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HomeMy WebLinkAboutFY15 CAFRFor the Fiscal Year Ended June 30, 2015 Comprehensive Annual Financial Report Town of Fountain Hills, Arizona Issued By: Ad ministration Department Finance Division TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 THIS PAGE BLANK TOWN OF FOUNTAIN HILLS,AR IZONA TABLE OF CONTENTS FISCAL YEAR ENDED JUNE 30, 2015 INTRODUCTORY SECTION LETTER OF TRANSMITTAL 1 LIST OF PRINCIPAL OFFICIALS 9 ORGANIZATIONAL CHART 10 GFOA CERTIFICATE OF ACHIEVEMENT 11 FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT 12 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT’S DISCUSSION AND ANALYSIS 14 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION 25 STATEMENT OF ACTIVITIES 26 BALANCE SHEET –GOVERNMENTAL FUNDS 27 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION 29 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES –GOVERNMENTAL FUNDS 30 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 32 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –GENERAL FUND 33 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –HURF FUND 34 NOTES TO THE BASIC FINANCIAL STATEMENTS 35 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET 57 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES 59 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –CAPITAL PROJECTS FUND 61 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –GENERAL OBLIGATION DEBT SERVICE FUND 62 TOWN OF FOUNTAIN HILLS,AR IZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2015 FINANCIAL SECTION CONTINUED) COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED) SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –MUNICIPAL PROPERTY CORPORATION DEBT SERVICE FUND 63 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –DEVELOPMENT FEES FUND 64 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –LOCAL COURT ENHANCEMENT FUND 65 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –GRANTS FUND 66 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –DOW NTOW N STRATEGY FUND 67 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –ECONOMIC DEVELOPMENT FUND 68 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –COTTONWOODS MAINTENANCE FUND 69 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE –BUDGET AND ACTUAL –EAGLE MOUNTAIN DEBT SERVICE FUND 70 STATISTICAL SECTION (UNAUDITED) FINANCIAL TRENDS NET POSITION BY COMPONENT 71 CHANGES IN NET POSITION 73 FUND BALANCES OF GOVERNMENTAL FUNDS 75 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS 76 REVENUE CAPACITY GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE 78 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY 79 PRINCIPAL PROPERTY TAXPAYERS 80 PROPERTY TAX LEVIES AND COLLECTIONS 81 TAXABLE SALES BY CATEGORY 82 DIRECT AND OVERLAPPING SALES TAX RATES 84 TOWN OF FOUNTAIN HILLS,AR IZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2015 STATISTICAL SECTION (CONTINUED) DEBT CAPACITY RATIOS OF OUTSTANDING DEBT BY TYPE 85 RATIOS OF GENERAL BONDED DEBT OUTSTANDING 86 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 87 LEGAL DEBT MARGIN INFORMATION 88 CALCULATION OF LEGAL DEBT MARGIN 90 REVENUE BOND COVERAGE 91 DEMOGRAPHIC AND ECONOMIC INFORMATION DEMOGRAPHIC AND ECONOMIC STATISTICS 92 PRINCIPAL EMPLOYERS 94 OPERATING INFORMATION AUTHORIZED FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION 95 OPERATING INDICATORS BY FUNCTION 96 CAPITAL ASSETS STATISTICS BY FUNCTION 98 THIS PAGE BLANK INTRODUCTORY SECTION THIS PAGE BLANK Town of FOUNTAIN HILLS (1) 16705 E. Avenue of the Fountains –Fountain Hills, Arizona 85268 –(480) 816-5100 -Fax (480) 837-3145 September 30, 2015 To the Honorable Mayor, Members of the Town Council, and Citizens of the Town of Fountain Hills: State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in accordance with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Town of Fountain Hills for the fiscal year ended June 30, 2015. This report consists of management’s representations concerning the finances of the Town of Fountain Hills. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town of Fountain Hills has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town of Fountain Hills’ financial statements in accordance with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the Town of Fountain Hills’ comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Town of Fountain Hills’ financial statements have been audited by CliftonLarsonAllen LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of Fountain Hills for the fiscal year ended June 30, 2015, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town of Fountain Hills’ financial statements for the fiscal year ended June 30, 2015, are fairly presented in accordance with accounting principles generally accepted in the United States of America. The independent auditors’ report is presented as the first component of the financial section of this report. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Town of Fountain Hills’ MD&A can be found immediately following the report of the independent auditors. (2) Town of Fountain Hills 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 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, and bordering northeast Scottsdale, Fountain Hills is surrounded by the 3,500-foot McDowell Mountains 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 Boulevard, 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 development of the land will occur over the next decade. Annexing this property into the Town ensures that its future development will be of the highest quality under such Town standards as the cut-and-fill ordinance and strict zoning regulations. Fountain Hills will have an opportunity to demonstrate that it is truly the best place to live in the Valley. The Town offers a wide range of living accommodations, from small condominiums to large custom homes. Fountain Hills also offers recreational, cultural and retirement programs that address the needs and lifestyles of active families as well as older adults. The community consists of primarily residential property; 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’s Mission Statement The Town of Fountain Hills’ purpose is to serve the best interests of the community by: providing for its safety and well-being; respecting its special, small-town character and quality of life; providing superior public services; sustaining the public trust through open and responsive government; and maintaining the stewardship and preservation of its financial and natural resources. To serve, respect, and provide trust and stewardship. (3) The Town of Fountain Hills is an Arizona Municipal Corporation, acting as a general law town as prescribed in the Arizona Revised Statutes. The Town was incorporated on December 5, 1989, with the governmental and administrative affairs of the Town operating under the Council-Manager form of government. The Town Council is responsible, among other things, for the adoption of local ordinances, budget adoption, development of citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and administering the Town’s operations through three department directors and approximately 52 FTE employees. The Presiding Judge, Town Attorney and Town Prosecutor are under the direction of the Town Council. The Town provides or administers a full range of services including public safety (law enforcement, fire, animal control); development services (code enforcement, planning, building inspection, zoning and public works); construction and maintenance of streets and infrastructure, municipal court, recreational activities, community center, senior services and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise 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 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 primary government. Accordingly, the Cottonwoods Maintenance District, the Eagle Mountain 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 legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, these funds have appropriated budgets, and budget to actual information is presented. On or before the second meeting in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the 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 expenditures during the fiscal year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. Fountain Hills Town Hall (4) Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Town of Fountain Hills operates. Local Economy. The Great Recession appears to be recovering modestly in Fountain Hills; this recovery is indicated by the local sales tax receipts in the construction category. The construction activity has increased 13% over the prior year which we interpret as a leading indicator of a rebounding economy. The Town of Fountain Hills’ local tax revenue base consists of two major tax categories, the most significant being wholesale/retail sales and transportation/communication/utilities (construction had been a third significant category in prior years). The chart below is a look at the past five years’ significant local sales tax activity by sector: $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 MillionsFY10-11 FY 11-12 FY 12-13 FY 13-14 FY14-15 Fountain Hills 2.6% Sales Ta x Activity by Sector -FY10-11 t hru FY14-15 Construction Transportation/Util Wholesale/Retail Restaurant/Bars As can be seen in the chart on the left, sales tax collections continue to show signs of moderate growth. Retail sales experienced a 6.5% increase over the prior year; restaurant/bar revenues have exceeded any prior year and an increase of 6.0% from FY13-14. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and increased 13.4% over the prior year; recent building permit activity indicates that construction sales tax is likely to increase over the next years. Transportation /communication/utilities tax revenues posted a slight increase of .6%. Construction activity provides revenue to the Town through local sales tax, the proceeds of which are utilized for general operations and capital expenditures. Without the resources to fund capital projects, the Town must find additional funds to pay for necessary infrastructure projects. For operating costs, the Town is dependent upon state shared revenues and local sales tax as a major source of operating revenue, accounting for 87% of total General Fund revenue for fiscal year 2014-15. State shared revenues are derived as a proportionate share of state sales, income and vehicle license taxes are distributed based on the Town’s population compared to all other incorporated cities and towns in Arizona (currently 0.45%).State shared income tax revenue category is based on two years prior personal and corporate earnings; from FY08-09 through FY11-12 the Town lost 52% of this revenue source ($1.8M or 14% of the General Fund operating budget). However, the revenue from the State income tax increased by 7.9% in FY14-15 and is anticipated to decrease 0.5% for FY15-16. After a 10% decrease in State sales tax from FY08-09 through FY11-12, this revenue has recovered with a 6.2% increase in FY14-15 and is anticipated to increase another 4.9% in FY15-16. Other local activity has remained fairly level during the recessionary period due to the lack of major retailers (the Town has three grocery stores and one major retailer). Fountain Hills is past the historic period of rapid growth and the long-term economic outlook for the Town must recognize this fact. The opportunity to further expand the retail tax base in Fountain Hills is limited by the lack of available commercial land –over 70% of the currently available commercial lots are already developed. (5) Development Activity over the past year: Development Services has been involved with the following development activities during fiscal year 2014-15 (7/1/2014 –6/30/2015): Four Concept Plans were approved by the Planning & Zoning Commission during the period: Master Plat at Firerock New VFW building The Hemmingway The Morningstar Project Fourteen Special Use Permits were granted. No Temporary Use Permits were issued during the period. Thirty-four new Single-Family Residential Building Permits were issued. There was one new Commercial Building Permits issued. There were fifteen commercial tenant improvement permits issued during the last fiscal year. Fiscal year SFR MFR T.I. & Comm Pools, Fences & Other Ad d Ons (Not Garages) Garages & Carports MONTH TOTAL JULY 3 0 0 25 4 0 32 AU GUST 1 1 1 18 5 1 27 SEPTEMBER 2 0 3 25 3 1 34 OCTOBER 1 3 2 21 5 0 32 NOVEMBER 1 2 0 25 3 0 31 DECEMBER 3 0 2 32 8 2 47 JANUARY 2 2 0 24 6 0 34 FEBRUARY 5 2 2 30 9 1 49 MARCH 2 0 1 34 3 1 41 AP RIL 2 0 1 35 3 1 42 MAY 7 0 2 18 8 0 35 JUNE 3 0 2 27 3 1 36 YEARLY TOTAL 32 10 16 314 60 8 440 (6) Long-term Financial Planning Fountain Hills’ financial policies are balanced on sound financial reserves and conservative revenue growth forecasts for the foreseeable future. Potential for State legislative impacts to revenue-sharing or local revenues and additional demands for essential Town services remain. The Town’s financial policies set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. In early 2009, the Strategic Planning Advisory Commission began the process of gathering public input to update the Strategic Plan’s vision, confirm residents’ values, and create a fresh structure for the Strategic Plan revision. Subsequently, Strategic Plan 2010 was built upon the foundation of a clearly defined vision statement and eight key values, with specific indicators to evaluate Council and staff priorities. Based on citizen input, the Strategic Plan is designed to guide our future decisions grounded on these common values: 1.Civility 2.Civic Responsibility 3.Environmental Stewardship 4.Economic Vitality 5.Education, Learning and Culture 6.Maintain and Improve Community Infrastructure 7.Public Safety, Health and W elfare 8.Recreational Opportunities and Amenities These values guide the Town’s annual budget process.The Strategic Planning Advisory Commission is currently in the process of preparing an update to the Plan. The Fountain Hills Town Council maintains a fund balance policy that ensures adequate reserves that will provide financial stability in the event of an unanticipated economic downturn. The policy was amended in FY08-09 to include the establishment of a Rainy Day Fund beginning in FY09-10. In FY11-12,the Town adopted Governmental Accounting Standards Board (GASB) Statement No. 54 which changed how governments report fund balance. The overall principal and goal of GASB No. 54 was to report governmental fund balances based on a hierarchy that shows, from the highest to the lowest, the level or form of constraints on fund balance, and accordingly, the extent to which governments are bound to honor them:nonspendable, restricted, committed, assigned, and unassigned. The fund balance amounts will not be programmed for expenditure and are only available for use within the confines of expenditure limitations imposed by the State. A Capital Projects Fund has been created and is funded with a portion of the construction sales tax, proceeds from excess revenues collected over budget, and any unexpended appropriations not needed to meet fund balance requirements or re- appropriation. The Council also adopted financial policies that include guidelines for the issuance of debt for capital expenditures, community facility districts, financing alternatives, expenditure controls and financial planning. The policy was amended during FY 09-10 to reduce the allocation of the local construction sales tax to the Capital Projects Fund from 85% to 50%, reflecting the transition from one-time building activity to ongoing redevelopment activity. The debt policy was prepared with a preference for “pay-as- you-go” financing for capital spending, however, the policy did not anticipate the lack of funding for capital projects and bond funding is being reconsidered. (7) Major Initiatives The Town of Fountain Hills’ adopted FY14-15 budget reflected the continued recession in the local economy, which is also somewhat mirrored at the national and state levels. Due to the challenging current economic conditions, the Town has made significant reductions in staff and service levels. This reduction was accomplished by a thorough assessment of all existing and proposed programs and workload; as a result, Town staffing was reduced from 81 to 52 FTE’s (full time equivalents) over the past years. The Town Council established priorities for FY14-15 of which the top two are Economic Development and Pavement Management. In order to implement the Pavement Management program, the Council approved the use of Vehicle License Tax revenues to be dedicated to annual pavement maintenance with an effective date of July 1, 2013. Economic Development initiatives are funded through a dedicated local sales tax which provides funding for business attraction, retention and expansion. During FY14-15, the Town embarked on two major street reconstruction projects. First was the Shea Boulevard widening project, a Maricopa Association of Governments (MAG) Proposition 400 project which provided 70% of the project funding with a 30% match from the Town. Shea Boulevard is a road of regional significance and has an average traffic volume of 25,000 vehicles per day at Saguaro Boulevard. And the second project was the Saguaro Boulevard Reconstruction. Saguaro Boulevard was one of the first streets constructed in Fountain Hills and is a major truck route. This reconstruction is the first major work performed on the street. Bonds totaling $7,565,000 were issued by the Town to fund this project. AW ARDS AND ACKNOWLEDGEMENT Aw ards.