 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 52 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. 2015-2016 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 that re- quire the establishment of enterprise funds. 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, 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 2015 Fountain Hills Unified School District No. 98 171 Fountain View Village 140 Rural Metro Corporation 111 Target Stores 101 Firerock Country Club 100 The height of desert living. 2015-2016 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 2015-2016, 2014-2015 and 2013-2014, 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 in 2015, with only slight increases in 2016 of $236,969 or 1.1% compared to 2015. Intergovernmental revenue in- cludes income and sales tax shared from the State and distributed based on population—these revenues de- clined due to a Maricopa Association of Governments grant received in 2015. Building activity increased re- sulting in an increase in Licenses and Permits. Page 5 2015-2016 Financial Overview In this section, we present an overview of monies in and monies out for the Town of Fountain Hills for the fiscal year ended June 30, 2016. REVENUE TYPE DEFINITIONS Taxes - Sales - the Town charges a local sales tax of 2.6% on most goods purchased in the Town. This tax is in addition to the State of Arizona rate of 5.6% and the Maricopa County rate of .7%, for a total sales tax rate of 8.9%. Taxes - Property - the Town does not charge a primary property tax, only a second- ary property tax. The secondary tax is for debt repayment on voter approved bonds (specifically the Community Center, open space and Saguaro Boulevard). Taxes - Franchise - revenue received from utility (telecommunications) companies for the right to operate within the Town. Licenses and Permits - includes building permit fees, business and animal license fees, fire inspections, etc. Leases and Rents - rental fees for use of the Community Center as well as fees from leases for cellular telephone towers. Intergovernmental - these are revenues re- ceived from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax, vehi- cle license tax, and state grants. Charges for Services - these are revenues received from services and/or programs pro- vided by the Town such as recreation pro- grams. Other - these are revenues that do not fit un- der another classification. Fines and Forfeitures - these are revenues received from court fines. Investment Earnings - revenue received from interest on invested monies. Revenues 2016 2015 2014 Taxes: Sales 9,395,667$ 8,983,049$ 8,459,267$ Property 2,543,298 904,660 1,463,056 Franchise 360,320 352,673 349,414 Licenses and Permits 1,372,045 1,043,382 891,782 Leases and Rents 258,165 269,753 252,584 Intergovernmental 7,559,436 9,770,048 6,677,518 Charges for Services 197,109 176,541 161,376 Other 147,662 188,251 134,114 Fines and Forfeitures 209,380 186,456 170,995 Investment Earnings 219,058 150,358 123,331 Total Revenues 22,262,140$ 22,025,171$ 18,683,437$ Governmental Funds Three Year Revenues Summary by Type The height of desert living. 2015-2016 Popular Annual Financial Report Page 6 MONIES OUT The three-year comparison for Town expenditures shows an in- crease in the overall cost of opera- tions. Overall, 2016 total Govern- mental Fund expenditures were $1,746,387, or 6.8% more than in 2015. The Town contracts for law enforcement and fire and emer- gency medical services—these contracts include automatic nego- tiated increases which are reflect- ed in the Public Safety category. Streets and Highways expenditures increased due to the pavement maintenance performed us- ing an accumulation of additional funding from the prior fiscal year. Debt service includes the annual principal and interest payment for outstanding bonds. Capital Outlay decreased due to the completion of the Shea Boulevard Widening project and the Saguaro Boulevard Recon- struction project which was paid for with voter-approved bonds. 