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HomeMy WebLinkAboutFY03 CAFRI own of Fountain Hills FOR THE FISCAL YEAR ENDED "w�WJ�Inj wrM r �y 1' 1 1-.. 1 I' 1 I I U Combining Balance Sheet - Nonrnajor Governmental Funds 60 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 61 General Obligation Debt Service Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 62 Eagle Mountain Debt Service Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 63 Municipal Property Corporation Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 64 Capital Projects Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 65 HURF Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 66 Grants Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 67 HURF Debt Service Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 68 Cottonwoods Special Assessment Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 69 Development Fees Fund -Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual 70 TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2003 TABLE OF CONTENTS STATISTICAL SECTION Government -wide information Government -wide Expenses by Function 72 Government -wide Revenues 73 Fund Information: General Government Expenditures by Function 74 General Government Revenues by Source 75 General Governmental Tax Revenues by Source 76 Town Transaction Privilege (Sales) Tax Collections by Industry Classification 77 Property Tax Levies and Collections 78 Assessed and Estimated Actual Value of Property 79 Primary and Secondary Taxable Property Assessed Valuation 80 Property Tax Rates for All Direct and Overlapping Governments 81 Primary and Secondary Property Tax Rates - All Overlapping Governments 82 Assessed Valuation of Major Taxpayers 83 Computation of Legal Debt Margin 84 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita 85 Ratio of Annual Debt Service Expenditures to Total General Expenditures 86 Direct and Overlapping General Obligation Bonded Debt 87 Maricopa County Economic Indicators 88 Miscellaneous Statistical Data 89 i►rr:�.�•l�r.�z.»��x.��r.� THIS PAGE BLANK ATE Town of F0111,11TAIN HILLS September 19, 2003 To the Honorable Mayor, Members of the Governing Council, and Citizens of the Town of Fountain Hills, Arizona: State law requires that all general-purpose local governments publish within 120 days (240 days with an extension) of the close of each fiscal year a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards (GAAS) by a firm of licensed certified public accountants. The Comprehensive Annual Financial Report (CAFR) of the Town of Fountain Hills for the fiscal year ended June 30, 2003, is hereby submitted. This document represents a joint effort by Town staff as well as our auditors, Cronstrom & Trbovich. This report consists of management's representations concerning the finances of the Town of Fountain Hills. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with management. To provide a reasonable basis for making these representations, management of the Town of Fountain Hills has established an internal control framework that is designed to both 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 conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town of Fountain Hills' framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from 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. All disclosures necessary for the reader to understand the Town's activities have been included. The Town of Fountain Hills' financial statements have been audited by Cronstrom &Trbovich, PC, 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, 2003, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the Town of Fountain Hills' financial statements for the fiscal year ended June 30, 2003, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. J 16836 East Palisades Boulevard, Building A - P0. Box 17958 -Fountain Hills, Arizona 85269 - (480) 837-2003 -FAX: (4801837-3145 GAAP 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 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. Town of Fountain Hills Profile The Town of Fountain Hills is a planned, family -oriented community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970 the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. It was purchased by Robert McCulloch in the late 1960s and 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 11,340 acres of land, and bordering northeast Scottsdale, Fountain Hills is surrounded by the 3,500-foot McDowell Mountains on the west, the Fort McDowell Indian Reservation on the east, the Salt River Indian Reservation on the south and by the McDowell Mountain Regional Park on the north. Elevation is 1,520 feet at the fountain, 3,000 feet on Golden Eagle Boulevard, and is 500 feet above Phoenix. 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. Policy making and legislative authority are vested in the Town Council, which consists of a Mayor and six Councilmembers. Councilmembers are elected at large for staggered four-year terns. The Mayor, who also sits on the Town Council, is directly elected bi-annually by the voters and the Vice -Mayor is selected by the Council every eight months on a rotating basis. The Town Council is responsible, among other things, for the adoption of local ordinances, budget adoption, the 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 five department directors and approximately 77 employees. The Magistrate, Town Attorney and Town Prosecutor are under the direction of the Town Council. Over the past thirteen years Fountain Hills has grown from 10,190 residents to a town of almost 22,000 in 2003. The Maricopa Association of Governments (MAG) estimates that the population of Fountain Hills will continue to grow to near 25,000 by 2010. Although the rate of growth has slowed due to the national economy the Town continues to attract residents who are building large custom homes to take advantage of the scenic vistas surrounding our mountain community. 2 The Town provides or administers a full range of services including public safety (police, fire, animal control, building inspection); community development (code enforcement, planning, zoning and engineering); the construction and maintenance of streets and infrastructure, municipal court, recreational activities, community center and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise funds. On October 31, 2001 the Town Council adopted an ordinance to provide fire protection services to all Fountain Hills residents, forming a municipal fire department. Fire protection was previously provided by a separate legal entity, the Fountain Hills Fire District, which has been merged with the Town of Fountain Hills. The financial reporting entity (the Town) includes all the funds and account groups 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, Eagle Mountain Community Facilities District and Fountain Hills Municipal Property Corporation are included in the financial reports of the Town. The annual budget serves as the foundation for the Town of Fountain Hills' financial planning and control. The Town Council formally adopts the budget and legally allocates, or 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 May 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 an ordinance and is prepared by fund and department. The ordinance 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. During fiscal year 2002/2003 there were no supplemental budgetary appropriations to the original budget. 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 2002-2003 fiscal year posed several significant challenges for the Town of Fountain Hills' economic picture. Despite the uncertain economic conditions of the nation and slower growth of the State's economy, the Town's economy remained stable. The residential housing market has continued to grow although at a more moderate pace than in previous years. New commercial development along Shea Boulevard corridor brought a Target Store and major supermarket shopping center. This increase in retail sales tax base will compensate for the decrease in construction activity that is anticipated in the next several years as the Town approaches build -out. 3 The Town recently awarded a contract to a consultant to develop a concept plan for the downtown area of Fountain Hills. This concept plan will revitalize the downtown area and create connectivity to new businesses being constructed in the same location. New lighting, pedestrian walkways, fountains and cultural amenities will provide interest for adults and children. The Town also approved plans for a Hilton resort that is scheduled to open in FY 2005. The resort will have 178 rooms and 71 townhomes that will expand tourism within the community. Long-term financial planning. During the coming year the Town is faced with the challenge of maintaining the existing level of service to the citizens with reduced resources. A formal five year financial plan and capital improvement plan that will identify projects to be integrated with the annual budget and sources of funding to pay for them will be considered by the Council in the upcoming year. Additional sources of revenue are being proposed that will help to diversify the resources. The Town administration recognizes the need to assure reserves for future revenue shortfalls in case of economic downturns. A large portion of General Fund operating revenue comes from construction related activity that eventually will be constrained by availability of land or the economy; the Council adopted a fund balance policy that will ensure that adequate future reserves are maintained. The policy states: 1. A contingency fund of no less than 30 days operating expenditures for the upcoming fiscal year to be designated for unanticipated expenditure or loss of revenue (contingency). 2. A designated unreserved fund balance of a minimum of ten percent (10%) of the average actual revenues for the preceding five fiscal years designated for "pay-as-you- go" capital. 3. A reserved fund balance of twenty percent (20%) of the average actual revenues for the preceding five fiscal years which is unavailable for appropriation. These amounts will not be programmed for expenditure and are only available for use within the confines of expenditure limitations imposed by the State. The contingency fund can be used for unexpected emergencies and projects upon approval by Council. The Council also adopted additional financial policies that include guidelines for the issuance of debt for capital expenditures, Community Facilities Districts, financing alternatives, expenditure controls and financial planning. The debt policy was prepared with a preference for "pay-as- you-go" financing for capital spending. An investment policy was adopted and was awarded the Investment Policy Certification from the Association of Public Treasurers of the United States and Canada. 0 Cash management policies and practices. State statutes permit municipalities in Arizona to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds, repurchase agreements, and the State Treasurer's Local Government Investment Pool (LGIP). The Town of Fountain Hills debt policy restricts investments to securities that are 100% backed by the fall faith and credit of the U.S. government. The Town of Fountain Hills invests all idle cash in the State LGIP-GOV which consists of government backed securities. The year-to-date yield on investments as of June 30, 2003 was 1.32%. Investment income includes appreciation in the fair value of investments. Increases in fair value during the current year, however, do not necessarily represent trends that will continue; nor is it always possible to realize such amounts, especially in the case of temporary changes in the fair value of investments that the government intends to hold to maturity. Daily cash deposits are made with the local bank and are maintained for payroll and payables; these accounts are fully collateralized to $1 million. Risk management. The Town of Fountain Hills is a member of the Arizona Municipal Risk Retention Pool. Risk coverage includes general liability, errors and omissions, property and automobile insurance. The policy insures up to $2,000,000 per incident occurrence plus any excess liability of up to $13,000,000 per occurrence per year. Coverage is provided on a claims - made basis. During fiscal year 2002-2003 the Town settled two of three lawsuits regarding the Town Council action to assume fire and emergency medical services to the community. The lawsuits were filed on behalf of former Fire District firefighters who were not offered positions with the Town as well as one citizen who filed on behalf of the voters right to decide fire services. The citizen lawsuit and one firefighter lawsuit were settled for immaterial amounts; the final lawsuit on behalf of the firefighters represents a claim for $10 million for breach of contract and interference with contractual relations. The Town expects to prevail in this lawsuit but would be covered by the insurance provider if the claim is determined to be valid. The Arizona Municipal Workers Compensation Fund is the Town°s insurance provider for Workers' Compensation. The rate varies according to the functions performed by personnel. Pension and other postemployment benefits. The Town of Fountain Hills had two venues available to employees to provide for them during retirement. The Town Marshal deputies participated in the Arizona Public Safety Retirement System until June 30, 2003 at which time the Marshal Department was eliminated. The state agency plan is offered to state and local governments statewide and funded by employee wage deductions and matching Town contributions. The rates for these contributions are determined by the retirement system in order to ensure the proper amount of funding to meet the obligations to retired employees on a timely basis. As a matter of policy, the Town of Fountain Hills fully funded each year's annual required contribution to the pension plan as determined by the actuary. The Town of Fountain Hills also provides two deferred compensation plans through the International City/County Management Association (ICMA) in accordance with Internal Revenue Code Sections 401A and 457. The 401A is funded by mandatory employee wage deductions and matching Town contributions. The 457 is voluntary and funded 100% through employee participation. F For further information on these plans please refer to Note 4 in the financial statements Awards and Acknowledgements. 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, 2002. This was the seventh consecutive year that the government has received this prestigious award. hi order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both 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. In addition, the government also received the GFOA's Distinguished Budget Presentation Award for its annual budget document dated August 1, 2002. 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. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance 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. f.% c Timothy G. Pickering,- :EcD, CM Town Manager / f 3 LIST OF PRINCIPAL OFFIC1 . Mayor Vice -Mayor Councihnember Councihmember Councilmember Councilmember Councilmember Town Manager ELECTED OFFICIALS Mr. W. J. Nichols Mr. Rick Melendez Mr. Mike Archambault Dr. John Kavanagh Ms. Kathleen Nicola Ms. Susan Ralphe Ms. Leesa Stevens DEPARTMENT DIRECTORS Magistrate Public Works Director Parks & Recreation Director Fire Chief District Commander Town Prosecutor Town Attorney 7 Timothy G. Pickering Ted Armbruster Tom Ward Mark Mayer Mark Zimmerman, Rural Metro Corporation Captain Scott Penrose, Maricopa County Sheriffs Office Iacovino & Kayler Andrew McGuire, Jorden Bischoff McGuire �`� ))\ \ § )) JF�l lu �. . �;.i. ƒ \) � `\\ )�) �:}z r 1 or Excellene in Financial a Presented to • For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30 2002 A Certificate of Achievement for Excellence in Financial Report ng is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. EO OF a DO President Ino Executive Director E THIS PAGE BLANK IS17 11 THIS PAGE BLANK 12 affloffiff to ILA 4 V 06 • CERTIFIED PUBLIC ACCOUNTANTS The Honorable Mayor and the Town Council of the Town of Fountain Hills, Arizona 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, 2003, which collectively comprise the Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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, 2003, and the respective changes in financial position, where applicable, thereof and the respective budgetary comparison for the General and Excise Tax Funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis on pages 15 - 25 and the Public Safety Personnel Retirement System Schedule of Funding Progress on page 56 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 13 8706 EAST MANZANITA DRIVE, SUITE 100 ° SCOTTSDALE, ARIZONA 85258 ° (480) 348-1102 fAX (480) 348-1104 A PROFESSIONAL CORPORATION Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Town's basic financial statements. The introductory section, combining and individual fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken 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 express no opinion on them. As described in Note 3, the Town has implemented a new financial reporting model, as required by the provisions of GASB statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, as of June 30, 2003. Cronstrom & Trbovich, P.C. September 19, 2003 We (the Town of Fountain Hills) are pleased to provide an overview of our financial activities for the fiscal year ended June 30, 2003. The intended purpose of the Management Discussion and Analysis (MD&A) is to provide an introduction to the basic financial statements and notes, that provides an objective and easy to read analysis of our financial activities based on currently known facts, decisions, and conditions, by providing an easily readable summary of operating results and reasons for changes, which will help to determine if our financial position improved or deteriorated over the past year. This report addresses current operational activities, the sources, uses, and changes in resources, adherence to budget, service levels, limitations, significant economic factors, and the status of infrastructure and its impacts on our debt and operation. As this is our first MD&A we do not have comparative information of many parts of this analysis. When referring to prior year data in this analysis we will be drawing upon information from last years audited financial reports. ® The assets of the Town of Fountain Hills exceeded its liabilities at the close of the most recent fiscal year by $21,162,894 (net assets). Of this amount $2,638,149 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. ® As of the close of the current fiscal year, the Town of Fountain Hills' governmental funds reported combined ending fund balances of $9,154,831, an increase of $2,413,947 in comparison with the prior year. ® At the end of the current fiscal year, unreserved fund balance for the general fund was $4,037,863 or 35 percent of total general fund expenditures. The fund balance policy adopted by the Council in May, 2003 requires a minimum of $4,469,191 in designated, undesignated and reserve funds; the general fund will contribute $431,328 to the fund balance in the upcoming fiscal year. ® General fund revenues (on a budgetary basis) exceeded budgeted revenues by $522,551 for fiscal year 2003. Additionally, budgetary basis expenditures were only 81% ($2,624,712 (19%) in savings) of the final budget in the General Fund. ® General fund revenues exceeded expenditures by $601,251; a positive variance of $3,147,263 from the original budget. ® The Town includes two types of separate legal entities in its report - a Municipal Property Corporation and Community Facilities Districts. Although legally separate, these "component units" are important because the Town is financially accountable for them. A description of these three component units is available in Note 1 on page 37. Separate Financial Statements are not available for these three entities. 15 Overview of the Financial Statements This is the first year that the Town has implemented the Governmental Accounting Standards Board (GASB) Statement 34 - Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (the new model). The new model contains sweeping changes to the requirements for governmental reporting. The major changes were as follows: ♦ Government -wide reporting -while governments have traditionally focused reporting on groupings of funds (i.e. General Fund, Special Revenue Funds, Capital Project Funds, etc.), the new model also contains financial statements on a government -wide basis. ♦ Fund financial statements - the new model maintains governmental, proprietary and fiduciary fund financial statements, but the focus is on major funds within each fund type. ♦ New focus for governmental activities - in the government -wide financial statements all activities, including the governmental activities, are reported using the economic resources measurement focus and accrual basis of accounting. The traditional current financial resources focus and modified accrual basis of accounting are maintained for the governmental fund financial statements in the new model. ♦ Infrastructure reporting - the new model requires governments to report the value of infrastructure assets of governmental activities (roads, bridges, storm drainage systems, parks, street lighting, etc.). These assets are reported in the governmental activities on the government -wide financial statements. The Town of Fountain Hills has historically capitalized assets for governmental activities that were reported in the General Fixed Assets Account Group and were not depreciated under the old reporting model. ♦ Changes in budgetary reporting - the new model requires the display of both the original adopted budget and the amended budget, if applicable, in the budgetary comparison schedules. These schedules are only required for the general fund and major special revenue funds, although they may be presented for other funds as additional information. ♦ Required narrative analysis - the new model requires that the financial statements be accompanied by narrative introduction and analytical overview of the government's financial activities in the form of "management's discussion and analysis" (MD&A). The financial section of the Comprehensive Annual Financial Report (CAFR) for the Town of Fountain Hills, Arizona consists of this discussion and analysis, the basic financial statements and the required supplementary schedules presented after the basic financial statements. The basic financial statements include the government -wide financial statements, fund financial statements, including the budgetary statements for the general fund and major special revenue funds, and notes to the financial statements. 16 Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the Town of Fountain Hills' finances, in a manner similar to private -sector business. The statement of net assets presents information on all of the Town of Fountain Hills° assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Town of Fountain Hills is improving or deteriorating. The statement of activities presents information showing how the govermment'a net assets changed during the most recent fiscal year. All changes in net assets 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., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the Town of Fountain Hills that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the Town of Fountain Hills include general government, community development, public safety, highways and streets, and culture and recreation. The Town does not have any business -type activities. The government -wide financial statements can be found on pages 28 - 29 of this report. Fund financial statements. Also presented are the traditional fund financial statements for governmental funds. The fund financial statements now focus on major funds of the Town, rather than fund type used in the old model. 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 of Fountain Hills, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the Town of Fountain Hills 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 focus on near -term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Since the governmental fund financial statements focus on near -term spendable resources, while the governmental activities on the government -wide financial statements have a longer term focus, a reconciliation of the differences between the two is provided with the fund financial statements. Notes to the financial statements. The notes to the financial statements (pages 37 - 53) provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements and should be read with the financial statements. 17 Required supplementary information other than MD&A. Governments have an 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 after the footnotes. The Town has chosen to present these budgetary statements as part of the basic financial statements. Additionally, governments are required to disclose certain information about employee pension funds. The Town has disclosed this information in Note 4.0 to the financial statements. Government -Wide Financial Analysis Net assets may serve over time as a use indicator of a government's financial poson. The following table reflects the condensed Statement of Net Assets of the Town for June 30, 2003 showing that assets exceeded liabilities by $21,162,894, Town of Fountain Hills Condensed Statement of Net Assets As of June 30, 2003 ASSETS Governmental Activities Current and other assets $ 16,801,782 Capital assets Non -depreciable 23,571,668 Depreciable (net) 17407L272 Total assets $ 57,444,722 LIABILITIES Other liabilities $ 7,307,826 Non -current liabilities Due within one year 1,484,604 Due in more than one year 27,4894398 Total liabilities $ 36,281,828 NET ASSETS Invested in capital assets, net of related debt $ 11,843,575 Restricted 6,681,170 Unrestricted 2,6389149 Total net assets $ 21,162,894 The net assets of the Town are $21,162,894 in fiscal year 2003 in governmental activities. The Town does not currently have any proprietary or enterprise funds that would otherwise be classified as business -type activities. All Town funds are considered governmental activities. m Net assets consists of three components. The largest portion of the Town of Fountain Hill's net assets (56%) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire those assets that is still outstanding. The Town of Fountain Hills uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town of Fountain Hills' 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. This category of net assets decreased from fiscal year 2001- 2002; the decrease is attributable to the implementation of the depreciation requirements of GASB 34 in the current reporting period. An additional portion of the Town of Fountain Hills' net assets (32%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($2,638,149) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the Town of Fountain Hills is able to report positive balances in all three categories of net assets for the government as a whole. Governme®tal Activltees. A comparison of the Town's government -wide revenues and expenditures is not available as this is the Town's first year to implement government -wide financial statements, therefore, prior year amounts are not available. However, an analysis of governmental fund revenues and expenditures has been presented in this discussion and analysis and comparative analysis of goverment -wide revenues and expenditures will be presented in the subsequent years' reports when prior year data is available. 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, unreserved 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 Governmental funds reported by the Town include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds. 19 As of the end of the current fiscal year the Town's governmental funds reported combined ending fund balances of $9,154,831, an increase of $2,413,947 in comparison with the prior year. Approximately 44% of this total amount ($4,037,863) constitutes general fund balance, which is available for contribution to the designated, undesignated and reserved fund balance. At fiscal year-end 2002-2003 fund balances were as follows: Fund Increase (Decrease) Balance From 2001-02 General Fund $ 4,037,863 $ (774,507) Excise Tax Fund 1,912,404 1,9125404 GO Debt Service Fund 647233 125,385 Eagle Mtn. Debt Service Fund 7902713 (249,784) Municipal Property Corporation Fund 850,284 8509284 Capital Projects Fund (414,432) Nonmajor Governmental Funds 1,499,334 9643597 The general fund is the chief operating fund of the Town of Fountain Hills. At the end of the current fiscal year, the fund balance of the general fund was $4,037,863, while total fund balance reached $9,154,831. As a measure of the general f rod's liquidity, it may be useful to compare both general fund balance and total fund balance to total fund expenditures. General fund balance represents 35 percent of total general fund expenditures, while total fund balance represents 58 percent of that same amount. The fund balance of the Town of Fountain Hills' general fund decreased by $(774,507) during the current fiscal year. Key factors in this change are as follows: ♦ The General Fund transferred $1,535,000 (0.4% of the total local rate) of local sales tax revenues to the Excise Tax fund to establish a dedicated fund for land preservation and downtown development. In FY2003 a separate fund was established (Excise Tax) to directly record the dedicated sales tax. ♦ The Council enacted an increase in the local sales tax rate of 1% on April 1, 2003 (increasing FY03 revenue by $623,275) to primarily fund fire and emergency medical service operations. The rate increase will be repealed if a new fire district is formed or the Town is successful in adopting a primary property tax. ♦ Intergovernmental revenues of the general fund increased by $207,244 as a result of a new revenue source from the Arizona Department of Insurance for fire insurance premium taxes. This source of revenue became available when the Town assumed fire operations in FY2001-2002. ♦ The General Fund was reimbursed by bond proceeds for the construction of a new Community Center. The bond proceeds were previously unavailable due to a lawsuit between the Town and the trustee but were recovered in August 2002 ($1,2569178). ♦ The increases in fund balance were offset by an increase in annual expenditures of $2A million for fire and emergency medical services that the Town assumed from the former Fire District. 20 ® A Budget Reduction Plan was implemented in February 2003 to reduce expenditures due to the declining revenues and the addition of a fire department that results in a savings of approximately $1.5M during FY2003. Total annual savings is $2.8M. The Excise Tax Fund is a dedicated portion of the local sales tax that can only be used for debt retirement of a Municipal Property Corporation bond for open space and development of the downtown area. The fund balance as of June 30, 2003 is $1,912,404; the annual debt service payment is $607,4111 The Highway User Revenue Fund is required by state statute to track the state allocation of gasoline taxes and other state revenues shared with local governments and required to be used for transportation purposes. Revenue in this fund increased $51,425 (4%) in fiscal year 2003 due to the increase in state shared revenues. Expenditures decreased $733,478 from the prior year with the absence of a transfer from the general fund and implementation of a Budget Reduction Plan in February, 2003. Other govenunental funds of the Town include the Development Impact Fees Fund which includes governmental impact (development) fees for streets and highways, parks and recreation, law enforcement, general government and open space. This is a restricted fund and may only be appropriated for the particular purpose for which they were imposed. The fund balance as of June 30, 2003 in this fund is $1,098,851; expenditures for FY 2003 were $30,407 and $80,953 in FY 2002. All nonmajor governmental funds of the Town are combined into one column on the governmental fund statements. The Town's annual budget is the legally adopted expenditure control document of the Town. Budgetary comparison statements are required for Lite General Fund and all major special revenue funds and may be found on pages 34 - 35. These statements compare the original adopted budget, the budget if amended throughout the fiscal year, and the actual expenditures prepared on a budgetary basis. In fiscal year 2002-2003 significant reductions in expenditures were made in order to offset the cost for providing municipal fire and emergency medical services without a funding source. The annualized expenditure reductions in the departments totaled $2,758,000 and were as follows: $ 1,028,695 General Government 894,950 Public Safety 546,170 Culture and Recreation 122,640 Public Works 165,545 Streets and Highways 21 General Fund revenues of $11,979,151, on a budgetary basis, exceeded budgeted revenues of $11,456,600 by $522,551 while budgetary basis expenditures of $11,377,900 were only 81% of budgeted expenditures (savings of $2,624,712). The excess of revenues over budgeted revenues is primarily due to the increase in the local sales tax rate, the new revenue source of fire insurance premium tax and vehicle license taxes. The increased taxes were offset by the decrease in intergovernmental revenues. The Town anticipated a transfer from the County of residual Fire District assets which were transferred on July 7, 2002 but recorded during FY2001-2002. Reduced expenditures were a result of the Budget Reduction Plan that was adopted by the Council in December and implemented in February, 2003, Capital Asset and Debt Administration The Town's capital assets for its governmental activities as of June 30, 2003 amount to $40,642,940 (net of accumulated depreciation), a decrease of 2.7%. For government -wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. See Section 3.13.3 in the Notes to the Financial Statements for further information regarding capital assets. The Town recorded its capital assets as part of the general fixed asset account group in past years and in the appropriate funds as they were acquired or constructed. Capital assets include land, buildings and improvements, machinery and equipment, roads and improvements, vehicles, office and computer equipment. With the implementation of GASB 34 the Town reduced the governmental assets by the appropriate accumulated depreciation amount of $4,129,433. During fiscal year 2002-2003 the annual depreciation expense was $1,145,159; decreases of $1,031,377 were recorded for assets with a life of less than five years and a valueless than $10,000. There were only two additions to capital assets during the fiscal year for a total of $31,857: ♦ The Town contributed to a Veterans Memorial in Fountain Park; the first phase consisted of the installation of three flag poles, and a concrete pad upon which a piece of military hardware will be placed. ♦ The Community Center and Parks and Recreation Departments were consolidated during FY03 to facilitate program registration and facility use through the Community Center. The former break room in the Community Center was converted into offices through the use of modular furniture and the Parks and Recreation Department moved into the center. 22 The following table provides a breakdown of the capital assets of the Town at June 30, 2003, Capital Assets at June 30, 2003 (Net of depreciation) Governmental Activities Percent 2003 2002 Change Land $ 23,5715668 $ 239571,668 % Buildings and improvements 955145951 %720,003 (2.1)% Improvements other than buildings 5,7115469 6,054,208 (5.7)% Infrastructure 377,221 3855181 (2.1)% Machinery/Equipment 607,395 694,386 (12.5)% Office Equipment/Computers 121,105 226,490 (46.5)% Vehicles 739,131 141045306 (33.1)% $ 40.642.940 $ 41,756,242 (2.7)% At the end of the current fiscal year, the Town of Fountain Hills had total long-term obligations outstanding of $28,974,002 with no debt issued during the year. Of the outstanding debt, $12,585,000 is general obligation bonds backed by the full faith and credit of the Town. An additional $4,765,000 are special assessment bonds that are backed by a guaranteed investment contract with the developer of the district property. All other outstanding debt is secured by pledges of specific revenue sources of the Town. The State imposes certain debt limitations on the Town of six percent (6%) and twenty percent (20%) of the outstanding assessed valuation of the Town. The Town available debt margin at June 30, 2003 is $16,643,114 in the 6% capacity and $54,852,046 in the 20% capacity. Additional information on the debt limitations and capacities may be found in the statistical section of this report (page 84), 23 The following schedule shows the outstanding debt of the Town (both current and long -tern) as of June 30, 2002 and 2003. Further detail on the Town's outstanding debt may be found in Note 3 on pages 49 - 50, Outstanding Debt Governmental Activities Percent 2003 2002 Change General Obligation Debt $ 119865,000 $ 127600,000 (5.8)% Highway User Revenue Bonds 7205000 810,000 (11.1)% Special Assessment Debt 199365 22,593 (14.3)% Community Facilities District Debt 45765,000 4,905,000 (2.9)% Municipal Property Corporation Debt 11,430,000 119855,000 (3.6)% Compensated Absences 1744637 2754626 (36.6)% $ 28,974,002 $ 30,468,219 (4.9)% The Town currently maintains a rating on its general obligation debt of Aa3 from Moody's Investor Services. The rating was assigned a negative outlook in April 2003 due to concerns regarding the Town's financial position and reserve levels that had been published in the FY 2002-2003 annual budget. However, with the implementation of the Budget Reduction Plan the actual general fund reserve balance as of June 30, 2003 is $4,037,863. Additionally, in May, 2003 the Town Council adopted a fund balance policy to establish levels of reserves sufficient to ameliorate effects of future economic fluctuations and legislative actions. Economic Factors and Next Year's Budgets and Rates Fountain Hills, as well as ali other Arizona cities, remains dependent on state shared revenues (257o) and local sales taxes for resources (50°/u). These revenue sources are economically sensitive taxes and subject to slowdowns in the economy and legislative appropriations. Fountain Hills' economic activity has remained fairly stable during the national recession and is expected to grow at a moderate pace over the next year. The low interest rates continue to fuel the housing market and Fountain Hills still has high -end properties that are being developed for custom homes. 24 The Town is committed to building cash reserves over the next few years, both for financial stability and anticipation of the capital and ongoing operational needs of the community. Fiscal year 2003-2004 budgeted general fund expenditures are $515,000 less than revenue; the surplus will be added to the prior year fund balance, none of which was appropriated for next fiscal year. The adopted fiscal year 2003-2004 budget is $18,658,981, up 14% from 2002 actual, which includes capital projects of $2,089,600. The budget for fiscal year 2003-2004 also includes: Conservative economic forecast and limited revenue growth ® Estimated expenditures are based on zero based approach for all departments ® Level of service based on implemented budget reduction plan ® Funding of general fund reserves to restore financial stability ® Capital projects are funded with "pay-as-you-go" resources This financial report is designed to provide a general overview of the Town°s finances for all of those with an interest in the government's finances and to demonstrate accountability for the use of public funds. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to: Town of Fountain Hills Accounting Department P.O. Box 17958 Fountain Hills, AZ 85269 (480) 837-2003 Or visit our website at: http://www.fh.az.gov 25 THIS PAGE BLANK 26 27 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2003 Assets Governmental Activities as and equivalents $ 13,780,485 Cash with paying agent 1,606,741 Receivables, net Accounts receivable 337,722 Taxes receivable 73,993 Intergovernmental receivable 917,519 Special assessments receivable 7,398 Inventories 63364 Prepaid items 71,560 Capital assets Non -depreciable 23,571,668 Depreciable (net) 17,071,272 Total assets 57,444,722 Liabilities Accounts payable 409,108 Accrued wages and benefits 1213734 Interest payable 780,180 Intergovernmental payable 1453029 Deposits payable 26,775 Due to developers 4,4353000 Matured debt principal payable 19390,000 Noncurrent liabilities Due within one year 134843604 Due in more than one year 27,489398 Total liabilities 36,2814828 Net assets Invested in capital assets, net of related debt 11,843,575 Restricted for Highways and streets 3065565 Debt service 351605835 Capital outlay 1,098,851 Other 23114,919 Unrestricted 2,638,149 Total net assets $ 21,162,894 The notes to the fmancial statements are an integral part of this statement. N TOWN OF FOUNTAIN HILLS, ARIZONA BALANCESHEET GOVERNMENTALFUNDS JUNE 30, 2003 General Eagle Municipal Nonmajor Obligation Mountain Property Capital Governmental General Excise Tax Debt Service Debt Service Corporation Projects Funds Totals Assets Cash and equivalents $ 39780,249 $ 1,8062942 $ 503679 $ 5,5233577 $ 1,1162540 $ - $ 155022498 $ 13,7807485 Cash with paying agent - - 11058,874 - 4392956 - 1072911 126062741 Accounts receivable 54,052 - - - - - - 54,052 Taxes receivable 137571 - 503663 %759 - - - 739993 Intergovernmental receivable 802,979 - - - - - 114,540 917,519 Special assessments receivable - - - - - - 75398 7,398 Due from other funds - 1055462 - - - - 223 1055685 Inventories 65364 - - - - - - 63364 Prepaid items 70,104 - - - - - 11456 71,560 Total assets $ 4,727,319 $ 1,912,404 $ 1,160216 $ 5,533,336 $ 1,556,496 $ - $ 1,734,026 $ 16,623,797 Liabilities and Fund Balances Liabilities Accounts payable $ 3095104 $ - $ - $ - $ - $ - $ 10%004 $ 4092108 Accrued wages and benefits 103,086 - - - - - 187648 121,734 Interest payable - - 323,874 156,675 281,212 - 18,419 7805180 Intergovernmental payable 145,029 - - - - - - 145,029 Due to other funds 105,462 - - - - - 223 105,685 Deferred revenue - - 37,109 109948 - - 7,398 55,455 Deposits payable 26,775 - - - - - - 26,775 Due to developers - - - 4,4353000 - - - 454355000 Matured debt principal payable - - 735,000 140,000 425,000 - 90,000 1,390,000 Total liabilities 6894456 110954983 41742,623 706,212 - 234,692 74468,966 Fund balances Unreserved 450372863 1,9121404 643233 7903713 8503284 - - 72655,497 Unreserved, reported in nonmajor Special revenue funds - - - - - - 3909333 390,333 Debt service funds - - - - - - 102150 10,150 Capital projects funds - - - - - - 190987851 1,098.951 Total fund balances 4,037,863 1,912,404 64233 7909713 850284 - 11499,334 9,154.831 Total liabilities and fund balances $ 4,727319 $ 1,912,404 $ 1.160216 $ 5.533,336 $ 19556,496 $ - $ 1,734,026 $ 16,623,797 The notes to the financial statements are an intergral part of this statement. 30 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS JUNE 30, 2003 Fund balances -total governmental funds $ 9,154,831 Amounts reported for governmental activities in the statement of net assets are different because: Property taxes not collected within 60 days subsequent to fiscal year-end are deferred in the governmental funds. 55,455 Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets 445886,155 Less accumulated depreciation (4,243,215) Capital assets used in governmental activities 40,642,940 Other long-term assets are not available to pay for current -period expenditures and are not susceptible to accrual. 2835670 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds. General obligation bonds Revenue bonds Special assessment debt with government commitment Community facilities district bonds payable Compensated absences Net assets of governmental activities The notes to the financial statements are an integral part of this statement. 31 (12,585,000) (113430,000) (193365) (4,765,000) (174,637) $ 21.162.894 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTALFUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Revenues Taxes Sales taxes Property taxes Franchise taxes Intergovernmental Fines and forfeitures Licenses and permits Charges for services Rents and royalties Contributions and donations Special assessments Investment earnings (loss) Other Total Revenues Expenditures Current General government Public safety Highways and streets Culture and recreation Community development Debt Service Principal retirement Interest on long-term debt Capital outlay Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year General Obligation General Excise Tax Debt Service Eagle Mountain Debt Service Municipal Property Corporation Capital Projects Nonmajor Governmental Funds Totals 683765 - 13383,019 4583288 - - - 1,910,072 1523542 - - - - - - 152,542 4,740,758 - - - - - 195709700 653112458 195,091 - - - - - - 1953091 15308,747 - - - - - - 15308,747 175,112 - - - - - 635,300 810,412 1885745 - - - - - - 188,745 102000 - - - - - 117,200 1277200 47302 47302 (533214) 7,880 - (1955647) - 212165180 1,610 17976,809 140,733 - - - 7,410 148,143 119979,151 7,880 19383,019 2624641 - 2,216,180 2,336,522 18,185,393 33225,928 - - 50,000 - 125239 3%407 333187574 51145,217 - - - - - 2%275 5,174,492 1,198,080 12198,080 15791,368 - - - - - 249048 178155416 172155387 - - - - - - 1,2155387 - - 735,000 140,000 4253000 - 93,228 13393,228 - - 648,347 3225425 5663433 23397 37,240 15576,842 799427 79 427 11,377,900 1 383,347 5129425 9919433 149636 114917705 159771,446 601,251 70 328) 249 784 991 433 27201.544 844.817 2.4131947 1,256,178 2,511,936 125,713 - 1,841,717 - 246,000 5,981,544 (2.631.936) 607 412 - 2 615 976 (126.220) (5,981.544) 1,375q758 1,904,524 125,713 - 1,841,717(2,615,976 1194780 (774,507) 1,912,404 125,385 (249,784) 8503284 (4145432) 9647597 2,413,947 4,812,370 61152 1,0409497 - 4149432 534,737 6,740,884 $ 4,037,863 $ 1.912.404 $ 64.233 $ 790713 $ 850,284 $ - $ 1.499,334 $ 9,154,831 The notes to the financial statements are an intergral part of this statement. 32 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES GOVERNMENTALFUNDS FOR THE FISCAL YEAR ENDED NNE 305 2003 Net change in fund balances - total governmental funds $ 25413,947 Amounts 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. Expenditures for capital assets 31,857 Less current year depreciation (1,145,159) Excess capital expenditures over depreciation (1,1134302) Some revenues reported in the statement of activities do not provide current financial resources and therefore are not reported as revenues in governmental funds. Court fines 202,349 The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to govemmemal 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 assets. The issuance of long- term debt increases long-term liabilities on the statement of net assets and the repayment of principal on long-term debt reduces long-term debt on the statement of net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when the debt is first issued, whereas these items are deferred and amortized over the tent of the long-term debt in the statement of activities. Principal payments on long-term debt 1,393,228 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. Net increase in compensated absences 100,989 Bad debt expense (709917) Change in net assets of governmental activities $ 2.926.294 The notes to the financial statements are an integza] part of this statement. 33 TOWN OF FOUNTAIN HILLS, ARIZONA GENERALFUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED DUNE 30, 2003 Original and Final Variance with Final Budget Actual Budget Revenues Taxes $ 4,430,000 $ 5,273,179 $ 8435179 Intergovernmental 5,3589000 4,74%758 (617,242) Fines and forfeitures 2609000 1955091 (64,909) Licenses and permits 8702000 1,3085747 4385747 Charges for services 205,000 1755112 (2%888) Rents and royalties 1367600 1885745 525145 Contributions and donations - 1%000 1%000 Investment earnings (loss) 1503000 (53,214) (2033214) Other 47,000 1409733 93,733 Total Revenues 11145600 11,979.151 5224551 Expenditures Current General government Mayor and Town Council 64,660 66,272 (15612) Magistrate Court 3273470 278,915 485555 General and Administrative 3,3323955 25851,202 481,753 Undesignated Reserves 859,793 - 8595793 Contingency 47.500 29,539 174961 Total general government 4,632,378 39225,928 1,4064450 Public safety Building Safety 501,700 37%880 121,820 Town Marshal 226583380 2544%402 217,978 Fire Department 24361,270 2.324,935 36 335 Total public safety 54521,350 5,145,217 376,133 Culture and recreation Parks and Recreation 7275850 62%752 1075098 Desert Vista Park 495800 42,143 71657 Golden Eagle Park 31 %190 278,334 31,856 Fountain Park 359,300 288,854 703446 Four Peaks/Palisades Court 1265330 110,359 15,971 Civic Center 6604704 450,926 209,778 Total culture and recreation 2,2344174 1,791368 442,806 Community development Community Development 4093510 272,798 136,712 Engineering Department 14205,200 9424589 262.611 Total community development 1,614,710 192154387 399,323 Total Expenditures 14,0029612 119377,900 2,6249712 Excess (deficiency) of revenues over expenditures (2,54690121 601,251 3.147,263 Other financing sources (uses) Transfers in 1,137,300 11256,178 118,878 Transfers out (1,075,000) (2,631,9361 (19556,9361 Total other financing sources (uses) 62,300 (1.375,7581 (1,438,0581 Net change in fund balances (2,483,712) (7743507) 197099205 Fund balances, beginning of year 2,4834712 44812370 2,3289658 Fund balances, end of year $ - $ 4,037,863 $ 4,037.863 The notes to the financial statements are an integral part of this statement TOWN OF • �ARIZONA EXCISE TAX FUND TATEMENT OF REVENUES. EXPENDITURES. r CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 302003 Revenues Investment earnings Total Revenues Expenditures Current General government Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Final Budget Actual Budget 7,880 T880 1,822,700 - 1.822,700 11822,700 - 1,822,700 0,822,700) 7.880 1,830,580 1,075,000 2,511,936 1,436,936 (605,000) (607Al2) (2,412) 470,000 1,904,524 144344524 (1,352,700) 1,9125404 33265,104 1.352,700 - (1,352,700) $ $ 1,912,404 $ 1,912,404 The notes to the financial statements are an integral part of this statement. 35 THIS PAGE BLANK 36 TOWN OF s MWIM• ENDEDFISCAL YEAR JUNE 30,2003 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity with U.S. generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A summary of the Town's more significant accounting policies follows. The Town is a municipal government that is governed by a separately elected governing body. It is legally separate from and fiscally independent of other state and local governments. The accompanying 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. Included within the reporting entity: The Eagle Mountain Community Facilities District and the Cottonwoods Improvement 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 for District 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. 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. For financial reporting purposes, transactions of the MPC are combined together and included as if they were part of the Town's operations. The government -wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. The effect of interfund activity has been removed from these statements. Governmental activities are normally supported by taxes and intergovernmental revenues. 37 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED TUNE 30, 2003 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 and other items not properly 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 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 provider have been met. 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, except expenditures related to compensated absences and claims and judgments, which are recorded only when payment is due. However, since debt service resources are provided during the current year for payment of general long- term principal and interest due early in the following year, the expenditures and related liabilities have been recognized in the Debt Service Funds. Property taxes, intergovernmental grants and aid, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the govermnent. • O • . i iIN Am WI M P 1 it The Town reports the following major governmental funds: The Generad Fund is the TOWn's primary operating fund. It accounts for all financial resources of the Town, except those required to be accounted for in another fund. The Excise Tax Fund accounts for the portion of Town sales tax reserved by the Town Council for special projects including Town beautification and economic development. The General Obligation Debt Service Fund accounts for the Town's property tax revenues received to pay the debt service of the Town's general obligation bonds. The Eagle Mountain Debt Service accounts for the property tax revenues received to pay the debt service of the Eagle Mountain Community Facilities District component unit. The Municipal Property Corporation Debt Service Fund accounts for the revenues received to pay the debt service on MPC revenue bonds. The Capital Projects Fund accounts for the capital improvements to various projects of the Town. As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements. Amounts reported as program revenues include 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Intemally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are available for use, for governmental activities it is the Town's policy to use restricted resources first, then unrestricted resources as they are needed. NOM 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. 39 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30, 2003 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. 2. Receivables All trade and property taxes receivables are shown net of an allowance for uncollectibles. Maricopa County levies real property taxes on or before the third Monday in August that become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May. However, a lien against real and personal property assessed attaches on the first day of January preceding assessment and levy thereof. 3. Short-term Interfund Receivables/Payables During the course of operations, individual funds within the Town's pooled cash accounts may borrow money from the other funds within the pool on a short-term basis. These receivables and payables are classified as "due from other funds" or "due to other funds" on the balance sheet of the fund financial statements and are eliminated in the preparation of the government -wide financial statements. 4. Inventories and Prepaid Items Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the first-in/first-out (FIFO) method.. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. Cif] TOWN OF FOUNTAIN HILLS, ARIZONA ENDEDFISCAL YEAR 0 00 Capital assets, which include property, plant, and equipment, 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 more than $10,000 and an estimated useful life in excess of one year. Property, plant and equipment purchased or acquired is carried at historical cost or estimated historical cost. Contributed assets are recorded at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. General infrastructure assets acquired prior to July 1, 2002 are not reported in the basic financial statements. Those assets will be transitioned in over the next four fiscal years in accordance with GASB Statement No. 34. Depreciation on all assets is provided on a straight-line basis over the following estimated useful lives: Buildings 50 years Improvements other than buildings 20 years Infrastructure 50 years Furniture, machinery and equipment 5 years Vehicles 5 years The liability for compensated absences reported in the government -wide statements consists of unpaid, accumulated leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. In the government -wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. 41 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 307 2003 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 on 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. 8. Net Assets In the govenunent-wide financial statements, net assets are reported in three categories: net assets invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. Net assets invested in capital assets, net of related debt is separately reported because the Town reports all Town assets which make up a significant portion of total net assets. Restricted net assets account for the portion of net assets restricted by parties outside the Town. Unrestricted net assets are the remaining net assets not included in the previous two categories. 9. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 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: 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. 42 u��rr�ry:r��:r i�aRy�y�i+►�tiii . 1% a 9 1 o+ 3. State law requires that, prior to April 15 the Economic Estimates commission provides the Town with a final expenditure limit for the coming fiscal year. 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 general-purpose financial statements to total expenditures for reporting in accordance with the State's uniform expenditure reporting system (A.R.S. §41-1279.07), 4. By Arizona Constitution, expenditures may not legally exceed the expenditure limitation described below of 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. Legal budgets are adopted 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 carry-over 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. No supplementary budgetary appropriations were necessary during the year. Expenditures exceeded appropriations in the following funds: Amount of Overexpenditure General Fund: Mayor and Town Council $ 1,612 Municipal Property Corporation Fund 6,433 VJRF Debt Service Fund 223 43 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30, 2003 C. Deficit Fund Equity A deficit fund balance in the amount of $223 was reported in the HURF Debt Service Fund. The deficit was due to unexpended fiscal charges. The Town plans to transfer additional funds from the HURF Fund in the upcoming fiscal year to cover the deficit. NOTE 3 -DETAILED NOTES ONALL FUNDS A. Change in Accounting Policy The Town implemented GASB 34 for the fiscal year ended June 30, 2003. The following adjustments were made in order to properly state beginning net assets using the full accrual method of accounting. Fund balances at June 30, 2002, govenunental fund types $ 6,740,884 GASB Statement No. 34 adjustments: Deferred property tax revenue - prior years Net capital assets Accounts receivable - court General obligation bonds Revenue bonds Special assessment debt with government commitment Community facilities district bonds payable Compensated absences Net assets of governmental funds at July 1, 2002 59,756 41,756,242 147,936 (13,4105000) (11,855,000) (229592) (4,905,000) (275,626) $ 18,236.600 Deposits and investments at June 30, 2003 consist of the following: Deposits Cash on hand $ 1,360 Cash in bank 439,449 Cash on deposit with paying agent 1,606,741 Investments Money Market Mutual Fund 90,775 U.S. Government Securities 19,365 State Treasurer's Investment Pool 6,589,915 Cash on deposit with trustee 646399621 Total cash and investments 15,3871226 Cash on deposit with paying agent (1.606.741) Total cash and equivalents $ 13.780,485 Deposlts -The Town's deposits at June 3Q 2003, were entirely covered by federal depository insurance or by collateral held by the Town's custodial bank in the Towns name. Investments -The State Board of Deposit provides oversight for the State Treasurer's pools, 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. In addition, the money market mutual fund is not subject to custodial credit risk. All other investments of the Town are uninsured and unregistered with the securities held by the counter party's trust department or agent in the Town's name. 45 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 303 2003 2. Receivables Court fines are recorded net of uncollectible amounts in the government -wide statements but are not recorded as a receivable in the fund statements because they do not meet the revenue recognition criteria for the modified accrual basis of accounting. The total receivable at June 30, 2003 was $354,587, which was reduced by $70,917 for uncollectible amounts for a net receivable balance at June 30, 2003 of $283,670, Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition 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 revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Delinquent property taxes receivables (General Obligation Debt Service Fund) $ 37,109 $ Delinquent property taxes receivables (Eagle Mountain Debt Service Fund) 10,948 Special assessments receivables (Nonmajor funds) 7398 Capital asset activity for the year ended June 3Q 2003 was as follows: Capital assets not being depreciated: Land I all wflg I I kil 1Ho•1 Capital assets being depreciated: Building and improvements Improvements other than buildings Infrastructure Furniture, machinery and equipment Vehicles Total capital assets being depreciated AA 4 Less accumulate for: Building and improvements Improvements other than buildings Infrastructure Furniture, machinery and equipment Vehicles Total accumulated depreciation Beginning Ending Balance Increases Decreases Balances $ 23,571,668 $ $ $ 23,571,668 23,571,668 23,571.668 10,080,070 10,080,070 8,491,441 315857 (1,031,377) 75491,921 397,976 397,976 1,518,647 1,518,647 148259873 1,825,873 22,314,007 31,857 {1,031,377) 21,314,487 (360,067) (205,052) - (565,119) (2,437,233) (374,596) 1,031,377 (1,780,452) (125795) (7,960) (209755) (597,771) (192,376) (790,147) (721,562) (36591751 (L086,7421 (4329,433) {1,145,159) 140319377 (4,243,215) 185184,574 (1.1132302) - 175071,272 47 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED DUNE 309 2003 Depreciation expense was charged to functions/programs as follows: Governmental activities General government $ 118,920 Public safety 365,146 Highways and streets 1169802 Culture and recreation 5449291 Total depreciation expense -governmental activities $ 1,145,159 C. Interfund Receivables, Payables and Transfers As of June 30, 2003 interfund receivable and payables were as follows: Due From General Fund Nonmajor Total Excise Tax Fund $ 105,462 $ - $ 105,462 Nonmajor Funds 223 223 $ 105 462 $ 223 $ 105,685 The above interfund receivables and payables are due to monthly sales tax allocations owed by the General Fund to the Excise Tax Fund and a deficit cash balance at year-end in a nomnajor fund. Interfund transfers for the year ended June 30, 2003 consisted of the following: Transfers From Capital Transfers To General Fund Excise Tax Projects Nonmajor Total General Fund $ - $ $ 1,255,958 $ 220 $ 1,2565178 Excise Tax 25511,936 2,511,936 GO Debt Service 1255713 125,713 MPC 607,412 1,234,305 15841,717 Nonmajor 120,000 1264000 246,000 $ 2.631,936 $ 607.412 $ 2.615,976 $ 126,220 $ 5,981,544 m TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30, 2003 The Capital Projects Fund recovered $2.1M from an investment made by the trustee for the Municipal Property Corporation (MPC). A portion of the recovery was transferred to reimburse the General Fund for the cost to complete the capital project that was to be constructed with bond proceeds. The remainder was transferred to the MPC for future debt payments. Residual proceeds from a general obligation bond for land preservation were transferred to debt service to retire the debt. During the 2002-03 fiscal year, local sales tax receipts were recorded in the General Fund which included a dedication portion that was transferred to the Excise Tax Fund. In future years the dedicated portion of the local sales tax will be recorded directly into the Excise Tax Fund. The General Fund recorded a donation that was restricted for furniture, fixtures and equipment for the new community center. This was transferred from the General Fund to a special revenue fund for that purpose. The nonmajor transfer of $126,000 was a transfer from HURF to HURF Debt Service for the annual payment on HURF revenue bonds. The Town leases office space under the provisions of a long-term lease agreement classified as an operating lease. Rental expenditures under the terms of the operating lease totaled $375,247 for the year ended June 30, 2003. The operating lease term is on a month -to -month basis. The Town has long -teen bonds and loans payable issued to provide funds for the acquisition and construction of major capital facilities. The Town has also issued debt to refund earlier obligations with higher interest rates. The debt is being repaid by various debt service funds. Compensated absences are paid by the applicable fund where each employee is regularly paid, primarily the General Fund. Special Assessment districts are created only by petition of the Town Council by property owners within the District areas. The Cottonwoods Improvement District was created so the Town could fund the improvements. Each of the 54 homeowners within the District has been assessed taxes by the Town for repayment of the bond. In case of default, the Town has the responsibility to cover delinquencies of special assessment bonds with other sources until foreclosure proceeds are received. m TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED .TUNE 30, 2003 Community facilities districts (CFDs) are created only by petition to the Town Council by property owners within the District areas. As board of directors for the District, the Town Council has adopted a formal policy that CID debt will be permitted only when the ratio of full cash value of the District property (prior to improvements being installed), when compared to proposed District debt, is a minimum of 3 to 1 prior to issuance of debt and 5 to 1 or higher after construction of improvements. These ratios are verified by an appraisal paid for by the District and administered by the Town. In addition, cumulative debt of all CFDs cannot exceed 5 percent of the Town's secondary assessed valuation, Changes in long-term obligations for the year ended June 30, 2003 are as follows: Due within July 1, 2002 Increases Decreases June 30, 2003 One Year Governmental Activities: General obligation bonds $ 133410,000 $ - $ (825,000) $ 125585,000 $ 8455000 Revenue bonds 11,855,000 (4255000) 11,430,000 425,000 Special assessment debt with government commitment 22,592 (31227) 19,365 35228 Community facilities district bonds payable 4,9053000 (140,000) 4,7655000 15%000 Compensated absences 2759626 397 697 (498,686) 174,637 614376 $ 30 ,468 218 $ 397.697 $ (1,8919913) $ 28.974,002 $ 1,484,604 Debt service requirements on long-term debt at June 30, 2003 are as follows: Governmental Activities Year Ending June 30 Principal Interest 2004 $ 1,4239228 $ 1,48%640 2005 1,508,228 1,4193829 2006 15583,228 1,344,319 2007 1,673,227 1,265,927 2008 1,7885227 1,182,207 2009-13 85638,227 45596,441 2014-18 7,735,000 2,473,668 2019-23 4,4504000 46L006 $ 28,799,365 $ 14,233,037 LY17 i a IV6 WA 1 • ' . a r t Ir NOTE 4 -OTHER INFORhdATION The Town of Fountain Hills, Arizona, 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 $13,000,000 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. The Arizona Municipal Risk Retention Pool is structured such that member premiums are based on an actuarial review that will provide adequate reserves to allow the pool to meet its expected financial obligations. The pool has the authority to assess its members additional premiums should reserves and annual premiums be insufficient to meet the pool's obligations. The Town is also insured by Arizona Municipal Workers Compensation Fund for potential worker related accidents. Accunbulated Sick Leave -Sick leave benefits provide for ordinary sick pay and are cumulative but do not vest with employees and, therefore, are not accrued. Unvested accumulated sick leave of Town employees at June 30, 2003, totaled $293,731. Lawsuits -The Town is a defendant in various lawsuits. In the opinion of the Town's attorney the outcome of these lawsuits is not presently determinable. All full-time employees of the Town, except participants in the Arizona Public Safety Personnel Retirement System, 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 the year ended June 30, 2003 was $2,922,909. The Town's total payroll was $3,950,930. 51 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30, 2003 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 participant's benefits that may be allocated to such participant's account. All non -peace officer 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 three years of service. 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 contribute 11 % of covered earnings. During fiscal year 2002-03, the Town's required and actual contributions amounted to $321,520. The employees' contributions totaled $321,520. 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 2002-03 or as of the close of the fiscal year. Public Safety Personnel Retirement System (PSPRS) Plan Description -The Town contributes to the Public Safety Personnel Retirement System (PSPRS), an agent multiple -employer, public employee retirement system that acts as a common investment and administrative agent to provide retirement and death and disability benefits for public safety personnel who are regularly assigned hazardous duty in the employ of the State of Arizona or a political subdivision thereof. All benefit provisions and other requirements are established by State statute. The Public Safety Personnel Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for PSPRS. That report may be obtained by writing to Public Safety Personnel, 1020 E. Missouri Ave., Phoenix, AZ 85014 or by calling (602) 255-5575. Funding Policy -Covered employees are required to contribute 7.65 percent of their annual salary to the PSPRS. The Town is required to contribute the remaining amounts necessary to fund the PSPRS, as determined by the actuarial basis specified by statute. The current rate is 10.71 percent of annual covered payroll. 52 TOWN OF •HILLS, J ENDEDFISCAL YEAR 12003 Annual Pension Cost - During Lite year ended June 30, 2002, the Town of Fountain Hill's annual pension cost of $61,102 for police was equal to the Town of Fountain Hill's required and actual contributions. The required contribution was determined as part of the June 30, 2001 actuarial valuation using an entry age actuarial funding method. Significant actuarial assumptions used in determining the entry age actuarial accrued liability include (a) a rate of return on the investment of present and future assets of 9.0% per year compounded annually, (b) projected salary increases of 6.5% per year compounded annually, and (c) additional projected salary increases of 0.0% to 3.0% per year attributable to seniority/merit. The actuarial value of the Town of Fountain Hill°s assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period. The Town of Fountain Hill's unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2002, was 20 years. The preceding methods comply with the financial reporting standards established by the Governmental Accounting Standards Board. !IZ�7tl Fiscal Year Annual Pension Ended June 30, Cost (Ark,) 2000 $ 287639 2001 57,277 2002 61,102 Percent Net Pension Contributed Obligation 100.0 % $ - 100.0 - 100.0 Additional historical trend information for the Town's PSPRS is disclosed on page 56. Historical trend information is presented in order for a reader to assess the progress made in accumulating sufficient assets to pay pension benefits as they become payable. 53 TffiS PAGE BLANK 54 55 TOWN OF FOUNTAIN HILLS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS Fountain Hills Police Over(Under) Entry Age funded AAL Valuation Actuarial Actuarial Over(Under) Annual as a Percentage Date Value of Accrued Percent funded Covered of Covered June 30 Assets Liability (AAL) Funded AAL Payroll Payroll 1996 $ 17,463 $ 16,084 108.6 % $ 1,379 $ 77,574 L8 % 1997 54,809 48,512 113.0 % 6,297 216,163 2.9 % 1998 1843135 125,791 148.7 % 58,344 3943005 14.8 % 1999 258,664 263,285 98.2 % (4,621) 4123182 (1.1)% 2000 375,860 401,167 93.7 % (25,307) 5563445 (4.5)% 2001 562,905 409,913 137.3 % 152,992 63%753 23.9 % 2002 591,957 557,666 106.1 % 34,291 549,166 6.2 % * Information prior to 1996 is not available. 56 i, • i �. i i :. i Statements i Schedules 57 YY71�Y7CU�711s1� G�3 Highway User Revenue Fund (HURF) - accounts for the Town share of motor fuel tax revenues and lottery proceeds. Grants Fund -accounts for the activities of various grants and contributions received by the Town. II7D) �I1T. E 'i ►CC6 . HURF Debt Service -accounts for operating transfers received from the HURF special revenue fund to pay the debt service of the Street and Highway User Revenue Bonds, Cottonwoods Special Assessment -accounts for all special assessments received to pay the debt service of the Cottonwoods Special Assessment District, Development Fees Fund -accounts for development fees collected from developers restricted for projects approved by Council. 59 Assets Cash and equivalents Cash with paying agent Receivables, net Intergovernmental receivable Special assessments receivable Due from other funds Prepaid items Total assets TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 302 2003 Capi al Revenue Debt Service Projects Cottonwoods Nonm jor HURF Debt Special Development Govemmeatal HURF Grants Total Service Assessment Total Fees Funds $ 185,119 $ 2045296 $ 389A15 $ - $ 105881 $ 10,881 $ 151023202 $ 17502,498 - - - 1075911 - 1073911 - 1075911 114,540 - 114,540 - - - - 1147540 - - - - 7,398 7,398 - 77398 223 - 223 - - - - 223 1.456 - 1.456 - - - - 19456 $ 301,338 $ 204,296 $ 505.634 $ 107,911 $ ]8.279 $ 126.190 $ 1,102,202 $ 1,734,026 Liabilities and Fund Balances Liabilities Accounts payable $ 94,872 $ 12781 $ 96,653 $ - $ - $ - $ 31351 $ 1002004 Accrued wages and benefits 185648 - 18,648 - - - - 189648 Interest payable - - - 17,911 508 187419 - 18,419 Due to other funds - - - 223 - 223 - 223 Deferred revenue - - - - 79398 7,398 - 7,398 Matured debt principal payable - - - 90.000 - 90,000 - 90,000 Total liabilities 113,520 14781 115,301 108134 7,906 116.040 34351 234,692 Fund balances Unreserved 1874818 202,515 390,333 (2231 10,373 104150 19098,851 19499.334 Total fund balances 1879818 202515 390333 223 104373 109150 11098,851 1.499,334 Total liabilities and fund balances $ 301,338 $ 204,296 $ 505,634 $ 107 911 $ 18.279 $ 126,190 $ 1,102,202 $ 1,734,026 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES-NONMASORGOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED NNE 305 2003 Revenues Intergovernmental Charges for services Contributions and donations Special assessments Investment earnings Other Total revenues Capi al Special Revenue Debt Service Projects HI1RF Gravts Total $ 154269688 $ 144,012 $ 1,570,700 $ 31,775 - 31,775 - 117,200 117,200 298 298 7 410 74410 1,466,171 26L212 1,727,383 HURF Debt Service Cottonwoods Nomnajor Special Development Governmental Assessment Total Fees Funds $ - $ - $ - $ I,570,700 - - 6035525 635,300 - - - 117,200 4,302 47302 - 41302 179 179 1,133 15610 - 7,410 49481 4,481 604,658 2,336,522 Expenditures Current General government - - - - - - 302407 302407 Public safety - 299275 29,275 - - - - 297275 Highways and streets 1,1525353 45,727 1,198,080 - - - - 1,198,080 Culture and recreation - 24,048 247048 - - - - 24,048 Debt Service Principal retirement - - - 907000 3,228 93,228 - 93,228 Interest on long-term debt - - - 362223 %017 37,240 - 37,240 Capital outlay - 79,427 79,427 - 79,427 Total expenditures 1,152,353 17SA77 1,330,830 126,223 4,245 130,468 304407 14491,705 Excess (deficiency) of revenues over expenditures 313,818 82,735 3969553 (126,223 236 (1254987) 5742251 8444817 Other financing sources (uses) Transfers in - 12(1000 1205000 126,000 - 126,000 - 246,000 Transfers out (126,000 1 (2201 1( 264220 CIL6 220 Total other financing sources (uses) 126,000 1195780 6 220 126.000 - 126.000 119,78 Net change in fund balances 187,818 2022515 390,333 (223) 236 13 5743251 964,597 >. Fund balances, beginning of year - - - - 104137 109137 524,600 5344737 Fund balances, end of year $ 187.818 $ 202,515 $ 390.333 $ (223) $ 10,373 $ 105150 $ 110984851 $ 1,499,334 61 TOWN OF FOUNTAIN HILLS, ARIZONA GENERAL OBLIGATION DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED TUNE 30, 2003 Revenues Taxes Property taxes Investment earnings Total Revenues Expenditures Current General government Debt Service Principal retirement Interest on long-term debt Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 7,25Q,000 $ 1,383,019 $ 133,019 Mn (246501 1,252,650 1,383,019 130,369 101,250 101,250 735,000 735,000 - 655.000 648,347 6,653 11491,250 1383,347 1074903 (23846001 (328) 2389272 125,7] 3 125,7] 3 125,713 125,713 (238,600) 125,385 3635985 238.600 (61,152) (299,752) $ $ 64,233 $ 64.233 62 TOWN OF FOUNTAIN HILLS, ARIZONA EAGLE MOUNTAIN DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 305 2003 Original and Final Variance with Budget Actual Final Budget Revenues Taxes Property taxes $ 490,000 $ 458,288 $ (31,712) Investment earnings (loss) (195.6471 (19546471 Total Revenues 490,000 262,641 (227,3591 Expenditures Current General government Debt Service Principal retirement Interest on long-term debt Total Expenditures Excess (deficiency) of revenues over expenditures Net change in fund balances Fund balances, beginning of year Fund balances, end of year - 50,000 (50,000) 140,000 140,000 - 1168179 3224425 845,754 11308,179 512,425 7954754 (818,179) (249,7841 568.395 (818,179) (2495784) 5685395 918179 1,040,497 222,318 $ $ 790.713 $ 790,713 TOWN OF FOUNTAIN HILLS, ARIZONA MUNICIPAL PROPERTY CORPORATION FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED NNE 309 2003 Expenditures Debt Service Principal retirement Interest on long -tens debt Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 4253000 $ 425,000 $ - 560,000 566,433 (64433) 985,000 991,433 (6,433) (9854000) (99L433) (64433) 985.000 1,841,717 856,717 9859000 118414717 856,717 - 850,284 8501284 $ $ 850.284 $ 850.284 TOWN OF FOUNTAIN HILLS, ARIZONA CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Revenues Investment earnings Total Revenues Expenditures Current General government Debt Service Interest on long-term debt Capital outlay Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 24100,000 $ 22162180 $ 1164180 22100,000 2216,180 116,180 - L2,239 (I2,239) - 29397 (27397) 720,000 - 7204000 720,000 14.636 705364 1,3809000 2201,544 821,544 (1,380,0001 (2,615.9761 (]235,976) (1380.0001 122615,976) (1123529761 - (4143432) (414,432) 414,432 414,432 TOWN OF FOUNTAIN HILLS, ARIZONA HURFFUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED TUNE 305 2003 Revenues Intergovernmental Charges for services Investment earnings Other Total Revenues Expenditures Current Highways and streets Total Expenditures Excess (deficiency) ofrevenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances and balances, beginning of year and balances, end of year Original and Final Variance with Budget Actual Final Budget $ 1,420,000 $ 114267688 $ 6,688 203000 31,775 11,775 2,000 298 (1,702) 7,410 7,410 11442,000 1,466,171 24,171 1.565.006 LI52.353 412.653 1,5654006 1152,353 412,653 (123,006) 3134818 4369824 249,000 - (249,000) (126,000) (126,000) 123,000 (126,000) (249,000) (6) 187,818 1872824 6 (6) $ $ 187 818 $ 187,818 TOWN OF FOUNTAIN HILLS, ARIZONA GRANTSFUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED DUNE 30, 2003 Revenues Intergovernmental Contributions and donations Total Revenues Expenditures Current General government Public safety Highways and streets Culture and recreation Capital outlay Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 94%900 S 1445012 $ (7963888) 117,200 117,200 940t900 261,212 (679,6881 750,000 - 750,000 111,900 29,275 82,625 755000 453727 2%273 124,000 243048 9%952 79,427 (79,427) 11060,900 178,477 882.423 (120,000) 82,735 2022735 12Q,000 12Q,000 - (2201 (2201 120,000 119.780 (2201 - 2027515 2025515 $ $ 2024515 $ 202.515 TOWN OF FOUNTAIN HILLS, ARIZONA HURF DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED NNE 30, 2003 Expenditures Debt Service Principal retirement Interest on long-term debt Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 9Q2000- 36,000 36,223 (223) 126,000 126223 (223) (126,000) (126,223) (223) 126,000 126.000 126 000 1264000 (223) (223) $ $ (223) $ (223) TOWN OF FOUNTAIN HILLS, ARIZONA COTTONWOODS SPECIAL ASSESSMENT FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Revenues Special assessments Investment earnings Total Revenues Expenditures Debt Service Principal retirement Interest on long-term debt Total Expenditures Excess (deficiency) of revenues over expenditures Net change in fund balances Fund balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 4,500 $ 4,302 $ (198) 179 179 4,500 4.481 (19) 3,228 1,272 4,500 3,228 1,017 4245 236 236 255 255 236 236 10,137 $ 10373 TOWN OF FOUNTAIN HILLS, ARIZONA DEVELOPMENT FEES FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Revenues Charges for services Investment earnings Total Revenues Expenditures Current General government Total Expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers out Total other financing sources (uses) Net change in fund balances and balances, beginning of year Fund balances, end of year Original and Final Variance with Budget Actual Final Budget $ 816,765 $ 603,525 $ (213,240) 59450 1,133 (58,317) 876,215 604,658 (271,557) 1.104,787 30,407 1,074,380 L1044787 30407 1,074,380 (2284572) 574 251 802,823 (383.100) 383.100 (3834100) 383,100 (611,672) 5749251 1,1853923 61 L672 524,600 (87,072) $ $ 1.098.851 $ 1,098,851 1 F, . 71 N 7 m � W 69 O t r O :-a G � o � U v� � F W r M O O M oo V --� rri O V V d' .--� N m 59 N a\ m Cr) 00 7 N �0 O ut 0, d' 00 O _ r� p 0\ N v� M 0\ O O �0 O •G 01 .-� V N 01 V) O ci y O d N M O � ON1 01 0\ N N 69 .-y N T Z CD O� cq d' O Y N 00 Vl Vl l0 N01 M [� T, O N 0\ N V) Vl V) 7 W d> M l� O N V b �c Vl V h p O �m N \o v M h 00 00 01 Nul O N 0 69 CN W~7 W N N v�i O O d' 0\ r� O rn vi rn C\ C) N m D1 .. � � M m i o0 0 00 OWE D a m oo m N O C, 00 N O O 7 CCC4444 �, y q `� O v� vi r� rn m rn 7 o0 W m a of 0, v oo r� O 3 'd " of o t� r O v oo rq r� o0 00 W 7 O N M M pp, r� C� N V O ON O M O .-y--� N N M M Vt V) 69 y O M N 7 h O M r+ W M 7 N S V1 1p V1 O M �! m N O r� 01 �o V'1 \o 00 M y 01 01 01 01 0\ 01 O O O O W D, D1 41 T N NO N N 7 p p1 V Vl 00 � N r c0 D\ W ray N V O Q\ W l� N h V Vl h Ol N M M 00 rz DO °J v^" o 0o a; ,ram" " -,^ ® -� .-• s9 '. N C� Vl N O\ V1 w � h y�y W oQ x W oo 0 b N V O M N M O Z y h M cn OO 7 F� Oi 44 tr0 O M O h Vl O w � itl W l0 V � N N �D l0 00 N M d' d' 7 vi vi 1p O M O iD 0p O M �O d' d' 00 N M M M d' iD h r fA TOWN OF FOUNTAIN HILLS, ARIZONA GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Sales Property Franchise Year Tax Tax Tax Total 1994 $ $ 393,654 $ 945780 $ 488,434 1995 16,622 3579033 94,848 468,503 1996 1,610,116 336,000 78,345 2,0245461 1997 2,664,923 350,024 86,840 3,101,787 1998 2,920,084 302,375 1035748 3,326,207 1999 3,394,152 348,778 118,407 3,861,337 2000 43087,514 657,026 131,926 4,8769466 2001 4,923,174 190385891 125,982 6,088,047 2002 4,355,701 3,109,353 130,694 7,595,748 2003 5,051,872 1,910,072 152,542 7,114,486 76 TOWN OF FOUNTAIN HILLS, ARIZONA TOWN TRANSACTION PRIVILEGE (SALES) TAX COLLECTIONS BY INDUSTRY CLASSIFICATION FISCAL YEAR BASIS (UNAUDITED) 2003 Excise Tax Business Activity Category Collections Construction $ 1,203,706 Transportation/Utilities/Communication 590,446 Wholesale/Retail 1,930J 75 Restaurants/Bars 276,664 Fire, Insurance and Real Estate 205,849 Services 455,324 All Other Services Not Specified 188.654 $ 4.850,818 77 Percent of Total 24.8 12.2 % 39.8 % 5.7 % 4.2 % 9.4 % 3.9 % 100.0 % oF„ o 0 0 0 0 0 0 0 0 0 a .. o m " fa m N N CO o M � q N N a y06 H O Q 64 w v ro O O O O O O C h 0 0 O O O O O O 001 � 0 F O a Pvy� 00 rn c r� �c v v N 0� J, C:) vi �p rn b a O1 o4i a U W m M NC'A 00 7 V N V \o m M � W 1-r�1 U M N m m O N 00 , U O� F A U 69 O � b 0 O aW c E o 0 0 o m 0, 00 o n OG a o o v r-: F o o o, o, o o rn o, a a a rn p, U QI U ice+ W O o h b h 7 r� O1 OC\ �o W ON1 .�. s> O N m C) 00 N U > � omo Vi � � bm-i O 00 oho �c 7 7 C\ M r� 69 Obi Obi Obi C\ C� O O O O ON C\ ON CN O1 ON O O O O N N N N w TOWN OF FOUNTAIN HILLS, ARIZONA ASSESSED AND ESTIMATED ACTUAL VALUE OF PROPERTY (1) LAST TEN FISCAL YEARS (UNAUDITED) I �� iir•I,•:i� Ratio of Total Assessed Value Total Total Net to Total Tax Assessed Exempt Full Cash Estimated Assessed Estimated Year Value Amount Value Actual Value Value Actual Value 1994 $ 92,301,694 $ 4,918,347 $ 753,145,358 $ 903,774,430 $ 87,383,347 10.21 °/ 1995 995271,154 5,0825517 826,917,659 99253015191 94,288,637 10.00 % 1996 105,912,474 5,2625641 884,979,322 1506159753186 10036495833 9.97 % 1997 11858885547 63602,978 15002,546,459 15203,0553751 1125285,569 9.88 % 1998 14130775170 73355,989 %20859%752 1245057625502 13357213181 9.72 % 1999 170,258,614 93255,978 154675193,748 1,76056325498 16150025636 9.67 % 2000 198,224,776 8,5785615 1,713,02%238 2,0555635,086 1895646,161 9.64 % 2001 232,442,986 1252135849 1,997,5253319 25397,030,383 220X9J37 9,70 % 2002 26056355914 1324845185 2,240,7025344 2M8,8422813 247,151,729 9.69 % 2003 29%7435562 16,942,705 2556555229177 3,07856265612 28258005857 9.74 % SECONDARY Ratio of Total Assessed Value Total Total Net to Total Tax Assessed Exempt Full Cash Estimated Assessed Estimated Year Value Amount Value Actual Value Value Actual Value 1994 $ 9450475575 $ 5,2501741 $ 7643582,686 $ 9175499,223 $ 88,796,834 10.25 % 1995 1055660,296 55498,728 8665122,390 15039,346,868 10M61,568 10.17 % 1996 1095463,361 5,5193310 906,4953406 1,087,794,487 1033944,051 10.06 % 1997 123,0973961 6,7645555 1,03428923731 1,2413871,277 11653335406 9,91 % 1998 155,7295430 8,7855700 1,31719463863 1,5815536,236 1465943,730 9,85 % 1999 18555405741 10,5755923 1358350725952 %8995687,542 1745964,818 9.77 % 2000 22159225165 938943702 1588930165352 232663819,622 2125027,463 9,79 % 2001 253,2695562 143555,025 2,1545928,885 255855914,662 238,714,537 9.79 % 2002 28758915481 1752883615 254185235,666 2590%882,799 270,6022866 9.92 % 2003 34450473844 2056629614 258425849,050 35411,418,860 323,385,230 10.09 % (1) Arizona uses two types of property values for taxing purposes. Primary values are used to calculate primary property taxes which are collected to fund the maintenance and operation of school districts, community college districts, counties, cites, and state government. Secondary values are used to pay off secondary property taxes which are collected for such things as debt service (bonds), budget overrides and special districts. Source: Arizona Department of Revenue. 79 TOWN OF FOUNTAIN HILLS, ARIZONA PRIMARY AND SECONDARY TAXABLE PROPERTY ASSESSED VALUATION LAST TEN FISCAL YEARS (UNAUDITED) Assessed Assessed Assessed Assessed Valuation Valuation Valuation Valuation Tax Town of Fountain Hills Maricopa State of Year Fountain Hills School District Co un Arizona 1994 P $ 87,3839347 $ 87,353,865 $ 13,2965003,025 $ 219349,754,194 S 88,796,834 899208,873 1395049107,816 215748,0409198 1995 P 94,188,637 88,978,760 13,3029326,609 21,688,438,645 S 100,161,568 90,394,390 13,521,1743915 22,179,317,949 1996 P 100,649,833 95,155,307 13,493,736,826 22510%868,588 S 103,944,051 10I,137,745 14j 19,434,946 23,022,330,962 1997 P 1125285,569 101,5735954 13,975,668,204 22,8115158,500 S 116,3335406 104,881,097 145343,156,861 2393335678,475 1998 P 133,721,181 1135072,537 15,006,270,531 215001,0641273 S 146,9439730 117,144,929 15,723,498,194 22,33398619362 1999 P 190,102,361 134,6501036 17,463,875,533 2L670530013 S 212,415,476 147,884,952 18,676,830,848 22,5339348,150 2000 P 1895646,161 191,579,669 19,3625298,255 22,6455463,514 S 2129027,463 214,037,354 20,8775715,546 231547,348,817 2001 P 220,22%137 1925200,924 19,603,718,629 30,144,285,019 S 238,714,537 214,726,796 21J38,917,389 32,071,738,214 2002 P 2475151,729 223,185,771 2L355,326,477 329518,431,991 S 270,602,866 242,086,985 22,913,134,480 34,4689574,240 2003 P 282,800,857 288596%887 25,4473850,971 34,86895965227 S 323,385,230 331,458,411 2754773987,528 36,825,6609973 P =Primary assessed valuation S =Secondary assessed valuation Source: Maricopa County and Arizona Tax Research Foundation. pp G dM'. M M OM N � N v�i vt 7 U¢ w ® o o ® d ® o ® o q o 0 0 0 0 0 0 0 0 0 O C v+ M M M M M M N N N N Q O O O O O O N O C� O � O W o y U m a o 0 0 o 0 0 TOWN OF FOUNTAIN HILLS, ARIZONA PRIMARY AND SECONDARY PROPERTY TAX RATES - ALL OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Rate Rate Rate Rate Rate Year Town School District County State Total 1994 P 5.03 1.58 0.47 7.08 S 0.43 1.76 0.19 2.38 1995 P 5.50 1.77 0.47 7.74 S 0.39 1.69 2.08 1996 P 4.96 1.69 0.47 7.12 S 0.32 2.67 0.15 3.14 1997 P 4.98 1.64 6.62 S 0.30 2.17 0.16 2.63 1998 P 4.89 1.68 6.57 S 0.23 2.32 0.13 2.68 1999 P 3.89 1.19 5.08 S 0.17 1.96 0.11 2.24 2000 P 3.91 1.16 5.07 S 0.26 2.38 0.12 2.76 2001 P 4.09 1.18 5.27 S 0.56 2.25 0.09 2.90 2002 P 0.97 * 4.33 1.68 6.98 S 0.56 2.00 0.09 2.65 2003 P 3.56 1.21 4.77 S 0.48 2.14 0.07 2.69 P = Primary assessed valuation S = Secondary assessed valuation Source: Maricopa County and Arizona Tax Research Foundation. * The primary tax rate represents the Fountain Hills Fire District and is included with the Town because the Town took over operations in November 2001. 82 • 8 . r • • a• �•. TUNE 302003 (UNAUDITED) Town's 2002/03 Total Secondary Assessed Assessed _ Taxpayer Land Description Valuation Valuation Firerock LLC Vacant Land $ 4,045,273 1.25 % Qwest Corporation TV Systems 3,385,045 1.05 % MCO Properties Vacant Land 3,079,071 0,95 % Chaparral Town Water Company Water Utility 2,9319751 0.91 % Fountain Hills Village LLC Nursing Home 1,9475937 0.60 % Target Corporation Shopping Center 1,481,678 0.46 % Cox Communications TV Systems 1,404,400 0,43 % Four Peaks Limited Partnership Condominiums 1,353,366 0.42 % Fountain Hills -Old Vine LP Shopping Center 928,888 0.29 % Sun Tech Development Condominiums 895,446 0.28 % Kimco Barclay Fountain Hills Shopping Center 85%491 0.27 % Safeway Inc. #1291 Shopping Center 857,444 0.27 % Inn at Eagle Mountain LLC Hotel 853,886 0.26 % Southwest Gas Gas & Electric 840 795 0.26 % $ 24.864,471 7.70 % Source: Treasurer of Maricopa County. TOWN OF FOUNTAIN HILLS, ARIZONA COMPUTATION OF LEGAL DEBT MARGIN JUNE 3% 2003 (UNAUDITED) Net secondary assessed valuation $ 323,385,230 Water, Sewer, Light, Parks, Open Snace and Recreational Facility Boards Debt limit - 20% of secondary net assessed valuation $ 64,677,046 Bonds outstanding 9.825,000 Net 20% General Obligation Bonding Capacity 54,8524046 All Other General Obligation Bonds Debt limit - 6% of secondary net assessed valuation 1934035114 Bonds outstanding subject to debt limit 2.760,000 Net 6%General Obligation Bonding Capacity 16,643,114 Tota120%and 6%Bonding Capacity $ 71,495,160 Source: Maricopa County Assessor's Office. E�! TOWN OF FOUNTAIN HILLS, ARIZONA RATIO OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS (UNAUDITED) Ne4 Ratio of Net Secondary Net Bonded Debt Net Bonded Fiscal Assessed Bonded to Assessed Debt Per Year Population Valuation Debt Value Capita 1993-94 12,005 $ 88,796,834 $ 45292,389 4.83 % $ 358 1994-95 13,100 100,161,566 4,144,881 4.14 % 316 1995-96 14,146 103,9449051 4,277,315 4.12 % 302 1996-97 15,220 116,333,406 4,056,473 3.49 % 267 1997-98 165275 146,943,730 3,883,018 2.64 % 239 1998-99 18,015 212,4159476 3,913,952 1.84 % 217 1999-00 18,595 212,0275463 8,677,053 4.09 % 467 2000-01 20,235 * 238,714,537 8,2095873 3.44 % 406 2001-02 20,235 270,6025866 13,410,000 4.96 % 663 2002-03 219740 323,385,230 12,585,000 3.89 % 579 * Year 2000 U.S. Census TOWN OF FOUNTAIN HILLS, ARIZONA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS (UNAUDITED) Interest Bond Tota] Ratio of Debt Fiscal and Fiscal Issuance Debt Total Service to Total Year Principal Charges Cost Service Expenditures (*) Expenditures 1993-94 $ 125,000 $ 340,493 $ $ 465,493 $ 4,113,127 11.32 % 1994-95 1255000 327,463 452,463 4,999,377 9.05 % 1995-96 209,193 208,477 4175670 7075025 5.45 % 1996-97 222,321 247,311 46%632 12,850,703 3.65 % 1997-98 245,210 5545731 799,941 1096315005 7.52 % 1998-99 2239024 517,696 54,368 795,088 11,464,538 6.94 % 1999-00 33%013 585,001 924,014 15,404,414 6.00 % 2000-01 620,408 1,0865208 144,986 L8515602 21,368,050 8.67 % 2001-02 1,229,215 1,372,965 300,936 2,903,116 3256305186 8.90 % 2002-03 1,393,228 1,576,842 2,970,070 1597713446 18.83 % (*) Includes all Governmental Fund Types. TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING GENERAL OBLIGATION BONDED DEBT DUNE 30, 2003 (UNAUDITED) Proportion Applicable to Town of Fountain Hills Net 2001-02 Outstanding Net Secondary General Assessed Obligation Approximate Net Debt Overlapping Jurisdiction Valuation (1) Bonded Debt Percent Amount State of Arizona $34,468,574,240 $ 0.69 % $ Maricopa County 22,91351349480 5822055000 0.98 % 570,409 Maricopa County Community College District 223913,134,480 305,7503000 0.98 % 2,9965350 Fountain Hills Unified School District No. 98 24250865985 355305,000 85,94 % 30,341,117 East Valley Institute of Technology District No. 401 115006,145,846 22,8055000 2.17 % 4945869 Fountain Hills Sanitary District 261,8955487 552203000 100.00 % 55220,000 Fountain Hills Fire District - - 100,00 % - Fountain Hills Road District - 100.00 % - Town of Fountain Hills 270 02,866 13,4103000 100.00 % 13,410,000 Total Direct and Overlapping General Obligation Bonded Debt $ 53,0322745 (I) 2001-02 is the most recent information available. Source: Maricopa County Treasurer's Office. TOWN OF FOUNTAIN HILLS, ARIZONA MARICOPA COUNTY ECONOMIC INDICATORS LAST TEN CALENDAR YEARS (UNAUDITED) Value of Building Permits (in Thousands) Housing Year Starts Residential Commercial Industrial Other 1993 24,147 $ 2,432,682 $ 547,667 $ 50,139 $ 499,052 1994 33,862 3,203,144 959,539 145,310 584,029 1995 373091 3,1995942 1,0433978 413,835 7829609 1996 395630 3,508,538 1,422,483 788,083 19079,458 1997 433013 3,9439544 1,840,334 233598 L133,069 1998 475801 43778,571 2,230,445 378,141 111015269 1999 47,106 5,142,869 138785629 210,676 15092,337 2000 42,205 4,774,188 2,1449767 253,472 1,493,186 2001 43,732 59088,241 2,256,850 345,985 1,641,521 2002 45,783 5,750,850 156203722 86,044 1,231,003 Source: Arizona Real Estate Center, College of Business, Arizona State University. m �. NX YUNE 302003 (UNAUDITED) } DATE OF INCORPORATION December 5, 1989 FORM OF GOVERNMENT Council - Manager NUMBER OF EMPLOYEES (no police and fire) Classified - Full time 59 Classified - Part time 18 Exempt 21 AREA 18.27 sq. miles TOWN OF FOUNTAIN HILLS FACILITIES AND SERVICES Miles of Street Surfaced 178.5 Unsurfaced 2 Population (estimated) 20,235 Housing Units 11,601 Building Permits Issued 897 Culture and Recreation Community Centers 1 Parks 4 Park acreage 121 Tennis courts 6 Senior center 1 FACILITIES AND SERVICES NOT INCLUDED IN PRIMARY GOVERNMENT Fire Protection: Number of stations 2 Number of fire personnel and officers 26 Number of calls answered 25670 Number of inspections conducted 35177 Police Protection: Contracted Number of stations 1 Number of police personnel and officers 29 Number of patrol units 9 Number of law violations Physical arrests 601 Traffic/Parking violations 33186 Sewerage System: Special District Miles of sanitary sewers 200 Number of treatment plants 1 Number of service connections 10,916 Daily average treatment in gallons 1.7mgd Maximum daily capacity of treatment plant in gallons 2.6mgd Water System: Private .Miles of water mains 178 Number of service connections I L448 Number of hydrants 15217 Daily average consumption in gallons 4.4mgd Maximum daily capacity of plant in gallons 1155705000 Education: Number of elementary schools 3 Number of secondary schools 1 Number of students - Primary 1,658 Number of Students - Secondary 833 Source: Town government offices and related districts. 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