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 nineteenth consecutive year that the government has received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both Generally Accepted Accounting Principles (GAAP) and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. For the third year, The Town was also given the Award for Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended June 30, 2014. In addition, the government 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 operations guide, and a communications device. This is the thirteenth consecutive year that the Town has received the award. An investment policy was adopted and was awarded the Investment Policy Certification from the Association of Public Treasurers of United States and Canada. (8) Acknowledgements.The preparation of this report would not have been possible without the efficient and dedicated services of the entire team of the Finance Division and Administration Department. I would also like to extend my appreciation to the Mayor and Council for their leadership and support. Each member of the department has my sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2015 (9) ELECTED OFFICIALS 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 DEPARTMENT DIRECTORS Town Manager Finance Director Grady Miller Craig Rudolphy Presiding Judge Robert Melton Community Services Director Mark Mayer Development Services Director Paul Mood Fire Chief Captain Randy Roberts Rural Metro Corporation District Commander Captain David Letourneau Maricopa County Sheriff’s Office Town Prosecutor Mark Iacovino The Law Office of Mark Iacovino Town Attorney Andrew McGuire Gust Rosenfeld, P.L.C. TOWN OF FOUNTAIN HILLS, ARIZONA ORGANIZATIONAL CHART JUNE 30, 2015 (10) (11) THIS PAGE BLANK FINANCIAL SECTION THIS PAGE BLANK An independent member of Nexi a Int ernat ional (12) INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of the Town Council Town of Fountain Hills Fountain Hills, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona (Town), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Town’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona (13) Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona as of June 30, 2015,and the respective changes in financial position and the budgetary comparison schedules of the General Fund and HURF Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis on pages 14 -24 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The combining and individual nonmajor fund financial statements and schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. a CliftonLarsonAllen LLP Phoenix, Arizona September 30, 2015 REQUIRED SUPPLEMENTARY INFORMATION THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (14) As management of the Town of Fountain Hills, Arizona (Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2015. This discussion and analysis is intended to be an easily readable breakdown of the Town of Fountain Hills’ financial activities based on currently known facts, decisions and conditions. This analysis focuses on current year activities and operations and should be read in combination with the transmittal letter and the financial statements that follow. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS The assets of the Town exceeded its liabilities at the close of fiscal year 2014-15 and fiscal year 2013-14 by $116.8 million and $114.4 million, respectively. Of these amounts, $15.2 million and $19.2 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. Governmental activities program revenues increased overall by $3.1 million (109.4%) over the previous year. The majority of the increase was attributable to an increase in capital grants and contributions received for construction on Shea Boulevard. At June 30, 2015, total fund balance of the governmental funds was $27.1 million. The increase of $4.4 million from the prior year was mainly the result of current year bond refundings and the issuance of General Obligation bonds in the current year. Of the total fund balance, $4.4 million is unassigned in the General Fund, while the remainder is classified as nonspendable, restricted, committed, and assigned. The major governmental funds,which include the General Fund, total $21.0 million in revenues, consisting primarily of local taxes, intergovernmental revenues, and licenses and permits. The total expenditures of the General Fund were $12.6 million and the fund balance increased from $8.0 million to $8.9 million including the Rainy Day, Public Art, Facilities Replacement and Vehicle Replacement Funds. The Highway User Revenue Fund (HURF) revenues were $2.3 million with expenditures of $1.3 million. The nonmajor governmental funds revenues were $1.1 million with the majority from local sales taxes (Downtown Strategy and Economic Development Funds) and property taxes (Eagle Mountain Community Facilities District). Expenditures for the nonmajor funds were $0.8 million primarily for debt service for Eagle Mountain Community Facilities District and economic development. The Town’s total net position of governmental activities increased $2.4 million from the prior fiscal year. Revenues increased 19.0%mainly due to capital grants received during the current year and higher sales tax and fee revenue; expenses decreased 3.1%, largely due to a decline in streets maintenance, but a significant increase in capital assets. General revenues accounted for $16.3 million in revenue, or 73.1% of all current fiscal year revenues. Program specific revenues in the form of charges for services and grants and contributions accounted for $6.0 million or 26.9% of total current fiscal year revenues. The Town had approximately $19.9 million in expenses related to governmental activities, a decrease of 3.1% over the prior fiscal year. Per local policy, residual unassigned General Fund revenues may be transferred to the Rainy Day fund, to supplement pay-as-you-go capital outlay expenditures or prepay existing town debt. The Council authorized the use of general fund surplus revenues in FY11-12 to transfer funds to the Municipal Property Corporation Debt Service Fund to provide funds that were placed in an irrevocable trust to provide for future principal and interest payments on bonds that were issued in 2005 for the Town Hall. The general fund balance will include the surplus. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (15) OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components:1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private sector business. The accrual basis of accounting is used for the government-wide financial statements. 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 or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The Statement of Activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused compensated absences). The government-wide financial statements outline functions of the Town that are principally supported by taxes and intergovernmental revenues. The governmental activities of the Town include general government, public safety, highways and streets, culture and recreation, development services, and interest on long-term debt. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town are included in the governmental funds. Governmental Funds –Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the Town’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Town’s near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (16) Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, Highway Users Revenue Fund (HURF), Capital Projects Fund,General Obligation Debt Service Fund, and Municipal Property Corporation Debt Service Fund,all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements and schedules. Notes to Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found immediately following the basic financial statements. Other Information Governments have the option of including the budgetary comparison statements for the General Fund and major special revenue funds as either part of the fund financial statements within the basic financial statements, or as required supplementary information following the notes to the basic financial statements. The Town has chosen to present these budgetary statements as part of the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the Town to provide services to our citizens, the Statement of Net Position and the Statement of Activities serve to provide an answer to the question of how the Town, as a whole, did financially throughout the year. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by the private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the Town’s assets and the changes in those assets. The change in assets is important because it tells the reader whether the financial position of the Town as a whole has improved or diminished. However, in evaluating the overall position of the Town, nonsets will also need to be evaluated. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (17) An alysis of Net Position Net position may serve,over time,as a useful indicator of a government’s financial position. In the case of the Town, assets exceeded liabilities by $116.8 million at the current fiscal year end. The following table presents a summary of the Town’s net position for the fiscal years ended June 30, 2015 and June 30, 2014. 2015 2014 Percent Change ASSETS Current and Other Assets 30,103,343$ 26,489,337$ 13.6 % Capital Assets: Non-depreciable 29,930,540 27,334,347 9.5 % Depreciable (net)75,321,571 73,728,913 2.2 % Total Assets 135,355,454 127,552,597 6.1 % LIABILITIES Other Liabilities 2,897,349 3,717,336 (22.1)% Long-Term Liabilities: Due W ithin One Year 4,545,644 2,164,879 110.0 % Due in More Than One Year 11,095,245 7,289,432 52.2 % Total Liabilities 18,538,238 13,171,647 40.7 % NET POSITION Net Investment in Capital Assets 95,325,824 89,713,260 6.3 % Restricted 6,310,810 5,480,867 15.1 % Unrestricted 15,180,582 19,186,823 (20.9)% Total Net Position 116,817,216$ 114,380,950$ 2.1 % The largest portion of the Town’s net position (82%) reflects its investment in capital assets (e.g., land, infrastructure, buildings, improvements, vehicles, machinery and equipment, and artwork) less any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In addition, a portion of the Town’s net position (5%) is for the specified purposes of debt service repayment, capital outlay investment, and highways and streets. At the end of the current fiscal year, the Town reported positive balances in all three categories of net position. The same situation held true for the prior fiscal year. The Town’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (18) An alysis of Changes in Net Position The Town’s total net position increased by $2.4 million during the fiscal year.The increase was primarily a result of the increase in capital assets funded by capital grants as well as an increase in sales tax and a reduction in street improvements that were incurred in the prior year. Total governmental revenues increased over the prior year with a net increase of $3.6 million (19%); primarily due to an increase in capital grants relating to the Shea Boulevard project. The Town also saw an increase in local sales taxes of $0.5 million (6%) as well as revenues shared with cities/towns by the State (income tax, state sales tax and vehicle license taxes –increase of 7%) reflecting improvements in the economy. The Town’s total revenues for the current fiscal year were $22.3 million. The total cost of all programs and services was $19.9 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2015 and June 30, 2014. 2015 2014 Percent Change REVENUES Program Revenues: Fees, Fines and Charges for Services $ 1,693,830 $ 1,412,797 19.9 % Operating Grants and Contributions 1,431,017 1,307,738 9.4 % Capital Grants and Contributions 2,874,796 144,570 1888.5 % General Revenues: Sales Taxes 8,983,049 8,459,267 6.2 % Property Taxes 904,660 1,449,646 (37.6)% Franchise Taxes 352,673 349,414 0.9 % State Shared Revenues 4,854,361 4,525,857 7.3 % Vehicle License Taxes 858,874 800,475 7.3 % Investment Earnings 150,358 123,311 21.9 % Miscellaneous 188,251 166,115 13.3 % Total Revenues 22,291,869 18,739,190 19.0 % EXPENSES General Government 2,479,365 2,432,965 1.9 % Public Safety 6,816,152 6,958,056 (2.0)% Highways and Streets 4,963,979 6,630,875 (25.1)% Culture and Recreation 2,822,954 2,760,690 2.3 % Development Services 2,074,611 1,237,717 67.6 % Interest on Long-Term Debt 698,542 472,999 47.7 % Total Expenses 19,855,603 20,493,302 (3.1)% CHANGE IN NET POSITION 2,436,266 (1,754,112) (238.9)% Net Position - Beginning of Year 114,380,950 116,135,062 (1.5)% NET POSITION - END OF YEAR 116,817,216$ 114,380,950$ 2.1 % TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (19) General revenues such as property, business, and privilege taxes are not shown by program, but are effectively used to support program activities town-wide. For governmental activities overall, without regard to program,business taxes which includes sales and use taxes and franchise taxes, are the largest single source of funds (42%), followed by state shared revenues (22%), capital grants and contributions (13%), fees, fines and charges for services (7%), operating grants (6%), property taxes (4%), and vehicle license tax (4%). The charts below compare the governmental expenses from fiscal years 2014-15 and 2013-14. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (20) The following items are significant current year transactions that had an impact on the Statement of Net Position and Statement of Activities: Depreciable assets increased 2.2% ($1,592,658) with the Town’s depreciation of capital assets. Overall revenues increased by 19% compared to the prior year, largely due to an increase in capital grants and contributions. Additionally, state shared revenues increased 7.3% which reflected the improving economy. The Town does not have a primary property tax that is used for operations; the Town property tax levy is dependent upon the annual debt payment for voter approved bonds. Fees, Fines and Charges for Services revenue increased 19.9% compared to the prior year due in large part to an increase in permit revenue. Sales tax revenues in Fountain Hills are derived primarily from retail and transportation/communications/utilities activity. An increase in these revenues reflects an improving economy. State shared revenues are determined by the prior two years of income tax returns in Arizona and is shared with cities and towns based on population; last fiscal year revenues, both State income tax and State sales tax, were higher than anticipated with an increase of $328,504. Investment income increased in the current year 21.9% over the prior year. This increase was due to realized gains on the Town’s investment portfolio. Overall expenses decreased 3.1% due to primarily to a decline in street maintenance. General Government expenses were slightly more than prior year due to increases in attorney fees and contracted services. Public Safety costs include contracts for police and fire; those contracts are multi-year with automatic increases. Decrease in Highways and Streets expenses was due to the postponement of the pavement management program for a year to accumulate funds. FINANCIAL ANALYSIS OF THE TOWN’S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the Town’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending.Such information is useful in assessing the Town’s financing requirements.In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.Types of major Governmental Funds reported by the Town include the General Fund,Highway Users Revenue Fund, Capital Projects Fund, General Obligation Debt Service Fund, and the Municipal Property Corporation Debt Service Fund. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (21) The financial performance of the Town as a whole is reflected in its governmental funds.As the Town completed the year, its governmental funds reported a combined fund balance of $27.1 million, an increase of $4.4 million. Increase (Decrease) Fund Balance From FY 2013-14 General Fund 8,894,502$ 896,550$ HURF Fund 1,692,305 990,914 Capital Projects Fund 10,859,923 3,712,337 General Obligation Debt Service Fund 354,062 277,228 Municipal Property Corporation Debt Service Fund 1,760,662 (212,405) Nonmajor Governmental Funds 3,569,394 (1,248,329) 27,130,848$ 4,416,295$ The General Fund is the chief operating fund of the Town of Fountain Hills, Arizona.At the end of the current fiscal year, the fund balance of the General Fund was $8.9 million, while total fund balance of all funds reached $27.1 million.As a measure of the General Fund’s liquidity, it may be useful to compare both General Fund balance and total fund balance to total fund expenditures.General Fund balance represents 71%of total General Fund expenditures, while total fund balance represents 106%of total expenditures.The fund balance of the Town of Fountain Hills’General Fund,which includes the Public Art, Facilities Replacement and Vehicle Replacement Funds,balance increased by $0.9 million. Any residual balance will be transferred to the Capital Projects Fund per the Town Council policy.Sales tax within the General Fund increased $0.4 million and licenses and permits increased $0.2 million which were the primary factors for the increase in General Fund fund balance. The General Fund comprises 33%of the total fund balance.Approximately $4.4 million or 49%of the General Fund’s fund balance constitutes unassigned fund balance.The remaining fund balance is committed, assigned and nonspendable for inventory and prepaid items. The fund balance of the HURF Fund increased $1.0 million. The increase was due primarily to a decline in expenditures as the pavement management program was deferred. The fund balance of the Capital Project’s Fund increased $3.7 million during the current fiscal year. The increase was primarily due to the issuance of General Obligation bonds in the current year to pay for Saguaro Boulevard reconstruction costs. This project was ongoing at fiscal year-end. The fund balance of the General Obligation Debt Service Fund increased $0.3 million during the current fiscal year.The increase was largely due to lower debt service payments. The fund balance of the Municipal Property Corporation (MPC) Debt Service Fund decreased $0.2 million during the current fiscal year.Revenues for the MPC are derived from local sales tax collections which were consistent with the prior year. The annual debt payment committed for the MPC is fixed but there were insufficient current revenues to pay annual debt service.Reserves from this fund contributed to the early retirement of Town Hall bonds in a prior year. All nonmajor governmental funds of the Town are combined into one column on the governmental fund statements. The nonmajor governmental funds reported a $1.2 million decrease in fund balance mainly due to the transfer out of funds to pay for ongoing capital projects. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (22) BUDGETARY HIGHLIGHTS A statement showing the original and final budget amounts compared to the Town’s actual financial activity for the General Fund and HURF Fund are provided in this report as part of the basic financial statements. The significant variances are summarized as follows: The favorable revenues variance of $271,374 in sales taxes is due to higher than expected tax revenue, mostly attributable to the improved economy. The favorable total expenditures variance of $420,942 includes all departments. No one department experienced any appreciable variances other than expenditures being less than anticipated. The change of $29,384 (0.2%) between the original and final expenditures budget was not significant during the fiscal year. CAPITAL ASSETS AN D DEBT ADMINISTRATI ON Capital Assets As of June 30, 2015, the Town had invested $105.3 million in capital assets, including buildings, vehicles, computers, equipment, infrastructure and artwork net of accumulated depreciation. This amount represents a net increase from the prior fiscal year of $4.2 million.Total depreciation expense for the current fiscal year was $4.9 million.The increase in capital assets was primarily the result of several street projects that have either been completed or still in progress. Those major capital asset events are listed on the following page. Major capital asset events during the current fiscal year included the following: Avenue of the Fountains median improvements Shea Boulevard Widening Project Saguaro Boulevard Reconstruction Fountain Park Improvements The schedule below presents a summary of capital asset balances for the fiscal years ended June 30, 2015 and June 30, 2014. 2015 2014 Percent Change Land 23,571,668$ 23,571,668$ 0.0% Artwork 2,216,500 1,967,500 12.7% Construction in Progress 4,142,372 1,795,179 130.7% Infrastructure 54,542,911 51,965,669 5.0% Buildings and Building Im provements 14,201,774 14,615,581 -2.8% Improvements Other than Buildings 5,311,582 5,913,128 -10.2% Vehicles, Machinery and Equipment 1,265,304 1,234,535 2.5% Total Capital Assets 105,252,111$ 101,063,260$ 4.1% Town of Fountain Hills, Arizona Capital Assets (Net of Accumulated Depreciation) Additional information on the Town’s capital assets can be found in Note 3.A.3. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (23) Long-Term Debt At year-end, the Town had $15.3 million in bonds outstanding, $4.3 million due within one year; this amount represents a net increase of $6.2 million. The increase in the current year was due to the issuance of General Obligation bonds for $7.6 million in the current year. Additionally, the Town refunded the Eagle Mountain Community Facilities District, General Obligation Bonds, Series 2005 and the Municipal Facilities Revenue Refunding Bonds, Series 2005. The chart below is a summary of the Town’s outstanding debt as of year-end: 2015 2014 General Obligation Bonds 11,475,000$ 4,495,000$ Revenue Bonds 3,525,000 4,695,000 Premium on Bonds 342,086 - Total Outstanding Debt 15,342,086$ 9,190,000$ Town of Fountain Hills, Arizona Outstanding Long-term Bonds The Town’s general obligation bonds are subject to two limits; the Constitutional debt limit (total debt limit) on all general obligation bonds (up to 20% of the total secondary assessed valuation) and the statutory debt limit on general purpose municipal bonds (up to 6% of the total secondary assessed valuation). The current total debt limitation for the Town is $95.6 million, which is more than the Town’s outstanding general obligation debt.Additional information on the Town’s long-term debt can be found in Note 3.C. ECONOMIC FACTORS The Town continues to maintain strong reserves for unforeseen circumstances, whether of a financial nature or a natural (or other) disaster. The Town’s reserves, in combination with our consistent adherence to adopted financial policies and management practices, proved big factors in the Aa3 credit rating awarded to Fountain Hills by a major credit rating agency. The housing market has shown signs of recovery (both nationally and regionally), indicating that the overall economy may continue to experience moderate growth in the year ahead. The Town’s local housing economy provides building permit and construction sales tax revenue, which have declined over the past fiscal years. With a limited inventory of available lots, the Town will have to adjust to the new economy, one that is less dependent upon building activity as a source of reliable revenue. There is an area of almost 1,300 acres that was annexed in 2006 that is planned to be developed but the first building permit is not scheduled to be issued until beyond 2020. The Town’s local sales tax collections, which represent the largest town revenue source, is made up of primarily retail, telecommunications and restaurant bar activity. Construction related sales tax are projected to continue increasing for the foreseeable future; retail collections, however, are projected to remain steady due to the fact that the existing retail base is not significantly affected by a recession (major retail activity consists of three grocery stores and one shopping center with a major retailer). The Town is heavily dependent upon State shared revenues for General Fund operations (34%); State- shared income tax revenues are anticipated to decrease slightly during fiscal year 2015-16 with increased individual and business revenues and state collections. The Town is aggressively pursuing economic vitality and redevelopment opportunities, specifically a proposed development in the downtown center. TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2015 (24) As of June 30, 2015, the Town had set aside $10.9 million in the capital improvement fund. The Town had been successful in obtaining a contract with ADOT to fund a major road improvement along Shea Boulevard that was completed in fiscal year 2011-2012. The Town completed a second construction project for another major road improvement on Shea Boulevard with further funding from ADOT in fiscal year 2012-2013. The widening of Shea Boulevard, funded primarily by a grant, began in fiscal year 2014-2015 as well as the reconstruction of Saguaro Boulevard, which was bond financed. NEXT YEAR’S BUDGETS AND RATES The protracted economic recession has forced the Town to evaluate core services and, in some cases, to reduce existing service levels. Prudent long-term fiscal planning dictates that we remain conservative, focus on the highest Council and citizen priorities, and fund only those enhancements we can sustain financially. The fiscal year 2015-2016 General Fund operating budget is $14.0 million representing a 2% increase from fiscal year 2014-15 budget. The operating budget is comprised of the costs to continue operations from year to year without any capital expenditures. It encompasses all the basic services provided to Fountain Hills’ residents: police and fire protection; parks, recreation, streets maintenance; planning and zoning; building inspection; economic development and administrative services. The capital budget is set at $ 14.3 million, a 36% decrease from fiscal year 2014-15 because most of the projects were completed in fiscal year 2013-14. There are some projects in the five-year plan that are considered affordable within current revenue sources, others will require other sources of revenue for funding such as bonds, grants, etc. Capital budgets tend to rise and fall each year depending on the timing of projects –especially if a town, such as Fountain Hills, strives to achieve a “pay-as-you-go” program. The capital improvement program (CIP) is the Town’s financial plan for supporting large capital projects. The five-year CIP addresses the growing needs of the community and enhances the quality of life through major public investment, and is an essential ingredient in the Town’s service delivery plan. The CIP is closely aligned with the general plan, and integrates a number of specialized facility and infrastructure master plans. Looking ahead, the five-year CIP totals $18.8 million; with the capital budget for fiscal year 2015-16 totaling $ 14.3 million (which includes carryover funds for some large projects currently underway). In fiscal year 2015-16, the CIP places major emphasis on major road improvements and maintenance. Due to the economy, there are no recreational or nonessential projects proposed. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the Town’s finances and to demonstrate the Town’s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Finance Division, Town of Fountain Hills, 16705 East Avenue of the Fountains, Fountain Hills, Arizona 85268 or visit our website at: www.fh.az.gov THIS PAGE BLANK BASIC FINANCIAL STATEMENTS TOWN OF FOUNTAIN HILLS,AR IZONA STATEMENT OF NET POSITION JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (25) Governmental Activities AS SET S Cash and Investments 21,356,349$ Cash with Paying Agent 430,000 Receivables, Net: Accounts Receivable 209,329 Intergovernmental Receivables 872,361 Property Taxes Receivable 48,273 Interest Receivable 4,863 Inventory, At Cost 6,975 Prepaid Items 11,311 Restricted Cash and Investments 7,163,882 Capital Assets: Non-Depreciable 29,930,540 Depreciable (Net) 75,321,571 Total Assets 135,355,454 LIABILITIES Accounts Payable 1,499,785 Accrued W ages and Benefits 157,519 Other Liabilities 4,451 Interest Payable 166,422 Retainage Payable 457,146 Customer Deposits Payable 6,100 Unearned Revenue 215,926 Matured Debt Principal Payable 390,000 Noncurrent Liabilities: Due W ithin One Year 4,545,644 Due in More Than One Year 11,095,245 Total Liabilities 18,538,238 NET POSITION Net Investment in Capital Assets 95,325,824 Restricted For: Highways and Streets 1,706,741 Public Safety 275,035 Capital Outlay 2,136,201 Debt Service 2,181,444 Cottonwoods Maintenance District 11,389 Unrestricted 15,180,582 Total Net Position 116,817,216$ TOWN OF FOUNTAIN HILLS,AR IZONA STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (26) NET (EXPENSE) REVENUE AN D CHANGES IN NET POSITION Fees, Fines and Operating Capital Charges for Grants and Grants and Governmental FUNCTIONS/PROGRAMS EXPENSES Services Contributions Contributions Activities Governmental Activities: General Government 2,479,365$ 1,671,843$ -$ 2,625,796$ 1,818,274$ Public Safety 6,816,152 18,965 38,211 - (6,758,976) Highways and Streets 4,963,979 3,022 1,392,806 - (3,568,151) Culture and Recreation 2,822,954 - - 249,000 (2,573,954) Development Services 2,074,611 - - - (2,074,611) Interest on Long-Term Debt 698,542 - - - (698,542) Total Governmental Activities $ 19,855,603 $ 1,693,830 $ 1,431,017 $ 2,874,796 (13,855,960) GENERAL REVENUES Taxes: Sales 8,983,049 Property 904,660 Franchise 352,673 State Sales and Income Tax Revenue Sharing - Unrestricted 4,854,361 Vehicle License Tax Revenue Sharing - Unrestricted 858,874 Investment Earnings 150,358 Miscellaneous 188,251 Total General Revenues 16,292,226 Change in Net Position 2,436,266 Net Position - Beginning 114,380,950 Net Position - Ending 116,817,216$ PROGRAM REVENUES TOWN OF FOUNTAIN HILLS,AR IZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (27) General Obligation General HURF Capital Projects Debt Service AS SETS Cash and Investments 8,627,196$ 1,765,295$ 6,650,549$ 438,711$ Cash with Paying Agent - - - 430,000 Accounts Receivable 114,925 16,528 77,876 - Intergovernmental Receivable 456,617 166,030 212,953 - Taxes Receivable 39,978 - - 5,123 Interest Receivable - - - - Inventory, At cost 6,975 - - - Prepaid Items 10,655 387 - - Restricted Cash and Investments 68,996 - 5,415,799 - Total Assets 9,325,342$ 1,948,240$ 12,357,177$ 873,834$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable 220,776$ 228,906$ 1,040,108$ -$ Accrued W ages and Benefits 138,949 11,447 - - Other Liabilities 3,305 1,146 - Retainage Payable - - 457,146 - Customer Deposits Payable 6,100 - - - Unearned Revenue 1,000 - - - Interest Payable - - - 129,772 Matured Debt Principal Payable - - - 390,000 Total Liabilities 370,130 241,499 1,497,254 519,772 Deferred Inflows of Resources Unavailable Revenues 60,710 14,436 - - Fund Balances: Nonspendable Cash with Escrow Agent - - - - Inventory 6,975 - - - Prepaid Items 10,655 387 - - Restricted - 1,691,918 5,415,799 354,062 Committed 2,634,923 - - - Assigned 1,872,492 - 5,444,124 - Unassigned 4,369,457 - - - Total Fund Balances 8,894,502 1,692,305 10,859,923 354,062 Total Liabilities, Deferred Inflows of Resources and Fund Balances 9,325,342$ 1,948,240$ 12,357,177$ 873,834$ (28) Municipal Property Nonmajor Total Corporation Governmental Governmental Debt Service Funds Funds 89,223$ 3,785,375$ 21,356,349$ - - 430,000 - - 209,329 24,139 12,622 872,361 - 3,172 48,273 4,863 - 4,863 - - 6,975 - 269 11,311 1,679,087 - 7,163,882 1,797,312$ 3,801,438$ 30,103,343$ -$ 9,995$ 1,499,785$ - 7,123 157,519 - - 4,451 - - 457,146 - - 6,100 - 214,926 215,926 36,650 - 166,422 - - 390,000 36,650 232,044 2,897,349 - - 75,146 1,645,000 - 1,645,000 - - 6,975 - 269 11,311 115,662 2,489,345 10,066,786 - 1,079,780 3,714,703 - - 7,316,616 - - 4,369,457 1,760,662 3,569,394 27,130,848 1,797,312$ 3,801,438$ 30,103,343$ THIS PAGE BLANK TOWN OF FOUNTAIN HILLS,AR IZONA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (29) Total Fund Balances for Governmental Funds 27,130,848$ Governmental Capital Assets 203,934,771 Less Accumulated Depreciation (98,682,660) Capital Assets Used in Governmental Activities 105,252,111 Miscellaneous Permits 75,146 General Obligation Bonds (11,475,000) Revenue Bonds Payable (3,525,000) Premium on Bonds (342,086) Compensated Absences (298,803) Total Net Position of Governmental Activities 116,817,216$ Long-term liabilities,including bonds payable and compensated absences,are not due and payable in the current period and therefore are not reported in the governmental funds. Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Amounts reported for governmental activities in the Statement of Net Position are different because: Some revenues are not available to pay for current period expenditures and,therefore, are reported as deferred inflows of resources in the funds. TOWN OF FOUNTAIN HILLS,AR IZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS FISCAL YEAR ENDED JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (30) General Obligation General HURF Capital Projects Debt Service REVENUES Taxes: Sales 7,504,014$ -$ 444,155$ -$ Property - - - 475,285 Franchise 352,673 - - - Intergovernmental 4,815,885 2,251,680 2,600,221 - Fines and Forfeitures 167,491 - - - Licenses and Permits 719,397 - 200,000 - Charges for Services 173,519 3,022 - - Leases and Rents 269,753 - - - Investment Earnings 55,299 807 51,174 328 Other 31,989 11,108 121,477 - Total Revenues 14,090,020 2,266,617 3,417,027 475,613 EXPENDITURES Current: General Government 2,192,408 - 1,949 - Public Safety 6,675,874 - - - Highways and Streets - 1,275,779 - - Culture and Recreation 1,960,585 - - - Development Services 1,772,964 - - - Debt Service: Principal Retirement - - - 390,000 Interest on Long-Term Debt - - - 169,772 Fiscal Charges - - - 1,250 Issuance Costs - - 105,394 - Capital Outlay - - 8,750,177 - Total Expenditures 12,601,831 1,275,779 8,857,520 561,022 Excess (Deficiency) of Revenues Over Expenditures 1,488,189 990,838 (5,440,493) (85,409) OTHER FINANCING SOURCES (USES) Transfers In - 562 1,564,936 362,637 Transfers Out (591,639) (486) (319,192) - Issuance of Long-Term Debt - - 7,565,000 - Premium on the Issuance of Long-Term Debt - - 342,086 - Debt Service Principal - - - - Total Other Financing Sources (Uses)(591,639) 76 9,152,830 362,637 Net Change in Fund Balance 896,550 990,914 3,712,337 277,228 FUND BALANCE Beginning of Year 7,997,952 701,391 7,147,586 76,834 End of Year 8,894,502$ 1,692,305$ 10,859,923$ 354,062$ (31) Municipal Property Nonmajor Total Corporation Governmental Governmental Debt Service Funds Funds 689,920$ 344,960$ 8,983,049$ - 429,375 904,660 - - 352,673 - 102,262 9,770,048 - 18,965 186,456 - 123,985 1,043,382 - - 176,541 - - 269,753 15,688 27,062 150,358 - 23,677 188,251 705,608 1,070,286 22,025,171 - 80,767 2,275,124 - - 6,675,874 - - 1,275,779 - 2,000 1,962,585 - 301,026 2,073,990 1,265,000 195,000 1,850,000 184,500 100,685 454,957 6,513 1,428 9,191 57,000 72,000 234,394 - 48,891 8,799,068 1,513,013 801,797 25,610,962 (807,405) 268,489 (3,585,791) 500,000 91,639 2,519,774 - (1,608,457) (2,519,774) 1,880,000 2,300,000 11,745,000 - - 342,086 (1,785,000) (2,300,000) (4,085,000) 595,000 (1,516,818) 8,002,086 (212,405) (1,248,329) 4,416,295 1,973,067 4,817,723 22,714,553 1,760,662$ 3,569,394$ 27,130,848$ TOWN OF FOUNTAIN HILLS,AR IZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (32) Net Change in Fund Balances of Governmental Funds 4,416,295$ Expenditures for Capital Assets 9,067,254 Less Current Year Depreciation (4,869,785) Excess Capital Expenditures Over Depreciation 4,197,469 Loss on Disposal of Capital Assets (8,618) Miscellaneous Permits 49,699 Miscellaneous Revenue (32,001) Principal Payments on General Obligation Bonds 585,000 Principal Payments on Revenue Bonds 1,265,000 Payment to Escrow Agent 4,085,000 Issuance of Long-Term Debt (11,745,000) Premium on the Issuance of Long-Term Debt (342,086) Net Change in Compensated Absences (34,492) Change in Net Position of Governmental Activities 2,436,266$ Am ounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures.However,in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Some revenues reported in the Statement of Activities do not provide current financial resources and therefore are not reported as revenues in governmental funds. The Statement of Activities reports losses arising from the disposal of existing capital assets as well as capital contributions received from other governments.Conversely, governmental funds do not report any gain or loss on disposals of capital assets or capital contributions. The issuance of long-term debt (e.g.bonds)provides current financial resources to governmental funds,while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds.Neither transaction,however,has any effect on net position.The issuance of long-term debt increases long-term liabilities on the Statement of Net Position and the repayment of principal on long-term debt reduces long-term debt on the Statement of Net Position.Also,governmental funds report the effect of issuance costs,premiums,and similar items when the debt is first issued, whereas these items are amortized over the term of the long term debt in the Statement of Activities except for issuance costs which are expensed in the year when incurred. TOWN OF FOUNTAIN HILLS,AR IZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FISCAL YEAR ENDED JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (33) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales Taxes 7,232,640$ 7,232,640$ 7,504,014$ 271,374$ Franchise Taxes 316,400 316,400 352,673 36,273 Intergovernmental 4,806,008 4,806,008 4,815,885 9,877 Fines and Forfeitures 150,011 150,011 167,491 17,480 Licenses and Permits 691,409 691,409 719,397 27,988 Charges for Services 141,350 141,350 173,519 32,169 Leases and Rents 241,762 241,762 269,753 27,991 Investment Earnings 62,424 62,424 55,299 (7,125) Other 48,480 48,480 31,989 (16,491) Total Revenues 13,690,484 13,690,484 14,090,020 399,536 EXPENDITURES Current: General Government: Mayor and Council 80,318 85,318 82,680 2,638 Administration 1,914,694 1,916,194 1,812,073 104,121 Municipal Court 275,165 300,165 297,655 2,510 Total General Government 2,270,177 2,301,677 2,192,408 109,269 Public Safety: Law Enforcement 3,379,630 3,379,630 3,353,580 26,050 Fire and Emergency Medical 3,435,099 3,435,099 3,322,294 112,805 Total Public Safety 6,814,729 6,814,729 6,675,874 138,855 Culture and Recreation: Community Services 2,205,721 2,116,719 1,960,585 156,134 Development Services 1,702,762 1,789,648 1,772,964 16,684 Total Expenditures 12,993,389 13,022,773 12,601,831 420,942 Excess (Deficiency) of Revenues Over Expenditures 697,095 667,711 1,488,189 820,478 OTHER FINANCING SOURCES (USES) Transfers Out (395,500) (507,639) (591,639) (84,000) Net Change in Fund Balance 301,595 160,072 896,550 736,478 FUND BALANCE Beginning of Year 7,997,952 7,997,952 7,997,952 - End of Year 8,299,547$ 8,158,024$ 8,894,502$ 736,478$ TOWN OF FOUNTAIN HILLS,AR IZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL HIGHWAY USER REVENUE FUND FISCAL YEAR ENDED JUNE 30, 2015 See accompanying Notes to Basic Financial Statements. (34) Variance with Original Budget Final Budget Actual Final Budget REVENUES Intergovernmental 2,061,094$ 2,061,094$ 2,251,680$ 190,586$ Charges for Services 12,240 12,240 3,022 (9,218) Investment Earnings 1,200 1,200 807 (393) Other 6,060 5,498 11,108 5,610 Total Revenues 2,080,594 2,080,032 2,266,617 186,585 EXPENDITURES Current: Highways and Streets 2,387,204 2,387,204 1,275,779 1,111,425 Excess (Deficiency) of Revenues Over Expenditures (306,610)(307,172) 990,838 1,298,010 OTHER FINANCING SOURCES (USES) Transfers In - 562 562 - Transfers Out - - (486) (486) Total Other Finance Sources (Uses)- 562 76 (486) Net Change in Fund Balance (306,610)(306,610) 990,914 1,297,524 FUND BALANCE Beginning of Year 701,391 701,391 701,391 - End of Year 394,781$ 394,781$ 1,692,305$ 1,297,524$ NOTES TO BASIC FINANCIAL STATEMENTS THIS PAGE BLANK TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (35) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES The accompanying financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB).A summary of the Town’s more significant accounting policies follows. A. Reporting Entity The Town is a municipal entity governed by an elected Mayor and Council. As required by accounting principles generally accepted in the United States of America, these financial statements present the Town and its component units, entities for which the Town is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town’s operations and so data from these units are combined with data of the Town, the primary government. The Town reports the following component units: Eagle Mountain Community Facilities District and the Cottonwoods Maintenance District.As special purpose districts and separate political subdivisions under the Arizona Constitution, the Districts can levy taxes and issue bonds independently of the Town. Property owners in the designated areas are assessed taxes, and thus for the costs of operating the Districts. The Town Council serves as the Board of Directors; however, the Town has no liability for the Districts’ debt, the Districts are responsible for the debt; the debt is therefore not subject to the Town’s debt limit.The District cannot be part of another reporting entity. The District’s governing body is substantially the same as the Town and the Town’s management oversees operations, resulting in the Town having the ability to exercise control. As a result,for financial reporting purposes, transactions of the Districts are combined together and included as if they were part of the Town’s operations. Town of Fountain Hills, Arizona Municipal Property Corporation. The Town of Fountain Hills, Arizona Municipal Property Corporation’s (MPC) Board of Directors consists of three members which are appointed by the Fountain Hills Town Council. The MPC, which is a nonprofit corporation incorporated under the laws of the State of Arizona, was formed for the sole purpose of assisting the Town in obtaining financing for various projects of the Town. The Town has a “moral obligation” for the repayment of the MPC’s bonds. The MPC cannot be part of another reporting entity.The MPC provides services exclusively to the Town. As a result, for financial reporting purposes, transactions of the MPC are combined together and included as if they were part of the Town’s operations. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (36) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) B.Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) present financial information about the Town as a whole. For the most part, the effect of internal activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the Town. Governmental activities normally are supported by taxes and intergovernmental revenues. The Town does not have any business-type activities. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2)grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, state shared revenues, investment earnings and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. C.Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the government-wide financial statements; however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (37) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service resources are provided during the current year for payment of long-term debt principal and interest due early in the following year (not to exceed one month) and therefore the expenditures and related liabilities have been recognized. Compensated absences are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses and permits, charges for services, and investment earnings associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Unearned revenues arise when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. Other receivables that will not be collected within the available period have also been reported as deferred inflows on the governmental fund financial statements. When both restricted and unrestricted resources are available for use, it is the Town’s policy to use restricted resources first, then unrestricted resources as they are needed. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (38) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) C.Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The Town reports the following major governmental funds. General Fund This fund is the Town’s primary operating fund. The Fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Highway Users Revenue Fund (HURF) This special revenue fund accounts for the Town’s share of motor vehicle fuel tax revenues. Capital Projects Fund This fund accounts for the capital improvements to various projects and equipment purchases of the Town. General Obligation Debt Service Fund This fund accounts for the Town’s property tax revenues received to pay the debt service of the Town’s general obligation bonds. Municipal Property Corporation Debt Service Fund This fund accounts for the revenues received to pay the debt service on MPC revenue bonds. D.Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Fund Balance 1.Deposits and Investments The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the State Treasurer, and highly liquid investments with maturities of three months or less from the date of acquisition. Cash and investments are pooled except for funds required to be held by fiscal agents or restricted under provisions of bond indentures.Interest earned from investments purchased with such pooled monies is allocated to each of the funds based on the average daily cash balances.State statutes authorize the Town to invest in obligations of the U.S. Treasury and U.S. agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties or incorporated cities, towns or duly organized school districts, improvement districts in this state and the State Treasurer’s Local Government Investment Pool.Investments are stated at fair value. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (39) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) D.Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 2.Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Property taxes are levied by the Town and collected by the Maricopa County Treasurer. Property taxes are levied no later than the third Monday in August and are payable in two installments due October 1 of the current year and March 1 of the subsequent year. Taxes become delinquent after the first business day of November and May, respectively. Interest attaches on installments after the delinquency date. Pursuant to Arizona Revised Statutes (A.R.S.)a lien against assessed real and personal property attaches on the first day of January preceding assessment and levy; however according to case law, an enforceable legal claim to the asset does not arise.The State Constitution and State law specify a property tax levy limitation system. The system consists of two levies, a limited levy known as the primary property tax levy and an unlimited levy referred to as the secondary levy, which may only be used to retire bonded indebtedness. The primary tax levy is limited to an increase of 2%over the previous year’s maximum allowable primary levy, plus an increased dollar amount because of a net gain in property not taxed the previous year. Also, the primary property tax from all taxing jurisdictions for homeowners may not exceed 1%of the market value of their homes. If the combined primary property tax (for the Town, County, School District, etc.) exceeds 1%of the market value of the homes, the school districts will reduce their rate until the homeowners’ aggregate rate is equal to or less than the allowable 1%. The State will then subsidize the school districts for the reduced revenue. This 1%limitation applies to primary property taxes only and does not affect the secondary property tax levy. There is also a control on the assessed value of property for primary tax purposes. The base year for the new tax system is fiscal year 1978-79. From this base year, two assessed values evolve. The primary assessed values are allowed to increase by no more than 10%a year. The dollar amount of the secondary property tax levy is “unlimited” and the actual full cash value of property is used in determining the tax rate.The Town does not asses a primary tax. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (40) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) D.Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 2.Receivables and Payables (Continued) Intergovernmental receivables include amounts due from other government agencies and include Town sales tax ($313,802), Highway User Revenue fuel tax ($130,117), State sales and income tax ($179,019), vehicle license tax ($35,918), court ($552), and grants ($212,953) in the governmental funds and governmental activities column of the government-wide financial statements. 3.Inventory Inventories are stated at average cost using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed in the government-wide financial statements, and as expenditures when consumed on the fund financial statements. 4.Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements.In the government-wide and fund financial statements prepaids are recognized as expenses/expenditures when goods and/or services are received rather than when purchased. 5.Restricted Cash and Investments The Town reported restricted assets in the amount of $68,996 for funds held in an escrow account. The agreement provides that if, prior to July 1, 2017, any future Council fails to ratify this agreement or fails to provide severance when required as set forth in the agreement between the Town Council and Town Manager, the Town Manager shall be permitted to withdraw all funds from the escrow, minus any interest earned, which interest shall be payable to the Town upon the Town Manager’s withdrawal of the amounts in escrow. The Town also has $1,676,787 deposited in an irrevocable trust with an escrow agent to make future principal and interest payments on the 2004 Municipal Property Corporation Revenue Bonds and $5,415,799 of unspent bond proceeds. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (41) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) D.Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 6.Capital Assets Capital assets, which include land, artwork, buildings, improvements, vehicles, machinery, and equipment, construction in progress, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost of $10,000 or more and an estimated useful life of more than one year.The capital assets include all infrastructure assets acquired by the Town since incorporation. Such assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are completed. Capital assets of the Town are depreciated using the straight-line method over the following estimated useful lives: Assets Years Infrastructure 15-50 Buildings and Building Improvements 20-50 Improvements Other than Buildings 20 Vehicles, machinery and equipment 5-20 7.Compensated Absences The Town’s employee vacation and sick leave policies generally provide for granting vacation and sick leave with pay. Sick leave and vacation benefits accrue as pay periods are completed at the current rate of pay. Effective October 7, 2004, all eligible full-time and part-time employees can accrue vacation leave.Full-time employees accrue up to a maximum of 224 hours of vacation through carryover of balances, while part-time employees can accrue up to 112 hours, depending upon their length of service.In the event of termination, employees will be paid for any accrued, but unused, vacation hours.Also effective October 7, 2004, full-time employees started to accrue sick leave, based on their length of service, up to a maximum of 960 hours.A portion of this balance will be paid upon a satisfactory separation of service. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (42) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) D.Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 7.Compensated Absences (Continued) The current and long-term liabilities, including related benefits, for accumulated vacation and sick leave are reported on the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. 8.Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the Statement of Net Position. Bond premiums and discounts and the difference between the reacquisition price and the net carrying amount of the old debt, are amortized over the life of the bonds using the straight-line method over the term of the related debt.The difference between the reacquisition price and the net carrying value of the old debt is reported as either a deferred inflow or a deferred outflow of resources and the premium and/or discount are recorded against the outstanding debt. Issuance costs are expensed when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts of debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 9.Net Position In the government-wide financial statements, net position is reported in three categories: net investment in capital assets; restricted net position; and unrestricted net position. The net investment in capital assets,is separately reported because capital assets make up a significant portion of total net position. Restricted net position account for the portion of net position restricted by parties outside the Town. Unrestricted net position is the remaining net position not included in the previous two categories. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (43) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) D.Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 10.Fund Balance Classifications Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources.The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent.The classifications are nonspendable, restricted, committed, assigned, and unassigned fund balance classifications. The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form such as inventories and prepaid items, or are legally or contractually required to be maintained intact. Restricted fund balances are those that have externally imposed restrictions on their usage by creditors (such as through debt covenants), grantors, contributors, or laws and regulations. Committed fund balances are self-imposed limitations approved by the Town’s Council, which is the highest level of decision-making authority within the Town.Only the Town Council can remove or change the constraints placed on committed fund balances.Fund balances must be committed prior to fiscal year end through formal council action by passage of a resolution at a public meeting. Assigned fund balances are resources constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. The Town Council has authorized the Finance Director to assign fund balances. The unassigned fund balance is the residual classification for the General Fund and includes all amounts not reported in the other classifications. Also, deficits in fund balances of the other governmental funds are reported as unassigned. It is the Town’s policy to use restricted fund balance first, then committed, assigned, and lastly unassigned amounts. The Town has established a fund balance policy whereas the combined General Fund operating fund balance of at least 30% of the average actual General Fund revenues for the preceding five fiscal years is recommended. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (44) NOTE 1 SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONTINUED) D.Assets, Liabilities, Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 10.Fund Balance Classifications (Continued) The Town has established a stabilization fund (Rainy Day fund) in the Town’s fund balance policy. The Rainy Day fund had a balance of $2,624,843, reported as a committed fund balance at June 30, 2015. The Rainy Day fund may only be used for the following: 1) to replace the loss of more than 25% of the Town’s local share of State shared revenues, 2) for any event that threatens the health, safety or welfare of the Town’s citizens, 3) for any event that threatens the fiscal stability of the Town, and lastly 4) to address any matter declared as an emergency by the Governor of the State of Arizona or the Mayor of the Town. All withdrawals from the Rainy Day fund shall be subject to the following rules: 1) any appropriation shall require the approval by at least 2/3 vote by the Town Council, and 2) the maximum amount of Rainy Day withdrawal in any fiscal year shall not exceed one-half of the total balance in the fund. Replenishment of the Rainy Day fund when spent by the Town should not exceed a period of more than five years, and should be repaid in equal annual installments of not less than 1% of the previous fiscal year General Fund fund balance. Repayments shall be appropriated as part of the annual budget adoption. 11.Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the Statement of Activities. Interfund transfers are reported as other financing sources/uses in governmental funds. 12.Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (45) NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A.Budgetary information The Town Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1.In accordance with Arizona Revised Statutes, the Town Manager submits a proposed budget for the fiscal year commencing the following July 1 to the Town Council.The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2.Public hearings are conducted to obtain taxpayer comment. 3.Prior to the third Monday in August, the expenditure limitation for the Town is legally enacted through passage of a resolution. To ensure compliance with the expenditure limitation, a uniform expenditure report must be filed with the State each year.This report, issued under a separate cover, reconciles total Town expenditures from the audited basic financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S. §41-1279.07). 4.Expenditures may not legally exceed the expenditure limitation described below for all fund types as a whole.For management purposes, the Town adopts a budget by department for the General Fund and in total by fund for other funds.The Town Manager, subject to Town Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between a department or activity.The adopted budget cannot be amended in any way without Town Council approval. 5.Formal budgetary integration is employed as a management control device during the year for the General, Special Revenue, Debt Service, and Capital Projects Funds on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. The Town is subject to the State of Arizona’s Spending Limitation Law for Towns and Cities.This law does not permit the Town to spend more than budgeted revenues plus the carryover unrestricted cash balance from the prior fiscal year.The limitation is applied to the total of the combined funds.The Town complied with this law during the year. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (46) NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) B.Excess of Expenditures Over Appropriations Expenditures exceeded appropriations in the following funds: Amount of Overexpenditure Major Funds: Municipal Property Corporation Debt Service Fund 399,813$ General Obligation Debt Service Fund 88,922 Nonmajor Governmental Funds: Economic Developm ent Fund 10,406 Development Fees Fund 535 Total 499,676$ The overexpenditure of $399,813 and $88,922 in the Municipal Property Corporation Debt Service Fund and General Obligation Debt Service Fund respectively were due to required principal and interest payments. The overexpenditures in the Nonmajor Governmental Funds were due to greater than expected expenditures. The Town has cash available to meet the overexpenditures. (Remainder of This Page Intentionally Left Blank) TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (47) NOTE 3 DETAILED NOTES ON ALL FUNDS A.Assets 1.Deposits and Investments Deposits and investments at June 30, 2015,consist of the following: Deposits: Cash on Hand 650$ Cash in Bank 7,911,802 Cash on Deposit with Paying Agent 430,000 Cash on Deposit with Escrow Agent 68,996 Investments Local Government Investment Pool 3,518,327 Wells Fargo Money Market 84,301 U.S. Agency Securities 3,545,801 U.S. Treasury Securities 1,676,787 U.S. Treasury Notes 11,713,567 Total 28,950,231 Less Cash with Paying Agent (430,000) Less Restricted Assets (7,163,882) Total Cash and Investments 21,356,349$ Deposits The Town’s deposits at June 30, 2015,had a carrying value of $7,911,802 and a bank balance of $8,431,288. Of the bank balance, $500,000 was insured by federal depository insurance and $7,931,288 was collateralized by the Arizona State Treasurer pooled collateral program. Investments The Town’s investments at June 30, 2015 were as follows: Investment Type Am ount Local Government Investment Pool 3,518,327$ Wells Fargo Money Market 84,301 U.S. Agency Securities 3,545,801 U.S. Treasury Securities 1,676,787 U.S. Treasury Notes 11,713,567 20,538,783$ The State Board of Deposit provides oversight for the LGIP, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. The shares are not identified with specific investments and are not subject to custodial credit risk. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (48) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A.Assets (Continued) 1.Deposits and Investments (Continued) Credit Risk –Credit risk is the risk that an issuer or counterparty to an investment will not fulfill its obligations. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in A.R.S 835- 323. When possible, analysis of the credit worthiness of all individual debt issuers held in the portfolio should be conducted on an annual basis in an effort to guard against investing in weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisors with which the Town will do business. At June 30, 2015, credit risk for the Town’s investments was as follows: Investment Type Rating Agency Amount Local Government Investment Pool AAA S&P 3,518,327$ Wells Fargo Money Market N/A N/A 84,301 U.S. Agency Securities AA+/Aaa S&P/Moody's 3,545,801 U.S. Treasury Securities N/A N/A 1,676,787 U.S. Treasury Notes AA+/Aaa S&P/Moody's 11,713,567 20,538,783$ Custodial credit risk –Concentration credit risk is the risk of loss associated with the majority of investments in a single issuer. The Town of Fountain Hills will diversify its investments by security type and institution. With the exception of U.S. Treasury notes and securities and authorized pools, no more than 25% of the Town’s total investment portfolio will be invested in a single security type or with a single financial institution. At June 30, 2015, the Town had the following diversification of Town investments: Percent of Town Investment Type Amount Investments Local Government Investment Pool 3,518,327$ 17.13% Wells Fargo Money Market 84,301 0.41% U.S. Agency Securities 3,545,801 17.26% U.S. Treasury Securities 1,676,787 8.17% U.S. Treasury Notes 11,713,567 57.03% 20,538,783$ 100.00% Interest rate risk –Interest rate risk is the risk that changes in interest rates will adversely affect an investment’s fair value. The Town will look to mitigate interest rate risk by performing the following: TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (49) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A.Assets (Continued) 1.Deposits and Investments (Continued) Structuring the investment portfolio so that securities mature concurrent with the anticipated cash requirements for ongoing operations, thereby avoiding, as much as possible, the need to sell securities into an adverse market environment prior to maturity. Investing funds primarily in shorter-term securities or similar investment pools and limiting the average maturity of the portfolio in accordance with the needs of the Town. With respect to any firm or individual given responsibility for investments utilizing external research and advice regarding the current interest rate outlook and global economic condition to optimize portfolio duration strategy. The following is a table of the Town’s investment maturities: Investment 0-6 Months 6-12 Months 12+ Months Total Local Government Investment Pool 3,518,327$ -$ -$ 3,518,327$ Wells Fargo Advantage Money Market 84,301 - - 84,301 Federal Home Loan Bank Global Notes - - 796,119 796,119 Federal Home Loan Mortgage Corp. Notes - 500,134 1,207,460 1,707,594 Federal National Mortgage Association Notes - 611,619 430,469 1,042,088 U.S. Treasury Securities 1,676,787 - - 1,676,787 U.S. Treasury Notes - 2,600,586 9,112,981 11,713,567 Total 5,279,415$ 3,712,339$ 11,547,029$ 20,538,783$ Maturity 2.Receivables Governmental funds report deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period.Governmental funds also record unearned revenue in connection with resources that have been received, but not yet earned.At the end of the current fiscal year, the various components of deferred inflows of resources and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Miscellaneous General Fund 60,710$ 1,000$ Highway User Revenue Fund 14,436 - Grants Nonmajor Governmental Funds - 214,926 75,146$ 215,926$ TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (50) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A.Assets (Continued) 3.Capital Assets Capital assets for the year ended June 30, 2015, were as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land 23,571,668$ -$ -$ 23,571,668$ Artwork 1,967,500 249,000 - 2,216,500 Construction in Progress 1,795,179 8,773,354 (6,426,161) 4,142,372 Total Capital Assets, Not Being Depreciated 27,334,347 9,022,354 (6,426,161) 29,930,540 Capital Assets, Being Depreciated: Infrastructure 131,540,108 6,270,997 137,811,105 Buildings and Building Improvements 19,011,247 486 (15,092) 18,996,641 Improvements Other than Buildings 13,642,549 23,677 - 13,666,226 Vehicles, Machinery and Equipment 3,463,105 175,901 (108,747) 3,530,259 Total Capital Assets, Being Depreciated 167,657,009 6,471,061 (123,839) 174,004,231 Accumulated Depreciation for: Infrastructure (79,574,439) (3,693,755) - (83,268,194) Buildings and Building Improvements (4,395,666) (405,675) 6,474 (4,794,867) Improvements Other than Buildings (7,729,421) (625,223) - (8,354,644) Vehicles, Machinery and Equipment (2,228,570) (145,132) 108,747 (2,264,955) Total Accumulated Depreciation (93,928,096) (4,869,785) 115,221 (98,682,660) Total Capital Assets, Being Depreciated, Net 73,728,913 1,601,276 (8,618) 75,321,571 Governmental Activities Capital Assets, Net 101,063,260$ 10,623,630$ (6,434,779)$ 105,252,111$ Depreciation expense was charged to functions/programs as follows: Governmental Activities: General Government 186,043$ Public Safety 140,278 Highways and Streets 3,688,200 Culture and Recreation 850,725 Community Development 4,539 Total Depreciation Expense 4,869,785$ TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (51) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A.Assets (Continued) 4.Construction Commitments At June 30, 2015, the Town has the following active construction commitments: Remaining Project Spent-to-date Commitment Drainage - Ashbrook W ash Channel 43,147$ 115,000$ Fountain Park VI 584,955 233,027 Shea Boulevard W idening Project 4,297,488 220,014 Saguaro Boulevard Reconstruction 3,216,390 4,328,194 Fountain Hills Boulevard Shoulder Paving 103,372 18,836 Traffic Signal - Palisades and Saguaro 82,171 332,247 Total Commitments 8,327,523$ 5,247,318$ Governmental Activities B.Interfund Transfers Interfund transfers for the year ended June 30,2015,consisted of the following: Municipal Property General Capital Corporation Obligation Nonmajor HURF Projects Debt Service Debt Service Governmental Transfers Out Fund Fund Fund Fund Funds Total General Fund -$ -$ 500,000$ -$ 91,639$ 591,639$ HURF Fund - 486 - - - 486 Capital Projects Fund - - - 319,192 - 319,192 Funds 562 1,564,450 - 43,445 - 1,608,457 Total 562$ 1,564,936$ 500,000$ 362,637$ 91,639$ 2,519,774$ Transfers In The General Fund transferred $500,000 to pay for debt service costs on the Municipal Property Corporation’s outstanding bonds. The General Fund transferred $91,639 to the Nonmajor Governmental Fund to support economic development activities and cover the Town’s matching requirements on grants. The HURF Fund transferred $486 to the Capital Projects Fund for capital expenditures. The Capital Projects Fund transferred $319,192, to the General Obligation Debt Service Fund to move the premium on the G.O.Bond issuance to the debt service fund. The Nonmajor Governmental Funds transferred $562 to the HURF Fund to pay for salaries related to the art festivals. The Nonmajor Governmental Funds also transferred $1,564,450 to the Capital Projects Fund for various ongoing capital projects including the Shea Boulevard widening project and the Avenue of the Fountains median and right-of-way project. The Nonmajor Governmental Funds also transferred $42,445 to the General Obligation Debt Service Fund to pay for debt service expenditures. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (52) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C.Long-Term Obligations Bonds payable at year end consisted of general obligation, municipal property corporation and community facilities district bonds. The bonds are both callable and noncallable with the interest payable semiannually. Property taxes from the General Obligation Bond Debt Service Fund and Eagle Mountain Debt Service Fund are used to pay general obligation and community facilities district bonds. Tax revenues from the General Fund and Excise Tax Fund are used to pay municipal facilities bonds. During the fiscal year ended June 30, 2015, the Town issued $2,300,000 in Eagle Mountain Municipal Facilities Revenue Refunding Bonds, Series 2015.The proceeds ($2,300,000) and $321,300 of Town cash contributions were used to refund $2,495,000 of outstanding debt. The proceeds and Town contribution were used to pay issuance costs of $72,000, accrued interest on the refunded bonds of $50,343, refund $2,495,000 of outstanding bonds and place $3,957 in the debt service account. The refunding resulted in a savings of $97,340 and a net present value savings of $94,704. The defeased debt is no longer considered outstanding debt of the Town and has been removed from the Town’s long-term liabilities. The defeased bonds were redeemed on July 1, 2015. Additionally, during the fiscal year ended June 30, 2015, the Town issued $1,880,000 in Municipal Property Corporation Municipal Facilities Revenue Refunding Bonds, Series 2015. The proceeds ($1,880,000) and $1,014,900 of Town cash contributions were used to refund $2,780,000 of outstanding debt. The proceeds and Town cash contributions were used to pay issuance costs of $57,000, accrued interest on outstanding debt of $55,600, refund $2,780,000 of outstanding bonds and place $2,300 in the debt service account. The refunding resulted in a savings of $55,680 and a net present value savings of $55,174. The defeased debt is no longer considered outstanding debt of the Town and has been removed from the Town’s long-term liabilities. The defeased bonds were redeemed on July 1, 2015. Lastly, during the fiscal year ended June 30, 2015, the Town issued $7,565,000 in General Obligation Bonds, Series 2014. The proceeds of $7,475,000 were deposited in the Capital Projects Fund to pay for the Saguaro Boulevard reconstruction project.The bonds were issued at a premium of $342,086 of which $319,192 was transferred to the Debt Service Fund net of the underwriter’s discount. The Issuances costs were $105,394. The General Obligation Bonds, Series 2014 have an interest rate of 2%-3% and will be retired in 2020. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (53) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C.Long-Term Obligations (Continued) Bonds outstanding at June 30, 2015, were as follows: Interest Maturity Original Outstanding Purpose Rates Date Amount Amount Governmental Activities: General Obligation Bonds: General Obligation Refunding Bonds, Series 2005 4.00 07/01/16-19 $ 7,225,000 $ 1,610,000 General Obligation Bonds, Series 2014 4.00 07/01/16-20 7,565,000 7,565,000 Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2015 2.00-3.00 7/1/2016-21 2,300,000 2,300,000 Total General Obligation Bonds $ 17,090,000 $ 11,475,000 Revenue Bonds: Municipal Facilities Revenue Bonds, Series 2004 4.25-4.50 7/1/2015 $ 3,645,000 $ 1,645,000 Municipal Facilities Revenue Refunding Bonds, Series 2015 1.62 7/01/16-20 1,880,000 1,880,000 Total Revenue Bonds $ 5,525,000 $ 3,525,000 The Town has pledged future excise taxes to repay a total of $1,880,000 in outstanding municipal facilities revenue and refunding bonds. The outstanding balance of $1,645,000 for the Municipal Facilities Revenue Bonds, Series 2004 have been put into an escrow account for payment on July 1, 2015. For fiscal year ended June 30, 2015, the net revenues available to service this debt were $15.5 million. The debt principal and interest paid on this debt for the fiscal year was $1,265,000 and $184,500, respectively (9%of available pledged revenues).Principal and interest outstanding on the bonds at June 30, 2015 is $3,612,820. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (54) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C.Long-Term Obligations (Continued) Changes in long-term obligations for the year ended June 30, 2015,are as follows: Due W ithin July 1, 2014 Increases Decreases June 30, 2015 One Year Governmental Activities Bonds General Obligation Bonds 4,495,000$ 9,865,000$ (2,885,000)$ 11,475,000$ 2,135,000$ Revenue Bonds 4,695,000 1,880,000 (3,050,000) 3,525,000 2,125,000 Premium on Bonds - 342,086 - 342,086 68,417 Total Bonds 9,190,000 12,087,086 (5,935,000) 15,342,086 4,328,417 Other Liabilities: Compensated Absences 264,311 253,343 (218,851) 298,803 217,227 Governmental Activities Long-Term Liabilities 9,454,311$ 12,340,429$ (6,153,851)$ 15,640,889$ 4,545,644$ Debt service requirements on long-term debt at June 30, 2015,are as follows: 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$ Governmental Activities Year Ending June 30, TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (55) NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) D.Fund Balances Fund Balances at June 30, 2015 were as follows: Municipal General Property Nonmajor Capital Obligation Corporation Governmental General HURF Projects Debt Service Debt Service Funds Total Nonspendable: Cash with Escrow Agent -$ -$ -$ -$ 1,645,000$ -$ 1,645,000$ Inventory 6,975 - - - - - 6,975 Prepaids 10,655 387 - - - 269 11,311 Restricted: Debt Service - - 5,415,799 354,062 115,662 66,720 5,952,243 Highways and Streets - 1,691,918 - - - - 1,691,918 Local Court Enhancement - - - - - 275,035 275,035 New Development - - - - - 2,136,201 2,136,201 Cottonwoods Maintenance District - - - - - 11,389 11,389 Committed Rainy Day Funds 2,624,843 - - - - - 2,624,843 Public Art 10,080 - - - - - 10,080 Downtown Strategy and Economic Development - - - - - 1,079,780 1,079,780 Assigned Vehicle Replacement 457,309 - - - - - 457,309 Facilities Replacement 102,762 - - - - - 102,762 Capital Projects 787,453 - 5,444,124 - - - 6,231,577 Equipment Replacement 524,968 - - - - - 524,968 Unassigned 4,369,457 - - - - - 4,369,457 Total Fund Balance 8,894,502$ 1,692,305$ 10,859,923$ 354,062$ 1,760,662$ 3,569,394$ 27,130,848$ NOTE 4 OTHER INFORMATION A. Contingent Liabilities Lawsuits The Town is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the Town’s legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of the Town. B.Risk Management The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The Town’s insurance protection is provided by the Arizona Municipal Risk Retention Pool, of which the Town is a participating member. The limit for basic coverage is for $2,000,000 per occurrence on a claims made basis. Excess coverage is for an additional $8,000,000 per occurrence on a follow form, claims made basis. No significant reduction in insurance coverage occurred during the year, and no settlements exceeded insurance coverage during any of the past three fiscal years. TOWN OF FOUNTAIN HILLS,AR IZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 (56) NOTE 4 OTHER INFORMATION (CONTINUED) B.Risk Management (Continued) Previously, the Town was unable to obtain workers’ compensation insurance at a cost considered to be economically justifiable. Therefore, the Town had joined the Arizona Municipal Workers’ Compensation Pool (AMWCP). AMWCP is a public entity risk pool currently operating as a common workers’ compensation insurance program for 67 member cities and towns. The Town is responsible for paying a premium, based on an experience rating formula that allocates pool expenditures and liabilities among members. C.Retirement Plans Defined Contribution Pension Plan All full-time employees of the Town participate in a defined contribution pension plan administered by the ICMA Retirement Corporation as a 401(a) plan. The payroll for the Town employees covered by this plan for the year ended June 30, 2015, was $2,460,327. The Town’s total payroll was $2,901,937. A defined contribution pension plan provides benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined, instead of specifying the amount of benefit the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account, the returns earned on investment of those contributions, and forfeitures of other participants’ benefits that may be allocated to such participant’s account. All full-time Town employees must participate in the pension plan from the date they are hired. Contributions made by an employee vest immediately and contributions made by the Town vest after five years of service on a pro rata basis. An employee that leaves the employment of the Town is entitled to his or her contributions and the vested portion of the Town’s contributions, plus interest earned. Each employee must contribute 11%of his or her gross earnings. The Town must match the employee contribution of 11%. During the fiscal year, the Town’s required and actual contributions amounted to $270,636. The employees’ contributions totaled $270,636. Employees may also contribute to the lCMA Retirement Corporation 457 plan on a voluntary basis; there is no employer match for those contributions. During the fiscal year, employees contributed $143,891 to that plan. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees.The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2014-15 or as of the close of the fiscal year. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES THIS PAGE BLANK NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Development Fees Fund -accounts for restricted development fees collected from developers for projects approved by the Town Council. Local Court Enhancement Fund -accounts for a local court surcharge,restricted for court enhancement. Grants Fund -accounts for the activities of various restricted grants and contributions received by the Town. Downtown Strategy Fund -accounts for the portion of Town sales tax committed by the Town Council for the development of downtown. Economic Development Fund –accounts for the portion of Town sales tax committed by the Town Council for economic development and tourism. Cottonwoods Maintenance Fund -accounts for all special assessments restricted to pay for maintenance of the Cottonwoods Maintenance District. DEBT SERVICE FUNDS Eagle Mountain Debt Service Fund –accounts for the property tax revenues restricted to pay the debt service of the Eagle Mountain Community Facilities District component unit. TOWN OF FOUNTAIN HILLS,AR IZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2015 (57) Development Fees Local Court Enhancement Grants Downtown Strategy AS SET S Cash and Investments 2,136,201$ 274,483$ 214,926$ 967,587$ Intergovernmental Receivable - 552 - 2,414 Taxes Receivable - - - - Prepaid Items - - - - Total Assets 2,136,201$ 275,035$ 214,926$ 970,001$ LIABILITIES AND FUND BALANCES Liabilities Accounts Payable -$ -$ -$ 7,085$ Accrued W ages and Benefits - - - - Unearned Revenue - - 214,926 - Total Liabilities - - 214,926 7,085 Fund Balances Nonspendable - - - - Restricted 2,136,201 275,035 - - Committed - - - 962,916 Total Fund Balances 2,136,201 275,035 - 962,916 Total Liabilities and Fund Balances 2,136,201$ 275,035$ 214,926$ 970,001$ Special Revenue Funds (58) Debt Service Fund Economic Development Cottonwoods Maintenance Total Special Revenue Funds Eagle Mountain Debt Service Total Nonmajor Governmental Funds 116,991$ 11,597$ 3,721,785$ 63,590$ 3,785,375$ 9,656 - 12,622 - 12,622 - 42 42 3,130 3,172 269 - 269 - 269 126,916$ 11,639$ 3,734,718$ 66,720$ 3,801,438$ 2,660$ 250$ 9,995$ -$ 9,995$ 7,123 - 7,123 - 7,123 - - 214,926 - 214,926 9,783 250 232,044 - 232,044 269 - 269 - 269 - 11,389 2,422,625 66,720 2,489,345 116,864 - 1,079,780 - 1,079,780 117,133 11,389 3,502,674 66,720 3,569,394 126,916$ 11,639$ 3,734,718$ 66,720$ 3,801,438$ Special Revenue Funds TOWN OF FOUNTAIN HILLS,AR IZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BAL ANCES FISCAL YEAR ENDED JUNE 30, 2015 (59) Development Fees Local Court Enhancement Grants Downtown Strategy REVENUES Taxes: Sales -$ -$ -$ 100,540$ Property - - - - Intergovernmental - - 102,262 - Fines and Forfeitures - 18,965 - - Licenses and Permits 123,985 - - - Investment Earnings 13,512 65 - 13,225 Other - - 23,677 - Total Revenues 137,497 19,030 125,939 113,765 EXPENDITURES Current: General Government - 845 76,687 - Culture and Recreation - - 2,000 - Development Services 535 - - 37,069 Debt Service Principal Retirement - - - - Interest on Long-Term Debt - - - - Fiscal Charges - - - - Issuance Costs - - - - Capital Outlay - - 48,891 - Total Expenditures 535 845 127,578 37,069 Excess (Deficiency) of Revenues Over Expenditures 136,962 18,185 (1,639) 76,696 OTHER FINANCING SOURCES (USES) Transfers In - - 1,639 - Transfers Out (451,366) - - (1,157,091) Issuance of Long-Term Debt - - - - Debt Service Principal - - - - Total Other Financing Sources (Uses) (451,366) - 1,639 (1,157,091) Net Change in Fund Balances (314,404) 18,185 - (1,080,395) FUND BALANCES Beginning of Year 2,450,605 256,850 - 2,043,311 End of Year 2,136,201$ 275,035$ -$ 962,916$ Special Revenue Funds (60) Debt Service Fund Economic Development Cottonwoods Maintenance Total Special Revenue Funds Eagle Mountain Debt Service Total Nonmajor Governmental Funds 244,420$ -$ 344,960$ -$ 344,960$ - 4,823 4,823 424,552 429,375 - - 102,262 - 102,262 - - 18,965 - 18,965 - - 123,985 - 123,985 85 9 26,896 166 27,062 - - 23,677 - 23,677 244,505 4,832 645,568 424,718 1,070,286 - 3,235 80,767 - 80,767 - - 2,000 - 2,000 263,422 - 301,026 - 301,026 - - - 195,000 195,000 - - - 100,685 100,685 - - - 1,428 1,428 - - - 72,000 72,000 - - 48,891 - 48,891 263,422 3,235 432,684 369,113 801,797 (18,917) 1,597 212,884 55,605 268,489 90,000 - 91,639 - 91,639 - - (1,608,457) - (1,608,457) - - - 2,300,000 2,300,000 - - - (2,300,000) (2,300,000) 90,000 - (1,516,818) - (1,516,818) 71,083 1,597 (1,303,934) 55,605 (1,248,329) 46,050 9,792 4,806,608 11,115 4,817,723 117,133$ 11,389$ 3,502,674$ 66,720$ 3,569,394$ Special Revenue Funds TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL CAPITAL PROJECTS FUND FISCAL YEAR ENDED JUNE 30, 2015 (61) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales 324,600$ 324,600$ 444,155$ 119,555$ Intergovernmental 4,314,000 4,314,000 2,600,221 (1,713,779) Licenses and Permits - 200,000 200,000 - Investm ent Earnings 19,800 19,800 51,174 31,374 Other - - 121,477 121,477 Total Revenues 4,658,400 4,858,400 3,417,027 (1,441,373) EXPENDITURES Current General Government - - 2,362 (2,362) Highways and Streets - - 9,530 (9,530) Debt Service Issuance Costs - - 105,394 (105,394) Capital Outlay 22,207,830 22,210,080 8,740,234 13,469,846 Total Expenditures 22,207,830 22,210,080 8,857,520 13,352,560 Excess (Deficiency) of Revenues Over Expenditures (17,549,430)(17,351,680) (5,440,493) 11,911,187 OTHER FINANCING SOURCES (USES) Transfers In 2,302,000 2,434,921 1,564,936 (869,985) Transfers Out - - (319,192) (319,192) Issuance of Long-Term Debt 8,200,000 8,200,000 7,565,000 (635,000) Premium on the Issuance of Long-Term Debt - - 342,086 342,086 Total Other Financing Sources (Uses) 10,502,000 10,634,921 9,152,830 (1,482,091) Net Change in Fund Balance (7,047,430)(6,716,759) 3,712,337 10,429,096 FUND BALANCE Beginning of Year 7,147,586 7,147,586 7,147,586 - End of Year 100,156$ 430,827$ 10,859,923$ 10,429,096$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL OBLIGATION DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2015 (62) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Property 474,000$ 474,000$ 475,285$ 1,285$ Investment Earnings 210 210 328 118 Total Revenues 474,210 474,210 475,613 1,403 EXPENDITURES Debt Service: Principal Retirement 390,000 390,000 390,000 - Interest on Long-Term Debt 80,000 80,000 169,772 (89,772) Fiscal Charges 2,100 2,100 1,250 850 Total Expenditures 472,100 472,100 561,022 (88,922) Excess (Deficiency) of Revenues Over Expenditures 2,110 2,110 (85,409) (87,519) OTHER FINANCING SOURCES (USES) Transfers In - 42,500 362,637 320,137 Net Change in Fund Balance 2,110 44,610 277,228 232,618 FUND BALANCE Beginning of Year 76,834 76,834 76,834 - End of Year 78,944$ 121,444$ 354,062$ 232,618$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL MUNICIPAL PROPERTY CORPORATION DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2015 (63) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales 619,800$ 619,800$ 689,920$ 70,120$ Investment Earnings 500 500 15,688 15,188 Total Revenues 620,300 620,300 705,608 85,308 EXPENDITURES Debt Service: Principal Retirement 995,000 995,000 1,265,000 (270,000) Interest on Long-Term Debt 111,200 111,200 184,500 (73,300) Fiscal Charges 7,000 7,000 6,513 487 Issuance Costs - - 57,000 (57,000) Total Expenditures 1,113,200 1,113,200 1,513,013 (399,813) Excess (Deficiency) of Revenues Over Expenditures (492,900) (492,900) (807,405) (314,505) OTHER