2015-2016 Financial Overview - continued General Government 8% Development Services 8% Public Safety 26% Streets and Highways 9% Culture and Recreation 8% Debt Service 17% Capital Outlay 24% FY 2016 Expenditures Expenditures 2016 2015 2014 General Government 2,324,026$ 2,275,124$ 2,194,845$ Development Services 2,217,814 2,073,990 1,774,983 Public Safety 7,034,887 6,675,874 6,890,770 Streets and Highways 2,498,714 1,275,779 3,085,559 Culture and Recreation 2,240,865 1,962,585 1,921,939 Debt Service 4,570,111 2,548,542 2,887,999 Capital Outlay 6,471,382 8,799,068 1,750,465 Total Expenditures 27,357,799$ 25,610,962$ 20,506,560$ Governmental Funds Three Year Expenditures Summary by Type The height of desert living. 2015-2016 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 de- partments.  Streets and Highways - 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) 2015-2016 Financial Overview - continued $10 $11 $12 $13 $14 $15 2016 2015 2014 2013 2012Millions Years Budget Actual The height of desert living. 2015-2016 Popular Annual Financial Report The Town’s Net Position The Statement of Net Po- sition presents information on all the Town’s assets and liabilities, with the difference between the two reported as net posi- tion. Over time, increases and decreases in net posi- tion may serve as a useful indicator of whether the financial position of the Town is improving or de- teriorating. Net position is categorized by activity type. Governmental activi- ties include services large- ly funded through reve- nues 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. 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 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 position and consist of three components. The largest portion (81%) 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 (15%) of net position is unrestricted as to pur- pose. Page 8 2016 2015 2014 ASSETS Current and Other Assets 23,190,907$ 30,103,343$ 26,489,337$ Capital Assets, net 106,661,659 105,252,111 101,063,260 Total Assets 129,852,566 135,355,454 127,552,597 LIABILITIES Current and Other Liabilities 4,025,377 2,897,349 3,717,336 Long-Term Liabilities 8,416,454 15,640,889 9,454,311 Total Liabilities 12,441,831 18,538,238 13,171,647 NET POSITION Net Investment in Capital Assets 95,647,990 95,325,824 89,713,260 Restricted 4,530,239 6,310,810 5,480,867 Unrestricted 17,232,506 15,180,582 19,186,823 Total Net Position 117,410,735$ 116,817,216$ 114,380,950$ Statement of Net Position The height of desert living. 2015-2016 Popular Annual Financial Report Page 9 Fund Accounting State and local govern- ments, such as 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, operates as a separate self-balancing set of accounts. The General Fund is the chief operating fund of the Town and General Fund expenditures ac- count for 47% of gov- ernmental expendi- tures. Capital 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 balance is an important component of fiscal planning and factors into the Town’s debt rating, and has been maintained during the Great Re- cession due to the Town Council’s commitment to fund on-going ser- vices with on-going revenues. $- $5 $10 $15 $20 $25 2016 2015 2014 2013 2012Millions Years Other Charges for Services Investment Revenue Fines and Forfeitures Leases and Rents Licenses and Permits Intergovernmental Taxes Revenues by Category Last Five Fiscal Years General Fund 46.4% HURF 7.5% General Obligation Debt Service 2.1% Eagle Mountain Debt Service 0.3%Municipal Property Corporation Debt Service 1.4% Capital Projects Fund 24.8% Non-Major Government al Funds 17.4% Fund Balances as of June 30, 2016 The height of desert living. 2015-2016 Popular Annual Financial Report Page 10 One of the biggest bills resi- dents face each year is tied to the property they own. Proper- ty tax in Fountain Hills is ad- ministered by Maricopa Coun- ty, and is based on property value (ad valorem) and typical- ly included 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 various Maricopa County districts. Currently, property taxes represent one of the most stable sources of revenue for the Town at 11.4% 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 $250,000 would pay approxi- mately $2,163 ($250,000 x 10% divided by 100 x 8.6531). $-$1.00 $2.00 $3.00 $4.00 $5.00 $6.00 Maricopa County Education/Schools Maricopa County Flood Control District Maricopa County Library District Fire District Assistance Central Arizona Water Conservation Maricopa Special Health District Fountain Hills Sanitary District Town of Fountain Hills Composition of Property Tax Entity Primary Rate Secondary Rate Maricopa County 1.4009$ -$ Education/Schools 3.8244 1.3876 Maricopa County Flood Control District - 0.1792 Maricopa County Library District - 0.0556 Fire District Assistance - 0.0112 Central Arizona Water Conservation - 0.1400 Maricopa Special Health District - 0.3053 Fountain Hills Sanitary District - 0.9017 Town of Fountain Hills - 0.4472 Total 5.2253$ 3.4278$ Property Tax Levy - Fiscal Year 2015-2016 The height of desert living. 