FINANCING SOURCES (USES) Transfers In 236,000 193,500 500,000 306,500 Issuance of Long-Term Debt - - 1,880,000 1,880,000 Debt Service Principal - - (1,785,000) (1,785,000) Total Other Finance Sources (Uses)236,000 193,500 595,000 401,500 Net Change in Fund Balance (256,900) (299,400) (212,405) 86,995 FUND BALANCE Beginning of Year 1,973,067 1,973,067 1,973,067 - End of Year 1,716,167$ 1,673,667$ 1,760,662$ 86,995$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL DEVELOPMENT FEES FUND FISCAL YEAR ENDED JUNE 30, 2015 (64) Variance with Original Budget Final Budget Actual Final Budget REVENUES Licenses and Permits $ 12,490 $ 12,490 $ 123,985 $ 111,495 Investment Earnings 100 100 13,512 13,412 Total Revenues 12,590 12,590 137,497 124,907 EXPENDITURES Current Development Services - - 535 (535) Excess (Deficiency) of Revenues Over Expenditures 12,590 12,590 136,962 124,372 OTHER FINANCING SOURCES (USES) Transfers Out (567,500) (700,421) (451,366) 249,055 Net Change in Fund Balance (554,910) (687,831) (314,404) 373,427 FUND BALANCE Beginning of Year 2,450,605 2,450,605 2,450,605 - End of Year 1,895,695$ 1,762,774$ 2,136,201$ 373,427$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL LOCAL COURT ENHANCEMENT FUND FISCAL YEAR ENDED JUNE 30, 2015 (65) Variance with Final Budget Actual Final Budget REVENUES Fines and Forfeitures 14,250$ 18,965$ 4,715$ Investment Earnings 300 65 (235) Total Revenues 14,550 19,030 4,480 EXPENDITURES Current: General Government 80,615 845 79,770 Excess (Deficiency) of Revenues Over Expenditures (66,065) 18,185 84,250 FUND BALANCE Beginning of Year 256,850 256,850 - End of Year 190,785$ 275,035$ 84,250$ Original and TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GRANTS FUND FISCAL YEAR ENDED JUNE 30, 2015 (66) Variance with Original Budget Final Budget Actual Final Budget REVENUES Intergovernmental $ 1,566,132 $ 1,431,572 $ 102,262 $ (1,329,310) Other - - 23,677 23,677 Total Revenues 1,566,132 1,431,572 125,939 (1,305,633) EXPENDITURES Current: General Government 1,566,132 1,289,439 76,687 1,212,752 Culture and Recreation - - 2,000 (2,000) Capital Outlay - - 48,891 (48,891) Total Expenditures 1,566,132 1,289,439 127,578 1,161,861 Excess (Deficiency) of Revenues Over Expenditures - 142,133 (1,639) (143,772) OTHER FINANCING SOURCES (USES) Transfers In - 1,639 1,639 - Net Change in Fund Balance - 143,772 - (143,772) FUND BALANCE Beginning of Year - - - - End of Year -$ 143,772$ -$ (143,772)$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL DOWNTOWN STRATEGY FUND FISCAL YEAR ENDED JUNE 30, 2015 (67) Variance with Original Budget Final Budget Actual Final Budget REVENUES Taxes: Sales 117,540$ 117,540$ 100,540$ (17,000)$ Investment Earnings - - 13,225 13,225 Total Revenues 117,540 117,540 113,765 (3,775) EXPENDITURES Current: Development Services 114,079 113,517 37,069 76,448 Excess (Deficiency) of Revenues Over Expenditures 3,461 4,023 76,696 72,673 OTHER FINANCING SOURCES (USES) Transfers Out (1,765,000) (1,765,562) (1,157,091) 608,471 Net Change in Fund Balance (1,761,539) (1,761,539) (1,080,395) 681,144 FUND BALANCE Beginning of Year 2,043,311 2,043,311 2,043,311 - End of Year 281,772$ 281,772$ 962,916$ 681,144$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL ECONOMIC DEVELOPMENT FUND FISCAL YEAR ENDED JUNE 30, 2015 (68) Variance with Original Final Budget Actual Final Budget REVENUES Taxes: Sales 176,400$ 160,300$ 244,420$ 84,120$ Investment Earnings - - 85 85 Total Revenues 176,400 160,300 244,505 84,205 EXPENDITURES Current: Development Services 126,741 126,741 145,299 (18,558) Culture and Recreation 110,175 126,275 118,123 8,152 Total Expenditures 236,916 253,016 263,422 (10,406) Excess (Deficiency) of Revenues Over Expenditures (60,516) (92,716) (18,917) 73,799 OTHER FINANCING SOURCES (USES) Transfers In 90,000 90,000 90,000 - Net Change in Fund Balance 29,484 (2,716) 71,083 73,799 FUND BALANCE Beginning of Year 46,050 46,050 46,050 - End of Year 75,534$ 43,334$ 117,133$ 73,799$ TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL COTTONWOODS MAINTENANCE FUND FISCAL YEAR ENDED JUNE 30, 2015 (69) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property 4,823$ 4,823$ -$ Investment Earnings - 9 9 Total Revenue 4,823 4,832 9 EXPENDITURES Current: General Government 3,600 3,235 365 Excess (Deficiency) of Revenue Over Expenditures 1,223 1,597 374 FUND BALANCE Beginning of Year 9,792 9,792 - End of Year 11,015$ 11,389$ 374$ Original and TOWN OF FOUNTAIN HILLS,AR IZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL EAGLE MOUNTAIN DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2015 (70) Variance with Final Budget Actual Final Budget REVENUES Taxes: Property 430,248$ 424,552$ (5,696)$ Investment Earnings 600 166 (434) Total Revenues 430,848 424,718 (6,130) EXPENDITURES Debt Service: Principal Retirement 315,000 195,000 120,000 Interest on Long-Term Debt 100,685 100,685 - Fiscal Charges 7,350 1,428 5,922 Issuance Costs - 72,000 (72,000) Total Expenditures 423,035 369,113 53,922 Excess (Deficiency) of Revenues Over Expenditures 7,813 55,605 47,792 OTHER FINANCING SOURCES (USES) Issuance of Long-Term Debt - 2,300,000 2,300,000 Payment to Escrow Agent - (2,300,000) (2,300,000) Total Other Finance Sources (Uses)- - - Net Change in Fund Balance 7,813 55,605 47,792 FUND BALANCE Beginning of Year 11,115 11,115 - End of Year 18,928$ 66,720$ 47,792$ Original and THIS PAGE BLANK STATISTICAL SECTION (UNAUDITED) The statistical section presents financial statement trends as well as detailed financial and operational information not available elsewhere in the report. The statistical section is intended to enhance the reader’s understanding of the information presented in the financial statements, notes to the financial statements, and other supplementary information presented in this report. The statistical section is comprised of the five categories of statistical information presented below. Financial Trends These schedules contain information on financial trends to help the reader understand how the Town’s financial position and financial activities have changed over time. Revenue Capacity These schedules contain information to help the reader assess the factors affecting the Town’s ability to generate revenue. Debt Capacity These schedules present information to help the reader evaluate the Town’s current levels of outstanding debt as well as assess the Town’s ability to make debt payments and/or issue additional debt in the future. Demographic and Economic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the Town’s financial activities take place and to help make comparisons with other cities. Operating Information These schedules contain information about the Town’s operations and various resources to help the reader draw conclusions as to how the Town’s financial information relates to the services provided by the Town. See the table of contents for page numbers of the schedules that encompass the above sections. TOWN OF FOUNTAIN HILLS,AR IZONA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (71) 2006 2007 2008 2009 Governmental Activities: Net Investment in Capital Assets 20,806,507$ 92,508,637$ 94,939,805$ 94,611,110$ Restricted 12,446,147 12,210,966 12,799,502 11,828,137 Unrestricted 9,053,611 14,276,126 13,230,726 13,765,293 Total Governmental Activities Net Position 42,306,265$ 118,995,729$ 120,970,033$ 120,204,540$ Fiscal Year Source:The source of this information is the Town’s financial records. (72) 2010 2011 2012 2013 2014 2015 95,467,509$ 92,579,483$ 92,006,103$ 89,800,560$ 89,713,260$ 95,325,824$ 11,396,116 4,385,595 5,951,416 5,721,744 5,480,867 6,310,810 12,321,090 22,598,669 21,064,267 20,612,758 19,186,823 15,180,582 119,184,715$ 119,563,747$ 119,021,786$ 116,135,062$ 114,380,950$ 116,817,216$ Fiscal Year TOWN OF FOUNTAIN HILLS,AR IZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (73) 2006 2007 2008 2009 EXPENSES Governmental Activities: General Government 3,875,014$ 4,292,515$ 3,921,588$ 4,231,529$ Public Safety 5,403,620 5,935,742 6,532,292 7,312,415 Highways and Streets 1,581,068 5,225,835 5,981,347 5,051,294 Culture and Recreation 2,576,406 3,282,160 3,092,661 3,336,616 Development Services 1,812,469 2,512,170 2,861,653 2,218,994 Interest on Long-Term Debt 1,297,119 1,163,370 1,132,947 1,033,536 Total Government Activities Expenses 16,545,696 22,411,792 23,522,488 23,184,384 PROGRAM REVENUES Governmental activities: Fees, Fines, and Charges for Services General Government 4,029,437 910,978 830,963 544,753 Public Safety - 982,659 746,227 55,042 Highways and Streets - - - - Other Activities 103,826 626,431 752,621 888,249 Operating Grants and Contributions 2,022,675 - 56,802 - Capital Grants and Contributions - 989,100 835,659 1,353,409 Total Governmental Activities Program Revenues 6,155,938 3,509,168 3,222,272 2,841,453 Net (Expenses)/Revenues (10,389,758) (18,902,624) (20,300,216) (20,342,931) GENERAL REVENUES AND OTHER Governmental Activities: Taxes: Sales Taxes 11,007,924 11,407,714 10,489,591 8,932,374 Property Taxes 1,648,947 1,385,953 1,635,542 1,531,770 Franchise Taxes 314,359 324,318 336,290 321,964 State Shared Revenues 5,389,551 8,444,731 8,848,199 8,456,552 Investment Earnings 673,351 1,094,994 780,935 258,478 Miscellaneous 200,921 85,418 183,963 76,300 Total Governmental Activities 19,235,053 22,743,128 22,274,520 19,577,438 CHANGE IN NET POSITION Governmental Activities 8,845,295$ 3,840,504$ 1,974,304$ (765,493)$ Fiscal Year Source:The source of this information is the Town’s financial records. (74) 2010 2011 2012 2013 2014 2015 3,720,236$ 2,876,848$ 3,119,113$ 2,909,443$ 2,432,965$ 2,479,365$ 6,293,323 5,963,067 5,820,136 6,100,131 6,958,056 6,816,152 5,202,285 5,567,973 4,718,047 5,712,817 6,630,875 4,963,979 2,927,848 2,840,154 2,754,731 2,779,294 2,760,690 2,822,954 1,612,287 1,572,202 1,442,613 1,633,361 1,237,717 2,074,611 950,484 851,957 779,576 567,043 472,999 698,542 20,706,463 19,672,201 18,634,216 19,702,089 20,493,302 19,855,603 1,340,457 1,126,926 1,025,940 1,204,356 1,373,670 1,671,843 32,667 21,222 20,323 14,227 16,971 18,965 2,556 16,270 11,825 4,916 22,156 3,022 - - - - - - 1,666,498 1,614,462 1,285,656 1,266,906 1,307,738 1,431,017 632,617 2,273,414 1,392,706 150,535 144,570 2,874,796 3,674,795 5,052,294 3,736,450 2,640,940 2,865,105 5,999,643 (17,031,668) (14,619,907) (14,897,766) (17,061,149) (17,628,197) (13,855,960) 7,644,440 8,013,480 7,787,489 7,957,163 8,459,267 8,983,049 1,928,028 1,349,079 1,453,405 1,385,147 1,449,646 904,660 285,881 322,659 332,130 334,668 349,414 352,673 6,000,923 5,217,140 4,515,511 4,979,183 5,326,332 5,713,235 22,831 28,456 88,877 69,998 123,311 150,358 129,740 68,125 178,393 300,899 166,115 188,251 16,011,843 14,998,939 14,355,805 15,027,058 15,874,085 16,292,226 (1,019,825)$ 379,032$ (541,961)$ (2,034,091)$ (1,754,112)$ 2,436,266$ Fiscal Year THIS PAGE BLANK TOWN OF FOUNTAIN HILLS,AR IZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (75) 2006 2007 2008 2009 2010 General Fund: Reserved $ 14,393 $ 2,934,144 $ 3,053,070 $ 3,234,860 $ 3,235,811 Unreserved, Designated for: Vehicle Replacement - - - 127,916 333,796 Unreserved, Undesignated 6,515,855 3,666,005 3,526,738 3,302,373 3,418,799 Total General Fund $ 6,530,248 $ 6,600,149 $ 6,579,808 $ 6,665,149 $ 6,988,406 All Other Governmental Funds: Unreserved, Designated for Vehicle Replacement $ - $ - $ - $ 95,620 $ 159,484 Unreserved, Undesignated Reported in: Special Revenue Funds 1,951,434 5,305,432 3,876,927 4,198,782 4,498,523 Capital Projects Funds 9,496,266 9,916,670 10,764,857 10,246,395 10,020,336 Debt Service Funds 159,530 1,386,674 1,585,740 1,218,971 1,182,834 Total All Other Governmental Funds $ 11,607,230 $ 16,608,776 $ 16,227,524 $ 15,759,768 $ 15,861,177 2011 2012 2013 2014 2015 General Fund: Nonspendable Inventory $ 13,183 $ 9,332 $ 10,201 $ 14,358 $ 6,975 Prepaid Items 29,234 28,245 32,493 18,348 10,655 Committed - 1,345,200 1,345,200 1,345,200 2,634,923 Assigned - 2,190,910 2,191,063 1,647,193 1,872,492 Unassigned 8,263,549 3,656,173 4,117,865 4,972,853 4,369,457 Total General Fund $ 8,305,966 $ 7,229,860 $ 7,696,822 $ 7,997,952 $ 8,894,502 All Other Governmental Funds: Nonspendable Cash with Escrow Agent $ - $ 2,623,895 $ 2,301,609 $ 1,973,067 $ 1,645,000 Prepaid Items 6,217 5,474 4,706 997 656 Restricted 4,379,987 3,300,426 3,354,189 3,505,590 10,066,786 Committed 11,480,869 2,039,560 2,175,094 2,089,361 1,079,780 Assigned - 9,312,168 9,005,276 7,147,586 5,444,124 Total All Other Governmental Funds $ 15,867,073 $ 17,281,523 $ 16,840,874 $ 14,716,601 $ 18,236,346 Fiscal Year Fiscal Year Source:The source of this information is the Town’s financial records. Note: During fiscal year 2011,the Town implemented GASB Statement No. 54.Therefore, starting in the fiscal year ended June 30, 2011, governmental fund balances will be presented based on the GASB Statement No. 54 hierarchy. TOWN OF FOUNTAIN HILLS,AR IZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (76) 2006 2007 2008 2009 2010 REVENUES Taxes 12,993,876$ 13,159,087$ 12,457,086$ 10,960,001$ 9,818,985$ Intergovernmental 7,412,226 8,444,731 9,353,260 9,607,961 7,672,037 Fines and Forfeitures 235,050 304,214 287,120 339,658 297,030 Licenses and Permits 1,918,107 1,239,318 1,125,957 541,627 399,094 Charges for Services 1,689,046 898,955 620,300 316,676 464,036 Leases and Rents 255,527 267,350 296,434 290,083 215,520 Special Assessments 21,147 4,228 4,337 4,037 - Investment Income (Loss)673,351 1,094,994 780,935 258,478 22,831 Other 233,565 85,418 183,963 43,683 129,740 Total Revenues 25,431,895 25,498,295 25,109,392 22,362,204 19,019,273 EXPENDITURES General Government 4,459,183 4,024,551 3,548,295 3,514,249 3,186,368 Public Safety 5,208,770 5,689,020 6,321,669 6,624,141 6,200,227 Highways and Streets 2,121,986 2,028,397 2,214,557 1,199,850 973,746 Culture and Recreation 3,607,750 2,131,374 2,257,007 2,215,065 2,007,737 Development Services 1,812,469 2,462,643 2,751,740 2,036,295 1,669,449 Capital Outlay - 2,002,887 5,239,169 3,708,277 1,254,223 Debt Service Principal Retirement 1,968,228 1,968,228 2,153,228 2,240,000 2,460,000 Interest on Long-Term Debt 1,192,414 1,058,665 1,025,320 929,134 842,857 Other Debt Service 532,762 - - - - Total Expenditures 20,903,562 21,365,765 25,510,985 22,467,011 18,594,607 Excess of Revenues Over (Under) Expenditures 4,528,333 4,132,530 (401,593) (104,807) 424,666 OTHER FINANCING SOURCES (USES) Transfers In 10,146,663 4,383,069 2,756,988 3,759,735 1,127,776 Transfers Out (10,146,663) (4,383,069) (2,756,988) (3,950,654) (1,127,776) Issuance of Refunding Debt 4,555,000 - - - - Issuance of Long-Term Debt - - - - - Bond Premium - - - - - Payment to Refunded Debt Escrow Agent (4,338,781) - - - - Total Other Financing Sources (Uses)216,219 - - (190,919) - Net Change in Fund Balance 4,744,552$ 4,132,530$ (401,593)$ (295,726)$ 424,666$ Debt Service as a Percentage of Noncapital Expenditures 21.46%18.53%18.60%20.33%18.29% Fiscal Year Source:The source of this information is the Town’s financial records. (77) 2011 2012 2013 2014 2015 9,704,054$ 9,577,321$ 9,713,445$ 10,271,737$ 10,240,382$ 7,165,103 6,035,448 6,323,047 6,677,518 9,770,048 236,221 223,673 187,251 170,995 186,456 312,367 194,976 570,904 891,782 1,043,382 388,635 405,663 162,086 161,376 176,541 227,195 206,018 213,871 252,584 269,753 - - - - - 28,456 88,877 69,998 123,311 150,358 72,125 178,393 300,899 134,114 188,251 18,134,156 16,910,369 17,541,501 18,683,417 22,025,171 2,575,975 2,887,321 2,699,109 2,194,845 2,275,124 5,772,800 5,869,445 6,022,269 6,890,770 6,675,874 1,123,230 1,054,930 2,058,990 3,085,559 1,275,779 1,871,446 1,794,332 1,791,018 1,921,939 1,962,585 1,564,615 1,421,787 1,643,757 1,774,983 2,073,990 1,043,304 884,323 453,002 1,750,465 8,799,068 2,115,000 1,965,000 2,280,000 2,415,000 1,850,000 744,330 639,135 554,860 460,811 454,957 - 55,752 12,183 12,188 243,585 16,810,700 16,572,025 17,515,188 20,506,560 25,610,962 1,323,456 338,344 26,313 (1,823,143) (3,585,791) 431,880 2,470,027 1,279,397 1,838,453 2,519,774 (431,880) (2,470,027) (1,279,397) (1,838,453) (2,519,774) - - - - 4,180,000 - - - - 7,565,000 - - - - 342,086 - - - - (4,085,000) - - - - 8,002,086 1,323,456$ 338,344$ 26,313$ (1,823,143)$ 4,416,295$ 17.41%17.09%16.63%16.63%15.40% Fiscal Year TOWN OF FOUNTAIN HILLS,AR IZONA GOVERNMENTAL AC TIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (78) Fiscal Year Sales Taxes Property Taxes Franchise Taxes Total 2006 11,007,924$ 1,671,593$ $ 314,359 12,993,876$ 2007 11,407,714 1,427,055 324,318 13,159,087 2008 10,489,591 1,631,205 336,290 12,457,086 2009 8,932,374 1,705,663 321,964 10,960,001 2010 7,644,441 1,888,664 285,881 9,818,986 2011 8,013,481 1,367,915 322,659 9,704,055 2012 7,787,489 1,457,702 332,130 9,577,321 2013 7,957,162 1,421,614 334,668 9,713,444 2014 8,459,267 1,463,056 349,414 10,271,737 2015 8,983,049 904,660 352,673 10,240,382 Source:The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS,AR IZONA AS SESSED VALUE AND ESTIMATED AC TUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) (79) Fiscal Year Net Assessed Taxable Value Total Direct Tax Rate* Estimated Actual Taxable Value 2006 375,183,181$ $ 0.3510 3,411,460,877$ 11.00 % 2007 397,380,162 0.3012 3,615,453,567 10.99 2008 610,738,122 0.2124 5,840,184,927 10.46 2009 684,742,347 0.1972 6,648,954,354 10.30 2010 651,218,464 0.2273 6,255,310,705 10.41 