2015-2016 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 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 combi- nation 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 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 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 $73.0 mil- lion in the 20% capacity and $24.1 million in the 6% capacity. The Town is currently using only 9% of the 20% capacity and 0% of the 6% capac- ity. Repayment of Outstanding Debt The repayment of debt is funded using secondary property tax and general fund revenues. Debt Margin Page 11 Debt Policy Debt Type 2016 2015 General Obligation Bonds 9,340,000$ 11,475,000$ Revenue Bonds 1,400,000 3,525,000 Total Debt 10,740,000$ 15,000,000$ Two Year Debt Summary All Funds Year ending June 30 Principal Interest 2017 2,675,000$ 244,986$ 2018 2,720,000 185,092 2019 2,635,000 123,872 2020 2,310,000 67,302 2021 400,000 7,040 Total 10,740,000$ 628,292$ The height of desert living. 2015-2016 Popular Annual Financial Report Fountain Hills, Arizona Awards Fountain Hills has had its share of accolades. Movoto ranked Fountain Hills as the third of the ten best places to live in Arizona, giving us an A+ in education, as well as several other bonus points. The Arizona Parks and Recreation Asso- ciation bestowed a Sports Program Award on the Town for archery instruction. The Fountain Hills Theatre was presented with several ariZoni awards, including a special award for excellence in stage management. 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, 2015. This was the 20th 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 orga- nized CAFR. This report satisfied both the ac- counting principles generally accepted in the United States of America (GAAP) and applica- ble 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, 2015. 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 fourteenth consecutive year that the Town has received the award. Also, the GFOA recognized the Town for its June 30, 2015, 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 fourth submission of its PAFR. Two hundred fifty-seven communities, including Fountain Hills, earned recognition from national non-profit KaBOOM! as 2016 Playful City USA communities for making it easy for all kids to get balanced and active play in their neighborhoods and for pledging to integrate play as a solution to the chal- lenges facing their commu- nities. From forty-three states and the District of Columbia, the Playful City USA honorees range from ten-time hon- orees to first-time recipients. In its tenth year, Playful City USA is a national recognition pro- gram that honors cities and towns for taking bold steps to create more play opportunities for all kids. Page 12 The height of desert living. 2015-2016 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, 2015. 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. 2015-2016 Popular Annual Financial Report TOWN MANAGER Grady E. Miller DEPARTMENT DIRECTORS Town of Fountain Hills, Arizona TOWN COUNCIL Finance Director Craig Rudolphy Community Services Director Mark Mayer Development Services Director Paul Mood Presiding Judge Robert Melton Fire Chief Captain David Ott, Rural Metro Corporation District Commander Captain David Letourneau, Maricopa County Sheriff’s Office Town Prosecutor Mark Iacovino The Law Offices of Mark Iacovino Town Attorney Andrew McGuire Gust Rosenfeld, P.L.C. This Popular Annual Financial Report is intend- ed to summarize the financial information ap- pearing in the fiscal year 2015-2016 Comprehen- sive Annual Financial Report (CAFR). Copies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/financial-reports. The data included in this review is not prepared in accord- ance 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 Cecil A. Yates Councilmember Nick DePorter Councilmember Cassie Hansen Councilmember Henry Leger Councilmember Alan Magazine Councilmember Dennis Brown -facebook.com/townoffountainhills -twitter.com/fhazgov -linkedin.com/company/town-of-fountain-hills