2011 576,535,714 0.1639 5,461,763,819 10.56 2012 451,860,136 0.2258 4,370,950,282 10.34 2013 377,521,718 0.2657 3,668,373,751 10.29 2014 366,302,672 0.2773 3,579,924,332 10.23 2015 402,965,927 0.1151 3,945,242,209 10.21 Net Assessed Taxable Value as a Percentage of Estimated Actual Taxable Value Source:The source of this information is the Arizona Department of Revenue’s Abstract of the Assessment Roll and the Town’s financial records. * Per $100 of secondary assessed value. TOWN OF FOUNTAIN HILLS,AR IZONA PRINCIPAL PROPERTY TAXPAYERS JUNE 30, 2015 AND 2006 (UNAUDITED) (80) Taxpayer Net Secondary Assessed Value Rank Net Secondary Assessed Value Rank Chaparral City Water Company 3,234,725$ 1 0.80 %3,107,090$ 3 0.83 % Hunter Retail LLC 2,623,248 2 0.65 EN, LLC 2,038,673 3 0.51 3,705,309 1 0.99 WSL Fountain View Investors V, LLC 1,905,620 4 0.47 2,251,545 6 0.60 Whitestone Fountain Hills, LLC 1,682,833 5 0.42 Target Corporation 1,641,857 6 0.41 1,725,801 8 0.46 Ridge View Apartments LP 1,629,560 7 0.40 1,070,000 0.29 Pacific FH Resort LLC 1,511,728 8 0.38 Arizona State Land Department 1,417,280 9 0.35 Smith's Food & Drug Centers Inc.1,241,591 10 0.31 1,506,003 0.40 Inland W estern Fountain Hills Four Peaks LLC 3,179,665 2 0.85 Qwest Corporation 1,170,753 0.29 2,743,364 4 0.73 Adero Canyon 803,824 0.20 2,626,800 5 0.70 JFM Limited Partnership I 2,066,000 7 0.55 Sun Tech Development, LLC 1,679,195 9 0.45 Four Peaks Limited Partnership 1,593,578 10 0.42 20,901,692$ 5.19 %27,254,350$ 7.27 % Percentage of Total Net Secondary Assessed Value 2015 2006 Percentage of Total Net Secondary Assessed Value Source:The source of this information is the Maricopa County Assessor’s Office. TOWN OF FOUNTAIN HILLS,AR IZONA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) (81) Ratio of Current Percent of Delinquent Total Tax Fiscal Total Tax Current Taxes Tax Total Tax Collections to Year Tax Levy Collections Collected Collections Collections Total Tax Levy 2006 1,673,519$ 1,618,877$ 96.7 %34,011$ 1,652,888$ 98.8 % 2007 1,391,521 1,359,035 97.7 27,203 1,386,238 99.6 2008 1,630,534 1,578,583 96.8 47,833 1,626,416 99.7 2009 1,719,105 1,660,820 96.6 53,378 1,714,198 99.7 2010 1,895,552 1,838,909 97.0 52,188 1,891,097 99.8 2011 1,340,544 1,307,092 97.5 24,924 1,332,016 99.4 2012 1,446,076 1,414,482 97.8 20,255 1,434,737 99.2 2013 1,429,284 1,401,654 98.1 18,938 1,420,592 99.4 2014 1,449,884 1,426,612 98.4 18,948 1,445,560 99.7 2015 892,104 881,170 98.8 - 881,170 98.8 Source:The source of this information is the Maricopa County Treasurer’s Office. TOWN OF FOUNTAIN HILLS,AR IZONA TAXABLE SALES BY CATEGORY LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) (82) 2006 2007 2008 2009 2010 Sales Category: Construction 3,106,859$ 2,694,700$ 2,062,028$ 1,414,240$ 538,551$ Transportation and Utilities 1,240,123 1,330,052 1,422,158 1,311,735 1,424,827 Wholesale/Retail 3,796,192 4,144,263 3,912,512 3,687,409 3,555,974 Restaurants and Bars 547,276 537,596 582,226 493,242 509,624 Real estate, Rental and Leasing 881,584 792,358 982,198 664,999 650,071 Services 263,239 280,290 327,411 258,138 241,686 Other 1,172,651 1,628,455 1,201,058 1,102,611 723,708 Total 11,007,924$ 11,407,714$ 10,489,591$ 8,932,374$ 7,644,441$ Fiscal Year Source:The source of this information is the Town’s financial records. Note: Other includes all state and local sales tax audit adjustments. (83) 2011 2012 2013 2014 2015 567,136$ 600,402$ 563,540$ 781,742$ 888,311$ 1,388,074 1,407,331 1,402,193 1,375,620 1,383,464 3,567,615 3,600,619 3,601,212 3,653,447 3,889,874 559,930 575,705 645,258 655,656 695,041 731,615 678,267 719,884 782,453 816,890 276,566 274,481 309,827 342,924 340,002 922,545 647,684 715,248 867,425 969,467 8,013,481$ 7,784,489$ 7,957,162$ 8,459,267$ 8,983,049$ Fiscal Year TOWN OF FOUNTAIN HILLS,AR IZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) (84) Fiscal Year 2006 2.60 % 0.70 % 5.60 % 8.90 % 2007 2.60 0.70 5.60 8.90 2008 2.60 0.70 5.60 8.90 2009 2.60 0.70 5.60 8.90 2010 2.60 0.70 6.60 9.90 2011 2.60 0.70 6.60 9.90 2012 2.60 0.70 6.60 9.90 2013 2.60 0.70 5.60 8.90 2014 2.60 0.70 5.60 8.90 2015 2.60 0.70 5.60 8.90 Total Tax Rate Town Rate Maricopa County State Rate Source:The source of this information is the Arizona Department of Revenue. TOWN OF FOUNTAIN HILLS,AR IZONA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) (85) Community Municipal Highway Percent of General Facilities Property User Special Total Debt Debt Per Obligation District Corporation Revenue Assessment Outstanding Per Personal Fiscal Year Bonds Bonds Bonds Bonds Bonds Debt Capita Income 2006 9,600,000$ 4,415,000$ 12,310,000$ 455,000$ 9,683$ 26,789,683$ 1,176$ 3.64% 2007 8,620,000 4,255,000 11,595,000 345,000 6,455 24,821,455 1,082 3.36% 2008 7,570,000 4,070,000 10,790,000 235,000 3,228 22,668,228 986 2.57% 2009 6,530,000 3,860,000 9,905,000 130,000 - 20,425,000 898 2.31% 2010 5,415,000 3,630,000 8,920,000 - - 17,965,000 799 1.96% 2011 4,595,000 3,370,000 7,885,000 - - 15,850,000 703 1.57% 2012 3,755,000 3,090,000 6,800,000 - - 13,645,000 601 1.27% 2013 2,900,000 2,800,000 5,650,000 - - 11,350,000 496 1.03% 2014 2,000,000 2,495,000 4,695,000 - - 9,190,000 389 0.84% 2015 9,517,086 2,300,000 3,525,000 - - 15,342,086 636 N/A Governmental Activities Source:The source of this information is the Town’s financial records and the U.S. Bureau of Economic Analysis. Note: All amounts presented are net of original issue discounts and premiums. Population and personal income data can be found in the Schedule of Demographic and Economic Statistics.Personal income for fiscal year 2015 was not available. TOWN OF FOUNTAIN HILLS,AR IZONA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) (86) Fiscal Year General Obligation Bonds Estimated Actual Taxable Value of Property Percentage of Estimated Actual Taxable Value of Property Net General Obligation Bonded Debt per Capita Municipal Property Corporation Bonds Net Municipal Property Corporation Debt per Capita Total Revenues - All Sources 2006 9,600,000$ 3,411,460,877$ 0.30 %421$ 12,310,000$ 540$ 25,431,895$ 2007 8,620,000 3,615,453,567 0.26 376 11,595,000 506 25,498,295 2008 7,570,000 5,840,184,927 0.14 329 10,790,000 469 25,109,392 2009 6,530,000 6,648,954,354 0.11 287 9,905,000 436 22,362,204 2010 5,415,000 6,255,310,705 0.10 241 8,920,000 397 19,019,273 2011 4,595,000 5,461,763,819 0.09 204 7,885,000 350 18,134,156 2012 3,755,000 4,370,950,282 0.09 165 6,800,000 300 16,910,369 2013 2,900,000 3,668,373,751 0.09 127 5,650,000 247 17,541,501 2014 2,000,000 3,579,924,332 0.06 85 4,425,000 187 18,683,417 2015 9,517,086 3,945,242,209 0.25 389 3,525,000 80 22,025,171 Source:The source of this information is the Department of Revenue and the Town’s financial records. Note: All amounts presented are net of original issue discounts and premiums. Population data can be found in the Schedule of Demographic and Economic Statistics. TOWN OF FOUNTAIN HILLS,AR IZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2015 (UNAUDITED) (87) Governmental Unit Outstanding Debt Estimated Percentage Applicable Estimated Share of Overlapping Debt Overlapping: Maricopa County -$ 1.15%-$ Maricopa County Community College District 593,820,000 1.15%6,828,930 East Valley Institute of Technology - 2.63%- Fountain Hills Unified School District 10,210,000 96.11%9,812,831 Eagle Mountain Com munity Facilities District 2,300,000 100.00%2,300,000 18,941,761 Direct: Town of Fountain Hills, Arizona 9,517,086 Total Direct and Overlapping Debt 28,458,847$ Source:The source of this information is the Town’s records and the State and County Abstract of the Assessment Roll,the Arizona Department of Revenue Report of Indebtedness and the applicable governmental unit. Note: The estimated percentage of debt outstanding applicable to the Town is calculated based on the Town’s secondary assessed valuation (full cash value) as a percentage of the secondary assessed valuation of the overlapping jurisdiction. Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town of Fountain Hills.This schedule further estimates the portion of outstanding debt of those overlapping governments that is borne by residents and businesses of the Town.This process recognizes that, when considering a town’s ability to issue and repay long-term debt, the entire debt burden borne by residents should be taken into account.However, this fact does not imply that every taxpayer is a resident, and therefore, responsible for repaying the debt of each overlapping government. TOWN OF FOUNTAIN HILLS,AR IZONA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (UNAUDITED) (88) 2006 2007 2008 2009 Debt Limit 22,510,991$ 23,842,810$ 36,644,287$ 41,084,541$ Total Applicable to Limit 800,000 550,000 275,000 - Legal Debt Margin 21,710,991$ 23,292,810$ 36,369,287$ 41,084,541$ Total Debt Applicable to the Limit as a Percentage of the Debt Limit 4%2%1%0% 20% Debt Limit 2006 2007 2008 2009 Debt Limit 75,036,636$ 79,476,032$ 122,147,624$ 136,948,469$ Total Applicable to Limit 8,800,000 8,070,000 7,295,000 6,530,000 Legal Debt Margin 66,236,636$ 71,406,032$ 114,852,624$ 130,418,469$ Total Debt Applicable to the Limit as a Percentage of the Debt Limit 12%10%6%5% Fiscal Year Fiscal Year Source:The source of this information is the Town’s financial records. (89) 2010 2011 2012 2013 2014 2015 39,073,108$ 34,592,143$ 27,111,608$ 22,651,303$ 21,978,160$ 24,177,956$ - - - - - - 39,073,108$ 34,592,143$ 27,111,608$ 22,651,303$ 21,978,160$ 24,177,956$ 0%0%0%0%0%0% 2010 2011 2012 2013 2014 2015 130,243,693$ 115,307,143$ 90,372,027$ 75,504,344$ 73,260,534$ 80,593,185$ 5,415,000 4,595,000 3,755,000 2,900,000 2,000,000 9,517,086 124,828,693$ 110,712,143$ 86,617,027$ 72,604,344$ 71,260,534$ 71,076,099$ 4%4%4%4%3%11% Fiscal Year Fiscal Year TOWN OF FOUNTAIN HILLS,AR IZONA CALCULATION OF LEGAL DEBT MARGIN AS OF JUNE 30, 2015 (UNAUDITED) (90) Net Secondary Assessed Valuation 402,965,927$ Water, Sewer, Artificial Lighting, Parks, Open Space, Public Safety, Law Enforcement, Fire and Em ergency Facilities, Street and Transportation Facilities, and Recreational Facility Improvements Debt Limit - 20% of Net Secondary Assessed Valuation 80,593,185$ Net Debt Applicable to Limit 9,517,086 20% Legal Debt Margin 71,076,099 All other general obligation bonds Debt Limit - 6% of Net Secondary Assessed Valuation 24,177,956 Net Debt Applicable to Limit - 6% Legal Debt Margin 24,177,956 Total legal debt margin 95,596,141$ Source:The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. TOWN OF FOUNTAIN HILLS,AR IZONA REVENUE BOND COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) (91) Fiscal Year Principal Interest Total Pledged Revenues Coverage 2006 $ 665,000 546,576$ 1,211,576$ 18,162,814$ 15.0 2007 715,000 473,349 1,188,349 18,414,733 15.5 2008 805,000 498,878 1,303,878 18,364,312 14.1 2009 885,000 460,379 1,345,379 15,934,788 11.8 2010 985,000 417,028 1,402,028 14,011,595 10.0 2011 1,035,000 327,312 1,362,312 13,512,514 9.9 2012 1,085,000 285,288 1,370,288 13,011,297 9.5 2013 1,150,000 234,175 1,384,175 13,413,531 9.7 2014 1,210,000 234,176 1,444,176 14,292,136 9.9 2015 1,265,000 184,500 1,449,500 15,513,363 5.4 Municipal Facilities Corporation Revenue Bonds Source: The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS,AR IZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS (UNAUDITED) (92) 2005 2006 2007 2008 Population 22,547 22,788 22,932 22,984 Per capita personal income 32,414$ 32,320$ 32,230$ 38,439$ Median age N/A 46.4 46.4 48.3 Public school enrollment 2,373 2,425 2,307 2,233 Town of Fountain Hills unemployment rate 2.0%1.7%1.5%2.6% Land use Total acres N/A 12,996.0 13,005.7 13,005.7 Total square miles N/A 20.31 20.32 20.32 Vacant lots N/A N/A 3,355 1,295 Number of units Housing N/A 12,681 12,850 12,832 Lodging N/A 4 4 4 Restaurants N/A 50 53 47 Shopping centers N/A 14 14 19 Schools Public N/A 4 4 4 Preschool N/A 5 4 4 Charter N/A 2 1 1 Calendar Year Source:The source of the “Per Capita” information is the U.S.Bureau of Economic Analysis.The source of the “Population” and “Unemployment Rate” information is State of Arizona, Department of Administration, Office of Employment and Population Statistics.The source of School Enrollment is the Fountain Hills Unified School District No. 98.Other information is from the Town’s records. Note:N/A indicates that the information is not available. * Information obtained is based on calendar years;therefore, the latest information obtained was from 2014. (93) 2009 2010 2011 2012 2013 2014* 22,736 22,489 22,554 22,695 22,893 23,602 38,918$ 40,672$ 44,660$ 47,260$ 48,244$ 46,619$ 48.9 53.9 53.9 53.9 53.0 53.7 2,203 2,103 1,981 1,886 1,820 1,692 4.5%4.8%6.7%5.6%6.0%5.4% 13,005.7 13,005.7 13,005.7 13,005.7 13,005.7 13,005.7 20.32 20.32 20.32 20.32 20.32 20.32 1,253 1,226 1,218 1,209 1,196 1,165 12,927 12,983 12,990 12,977 12,991 12,981 4 4 4 4 4 4 52 53 56 56 54 43 19 20 20 20 20 20 4 4 4 3 3 3 4 4 4 6 7 7 1 1 1 1 1 1 Calendar Year TOWN OF FOUNTAIN HILLS,AR IZONA PRINCIPAL EMPLOYERS JUNE 30, 2014, AND 2006* (UNAUDITED) (94) Em ployer Employees Rank Percentage of Total Town Employment Employees Rank Fountain Hills Unified School District No. 98 193 1 3.9%285 1 Fountain View Village 140 2 2.8% Rural Metro Corporation 111 3 2.2% Firerock Country Club 100 4 2.0% Safeway Stores 86 5 1.7%95 5 Target Stores 85 6 1.7%130 3 Fry's Food Stores 80 7 1.6%80 7 Bashas 74 8 1.5%70 8 Eagle Mountain Golf Club 70 9 1.4%70 10 United States Postal Service 60 10 1.2% Sunridge Canyon Golf Course 59 1.2%70 9 Town of Fountain Hills 41 0.8%87 6 MCO Properties, Inc.12 0.2%125 4 Monk s Construction - -190 2 Total 1,111 22.4% 1,202 Total Town employment 4,951 2014*2006 Source:The source of this information is the Maricopa Association of Governments. Note Total Town employment for 2006 was not available. * Data for 2015 was not available. TOWN OF FOUNTAIN HILLS,AR IZONA AUTHORIZED FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (95) Function 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Municipal Court 5.50 5.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.63 Administration 12.50 13.00 13.50 13.50 13.25 11.25 11.58 11.68 10.56 11.33 Development Services 41.00 41.00 40.50 40.00 35.75 23.25 20.25 18.75 16.25 16.30 Community Services 23.50 28.00 29.25 29.75 27.10 21.63 21.53 21.18 20.18 21.06 Total 82.50 87.00 88.25 88.25 81.10 61.13 58.36 56.61 50.99 52.32 Fiscal Year Source:The source of this information is the Town’s financial records. TOWN OF FOUNTAIN HILLS,AR IZONA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (96) Function/Program 2006 2007 2008 2009 2010 2011 Municipal Court: Cases filed N/A N/A N/A N/A 3,520 2,584 Hearings/Trials held N/A N/A N/A N/A 1,089 738 Administration: FTEs per 1,000 residents 3.6 3.6 3.5 3.3 3.2 2.7 Registered voters - general election 13,669 none 14,335 none 15,511 none Voter turnout - general election 21%none 39%none 50%none Development Services: Building permits issued 468 759 716 391 409 354 Building inspections conducted 9,377 7,975 5,692 3,189 1,936 1,546 Number of code violation cases N/A N/A N/A N/A 1,024 843 Number of zoning cases N/A N/A N/A N/A 7 14 Community Services: Number of Community Center bookings N/A N/A N/A N/A 3,396 3,315 Number of participants in recreational programs N/A N/A N/A N/A 1,960 1,759 Number of Senior Services members N/A N/A N/A N/A 1,105 1,205 Number of home delivered meals N/A N/A N/A N/A 10,169 9,742 Law Enforcement (contracted): Physical arrests N/A 993 524 825 679 645 Traffic violations N/A 2,315 2,504 4,900 2,959 1,909 Fire & Emergency Medical (contracted): Total incident responses 3,056 3,069 2,694 2,787 2,875 3,179 Average response time (in minutes)3:47 3:49 3:37 3:44 4:32 3:46 Fiscal Year Source:The source of this information is the Town’s financial records. Note:N/A indicates that the information is not available. *Excludes hiking and teen trips which are no longer tracked. (97) 2012 2013 2014 2015 2,173 1,740 1,649 1,738 731 703 1,665 1,585 2.6 2.5 2.2 2.2 16,074 none N/A 16,213 34%none N/A 38% 352 419 566 443 1,257 1,395 2,131 2,448 804 746 716 752 7 10 41 65 3,236 3,196 3,383 3,439 1,833 1,789 2,291 2,249 * 1,208 1,118 1,189 1,273 8,419 6,941 4,799 4,035 522 545 743 445 1,366 1,296 1,379 1,539 3,082 3,136 2,956 3,166 3:50 3:53 3:37 3:57 Fiscal Year TOWN OF FOUNTAIN HILLS,AR IZONA CAPITAL ASSETS STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) (98) Function/Program 2006 2007 2008 2009 2010 2011 Public Safety: Number of Fire stations 2 2 2 2 2 2 Highways and Streets Streets (Centerline Miles)178.9 178.9 178.9 178.9 178.9 178.9 Streets (Lane Miles)390 390 390 390 390 390 Pedestrian Lighting 34 34 34 34 34 34 Traffic Signals 12 12 13 13 13 13 . Parks and Recreation: Acreage 116 116 116 116 116 116 Playgrounds 6 6 7 7 7 7 Baseball/Softball Diamonds 6 6 6 6 6 6 Soccer/Football Fields 1 1 7 7 7 7 Community Centers 1 1 1 1 1 1 Preserve Acreage N/A N/A N/A N/A N/A N/A Miles of Trails N/A N/A N/A N/A N/A N/A Fiscal Year Source:The source of this information is the Town’s facilities records. Note: N/A indicates the information is not available. (99) 2012 2013 2014 2015 2 2 2 2 178.9 178.9 178.9 178.9 390 390 390 390 34 34 34 78 13 13 13 13 116 116 116 119 7 7 7 7 6 6 6 6 7 7 7 7 1 1 1 1 740 740 740 807.2 4.3 10.43 10.43 17.5 Fiscal Year 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Phone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov