City of Eloy, Arizona Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 _____________________ 628 North Main Street – Eloy, Arizona 85131 City of Eloy, Arizona COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2016 Prepared by the Finance Department Brian M. Wright, Finance Director CITY OF ELOY, ARIZONA TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal 1 GFOA Certificate of Achievement 9 Organizational Chart 10 List of Elected and Principal Officials 11 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT 15 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 19 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 39 Statement of Activities 40 Fund Financial Statements: Balance Sheet – Governmental Funds 44 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 47 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 48 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 51 Statement of Net Position – Proprietary Funds 52 Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds 54 Statement of Cash Flows – Proprietary Funds 56 Notes to Financial Statements 57 CITY OF ELOY, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION Page REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues Expenditures and Changes in Fund Balances – Budget and Actual: General Fund 92 Highway User Revenue Fund 94 Schedule of Proportionate Share of the Net Pension Liability 95 Schedules of Changes in the Net Pension Liability and Related Ratios 96 Schedule of Contributions 97 Schedule of Funding Progress 98 Notes to Required Supplementary Information 99 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Combining Balance Sheet – Non-Major Governmental Funds 104 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-Major Governmental Funds 106 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Public Works Facility 108 Local Transportation Assistance Fund (LTAF) 109 Economic and Community Development Fund 110 Impact Fee 111 Grants 112 Judicial Collection Enhancement Fund (JCEF) 113 Court Recovery 114 Cemetery 115 Airport 116 Capital Projects 117 Perpetual Care 118 CITY OF ELOY, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION Page Financial Trends: Net Position by Component 121 Changes in Net Position 122 Fund Balances of Governmental Funds 124 Changes in Fund Balance of Governmental Funds 125 Revenue Capacity: Net Limited Assessed Value and Full Cash Value of Taxable Property 126 Property Tax Rates – Direct and Overlapping Governments 127 Real and Personal Property Tax Levies and Collections 128 Sales Tax Revenues by Industry 129 Direct and Overlapping Sales Tax Rates 130 Actual Excise Tax Collections 131 Debt Capacity: Ratios of Outstanding Debt by Type 132 Direct and Overlapping Governmental Activities Debt 133 Legal Debt Margin Information 134 Pledged Revenue Coverage 135 CITY OF ELOY, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION Page Demographic and Economic Information: Demographic and Economic Statistics 136 Principal Employers 137 Authorized Full-Time Government Employees by Function/Program 138 Operating Information: Operating Indicators by Function/Program 140 Capital Asset Statistics by Function/Program 142 (This page intentionally left blank) INTRODUCTORY SECTION (This page intentionally left blank) 628 North Main Street, AZ 85131, (520) 466‐9201, (520) 466‐3760 Fax, (520) 466‐7455 TDD December 20, 2016 To the Honorable Mayor, Members of the City Council and Citizens of Eloy, Arizona: State Statues require that cities and towns publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards accepted in the United States by a certified public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) of the City of Eloy, Arizona (the City), for the fiscal year ended June 30, 2016. This report consists of management’s representations concerning the finances of the City of Eloy. Consequently, management assumes full responsibility for the accuracy of the data, and the completeness and fairness of all of the information presented in this report. To provide a reasonable basis for making these representations, the City has established a comprehensive internal control framework that is designed both to protect the City’s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the basic financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive 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. The City’s financial statements have been audited by Heinfeld, Meech & Co., P.C., certified public accounting firm. The goal of the independent audit is to prove reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2016 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement preparation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City’s statements for the fiscal year ended June 30, 2016, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor’s report is presented as the first component of the financial section of this report. Page 1 The independent audit of the financial statements of the City was part of a boarder, federally mandated Single Audit as required by the provisions of the Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the City’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in a separately issued Single Audit Reporting Package. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE CITY OF ELOY The City was incorporated in 1949 with an estimated population of 4,700. In 1965, the Toltec area was annexed increasing the City’s incorporated area to 11 square miles. By the year 2000, the city limits had increased to 71 square miles. As of June 2016, the incorporated city limits is 113.3 square miles with a planning area of 534.7 square miles and has an estimated population of 17,787. Located in central Pinal County, the City is located along Interstate 10 (I-10) approximately halfway between the cities of Phoenix and Tucson. Historically, the City’s economy has been largely dependent upon agriculture. The area is part of the Santa Cruz Basin, which is one of Arizona’s most fertile soil and agricultural areas. The economy has diversified, with over threequarters of its businesses and nearly half its employment now in the industrial, wholesale/retail trade, and service sector. The City operates under a Council-Manager form of government. Policymaking and legislative authority are vested in the City Council, which consists of a Mayor and six Council Members. Council Members are elected to four-year staggered terms. The citizens elect the Mayor then the Council, from among its members, selects the Vice-Mayor. The City Council is responsible, among other things, for the adoption of local ordinances, budget adoption, the development of citizen advisory committees, the hiring and removal of the City Manager, City Attorney, City Magistrate, and City Clerk. The City Manager is responsible for the implementation of the policies of the City Council. The City Manager appoints all other department heads except those mentioned above under the City Council responsibilities. The City provides a full range of municipal services, including police protection, the construction and maintenance of streets and infrastructure, as well as recreational and cultural activities. The City’s three enterprise funds provide water, sewer, and solid waste disposal. The City also operates a library, a cemetery, and general aviation airport. Page 2 As with all cities in the State of Arizona, the City is required to comply with Article IX, Section 20(1) of the Arizona Constitution, which sets limits on the City’s legal budget capacity. The City of Eloy currently operates under the Alternative Expenditure Limitation – Home Rule Option. This option allows the City Council to establish the budgetary limits locally, rather than being restricted by the State-imposed expenditure limitation. The voters must authorize this option every four years. The citizens of Eloy last authorized it in August 2014. The annual operating budget serves as the foundation for the City’s financial planning and control. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual operating budget approved by the City Council. The City’s proposed operating budget is presented to the City Council for review throughout the budget cycle starting in January with final approval in June. The City Council is required to hold a public hearing on the proposed budget and to adopt the final budget by no later than the second Monday in August. Budget amendments and transfers requiring the approval of the City Council include the following: budget transfers between funds; transfers to fund additional personnel or increased expenditures as a result of personnel reclassifications; transfers that would reduce or eliminate funding for items designated in the adopted Capital Improvement Plan; and transfers that would reduce or eliminate funding for debt service. All other operational budget amendments that involve transfers between line items or expenditure categories require approval by the City Manager. ECONOMIC CONDITIONS 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 City operates. The local economy of Eloy is a diverse combination of agriculture, manufacturing, commercial, private prisons, and service activities. The majority of the local tax base is located along Interstate 10, which is supported by restaurants, truck stops and local businesses. Local indicators continue to point towards stagnant to slow growth. However, during FY 2015-2016 revenues in the General Fund increased $1,444,514 or 13% over last fiscal year. One of the primary factors was city sales taxes increased $701,719 or 15% over last fiscal year. The reason for this increase was construction activity exceeded budgeted expectations and the City Council reestablishment of the food tax for home base consumption. Other contributing factors, to the General Fund increase, were higher returns on investment income along with increases to permits and user fees. The City, like most municipalities, is significantly dependent upon local sales taxes, which are subject to economic fluctuations. Local sales taxes, also known as city sales tax, comprised 42% of the total general fund revenues collected. Local sales taxes are comprised of retail, construction, restaurant/bar, hotel/motel, and other taxing categories. Of those revenues, retail, construction and restaurant/bars comprised 63% of the total local sales tax revenues. Page 3 The local tax base is stable however; a few of the taxing sources are volatile. One of those taxing sources is retail tax. Over the last five years, the average retail tax collected is $1,136,590. Since July 2011, retail sales tax has decreased 13% over the last five years. A few contributing factors is the continual growth along I-10 in the Casa Grande area along with the diverse economic conditions in Eloy. The chart below demonstrates the volatility of the retail tax. Retail sales tax is collected on items such as supplies, tools, clothing, materials, etc. The tax rate on retail items is 3%. In January 2016, the Eloy City Council approved the reestablishment of the tax on food for home base consumption. The tax rate is 2% with revenue collected from this tax being dedicated for community and/or economic development purposes. Page 4 Construction Sales Tax represents one of the largest taxing sources from the City’s local tax base. It is also the most volatile and unstable tax. The tax rate is 4.5% with 3.0% dedicated to one-time capital projects and 1.5% dedicated to Street Improvements. The City does not budget construction sales tax into the operations and maintenance of city services, but uses this one-time revenue source to fund capital projects or one-time expenses. Since 2011, the average construction sales tax collected is $1,195,731. However, the graph above shows construction activities fluctuating yearly over the past five years. Much of this fluctuation is due to the housing construction industry along with the decline in economic development projects. In FY 2015-2016, construction sales tax collections were $1,363,593 or $485,663 more than that of the prior year. This increase was primarily due to a facility expansion at Corporations Corrections of America (CCA). Page 5 Property tax is one of the most stable sources of revenue because it is not subject to the same fluctuations sometimes experienced with other excise taxes. Eloy has a primary property tax rate but no secondary property tax rate. The primary property tax rate has increased from $1.1484 in FY 2014-2015 to $1.1701 in FY 2015-2016 per $100 of assessed valuation. In FY 2015-2016, the primary property tax collected was $981,586, which is an increase of $30,548 over the prior fiscal year. MAJOR INTITIATIVES AND ACCOMPLISHMENTS FOR THE YEAR In FY 2015-2016, the City continued to invest in programs and infrastructure that makes Eloy a better community. The following are the major accomplishments during the year: General Administration o Constructed the 1st phase of the Veterans Park o Obtained 3.84 acres for the future development of a new city complex o Received digitization grant from State Library to digitize local newspaper o Re-established the tax on food for home base consumption with the funding being dedicated to community and economic development activities Community Development o Constructed new community signage o Conducted four community/street clean ups-collecting 136 tons of trash o Initiated a dedicated telephone line for next day building inspection requests o Conducted 1,311 building inspections and issued 268 building permits o Updated the Land Use and Circulation Elements of the General Plan Page 6 Parks and Recreation o Renovated Shumway Park basketball and tennis courts o Replaced dugouts and backstop fencing at Jones Park ballfield o Replaced kitchen appliances and cabinets at Toltec Senior Center o Implemented new recreation programs - adult dance and youth gymnastics Police o Purchased three new police cars vehicles and associated equipment o Awarded Governor’s Office of Highway Safety Grant for laser speed detectors and portable breath testers o Purchased new voice recorder to be interactive with CAD system and 911 system o Six animals were adopted while 35 were turned over to no kill shelters for adoption Airport o Initiated process for land acquisition around the airport for future airport improvements o Obtained a grant for design and construction of three new taxi-lanes Public Works o Chip Sealed over 5 miles of roadways o Reconstruction over 1.65 miles of roadways with asphalt o Established a curbside recycling program with a diversion rate of 15% o Installed new water mains on Main Street and 11th Street o Produced and delivered over 400 million gallons of water to customers FUTURE ECONOMIC OUTLOOK The City’s responsiveness to emerging economic challenges and its careful long-range planning have been key factors in Eloy’s excellent fiscal health. The City will continue to use General Fund one-time revenue to fund capital projects along with constructing, repairing and maintaining city roadways. The City will be undertaking strategic planning during the City’s budgeting process in order to continue to make timely and essential improvements to the City’s basic infrastructure. The City is dedicated to enhancing the quality of life for its citizens and to provide municipal services in the most effective and efficient manner while exercising fiscal responsibility. For FY 2016- 2017, the City will continue investing in the City’s operations and facilities that provide the highest return on investment for the future – our employees, our infrastructure, and continued delivery of quality community services. Page 7 A few of the strategies in the budget for FY 2016-2017 are: o Employee performance merit and step increases have been budgeted, along with continuing to fund all employee healthcare benefits and 70% of dependents benefits. o Modifying the City’s compensation schedule by increasing the maximum range to ensure competitive salaries and provide long-term growth. o Over $1.1 million in street projects including G Street, Sunshine Blvd, South Toltec Road and 5th Street. o Over $750,000 in various capital related projects and equipment for Parks, Police, and Streets. o Over $3.5 million in Water and Sewer improvements for the reconstruction of Pump Station 1, rehabilitation of the reservoir at Pump Station 2, equipment upgrades at the sewer treatment plant and the rehabilitation of sewer lift stations. o The City will seek financing and contractual agreements towards the construction of a new city complex after land was secured in FY 2015-2016. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Eloy for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015. This was the fourth year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for only one year. We believe that our current Comprehensive Annual Financial Report 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. The preparation of the Comprehensive Annual Financial Report would not have been possible without the efficient and dedicated staff of the Finance Department and to the many members of other departments who assisted and contributed to the preparation of this report. The Mayor and City Council are also to be commended for their leadership and support for maintaining the highest standards of professionalism in the management of the City of Eloy’s finances. Respectfully submitted, Harvey Krauss City Manager Page 8 Brian M. Wright Finance Director Page 9 Page 10 CITY OF ELOY List of Elected and Principal Officials for Fiscal Year Ended June 30, 2016 City Council Joel G. Belloc Mayor Micah Powell Vice Mayor J.W. Tidwell Augustine Sauceda J.R. Nagy Andrew Rodriguez JoAnne Galindo City Manager Harvey Krauss Finance Director Brian M. Wright Page 11 (This page intentionally left blank) Page 12 FINANCIAL SECTION Page 13 (This page intentionally left blank) Page 14 INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the City Council City of Eloy, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Eloy, Arizona (City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Eloy, Arizona, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, for the year ended June 30, 2016, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Page 15 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, budgetary comparison information, net pension liability information, and schedule of funding progress, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’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 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2016, on our consideration of City of Eloy, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Eloy, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Tucson, Arizona December 20, 2016 Page 16 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) Page 17 (This page intentionally left blank) Page 18 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 As management of the City of Eloy, Arizona (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ending June 30, 2016. The management’s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. We encourage readers to consider the information presented here in conjunction with additional information we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS The financial statements, which follow Management’s Discussion and Analysis, provide those significant key financial highlights for 2016 as follow:  Assets exceeded liabilities at the close of the most recent fiscal year by $43,941,856 (net position). Of this amount, $6,652,792 (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors.  General revenues from governmental activities, excluding transfers, accounted for $11,405,725 or 69% of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $5,137,387 or 31% of total governmental activities revenues. The City had $5,031,509 of program revenues and $2,365 in general revenues related to business-type activities.  As of the close of the current fiscal year, governmental funds reported a combined ending fund balances of $21,416,453, an increase of $1,745,080 in comparison with the prior fiscal year.  At the end of the current fiscal year, the unassigned fund balance for the General Fund was $14,692,428 or 153% of the total general fund expenditures.  As of June 30, 2016, the net capital assets were $44,096,343, an increase of $2,356,603 from the prior fiscal year. Net capital assets for governmental activities increased by $1,937,578 while business-type activities increased by $419,025.  General Fund revenues exceeded expenditures by $3,044,965 before transfers. After transfers of $1,637,287, a positive change in fund balance occurred in the amount of $1,407,678. This positive change was due to local sales taxes, license/permits and charges for services exceeding budget estimates along with conservative spending.  The current year net loss in the HURF Fund, before transfers, was $839,377 due to the road improvements expenditures during the year on Shedd Road, Main Street, Sunshine, 11th Street, and Alsdorf Road.  Total business-type revenues exceeded total business-type expenses (excluding transfers) by $356,505. This positive change is due to fees and charges exceeding budgeted estimates along with conservative spending. Page 19 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a privatesector business. The statement of net position presents information on all of the City’s assets liabilities, and deferred inflows/outflows of resources with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). In the government-wide financial statements the City’s activities are presented in the following categories:  Governmental activities – Most of the City’s basic services are included here, such as general government, culture and recreation, public safety, airport, and pubic works. Taxes and general revenues finance most of these activities.  Business-type activities – The services provided by the City included here are water, sewer, and sanitation. The services are primarily financed through user fees and charges. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Page 20 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 OVERVIEW OF FINANCIAL STATEMENTS 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 nearterm inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City’s near-term financing requirements Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’s nearterm financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General and Highway User Revenue Funds, both of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules. Proprietary funds – Proprietary funds are used to account for business-type activities of the City. Proprietary funds, like the government-wide statements, provide both long and short-term financial information. Enterprise funds are used for activities that primarily serve customers outside the governmental unit for which fees are charged. The City has three enterprise funds: the Water, Sewer, and Sanitation Funds. The basic proprietary fund financial statements can be found on pages 52-56 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements. Page 21 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 OVERVIEW OF FINANCIAL STATEMENTS Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s budget process and pension plan. The City adopts an annual expenditure budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances – budget and actual has been provided for the General Fund and the major Special Revenue Fund as required supplementary information. Schedules for the pension plan have been provided as required supplementary information. Fund Balance Reporting and Governmental Fund Type Definitions, also known as GASB 54, is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. GASB 54 establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Clarifications of the governmental fund type definitions, in Note 2 (page 64-65), will reduce uncertainty about which resources can or should be reported in the respective fund types. 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 or as required supplementary information after the notes. The City has chosen to present these budgetary statements as part of the required supplementary information after the notes. Additionally, governments are required to disclose certain information about employee pension funds and other postemployment benefit plans. The City has disclosed this information starting on page 92 of the financial statements. Schedules for the pension plan have been provided as required supplementary information. Page 22 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS The following tables, graphs and analysis discuss the financial position and changes to the financial position for the City as a whole as of and for the year ending June 30, 2016. Statement of Net Position Net position may serve over time as a useful indicator of the City’s financial position. The following table reflects the condensed statement of net position as of June 30, 2016. The City has chosen to account for its water, sewer and sanitation operations in the enterprise funds which are show as Business-Type Activities. Current and Other Assets Capital Assets Total Assets Pension Plan Items Total Deferred Outflows Current Liabilities Noncurrent Liabilities Total Liabilities Pension Plan Items Total Deferred Inflows Governmental Activities 2015 2016 $ 21,220,827 $ 23,027,535 23,054,282 24,991,860 44,275,109 48,019,395 Business-Type Activities 2015 2016 $ 4,207,697 $ 4,442,333 18,685,458 19,104,483 22,893,155 23,546,816 Total 2015 2016 $ 25,428,524 $27,469,868 41,739,740 44,096,343 67,168,264 71,566,211 1,681,916 1,681,916 1,996,395 1,996,395 154,235 154,235 130,553 130,553 1,836,151 1,836,151 2,126,948 2,126,948 1,520,477 11,139,657 12,660,134 1,577,622 11,742,688 13,320,310 453,668 14,538,938 14,992,606 392,262 15,212,471 15,604,733 1,974,145 25,678,595 27,652,740 1,969,884 26,955,159 28,925,043 1,180,772 1,180,772 716,050 716,050 266,110 266,110 110,210 110,210 1,446,882 1,446,882 826,260 826,260 20,268,071 4,629,220 7,218,828 $ 32,116,119 22,423,567 4,745,019 8,810,844 $ 35,979,430 29,747,617 5,346,196 4,810,980 $ 39,904,793 31,825,675 5,463,389 6,652,792 $43,941,856 Net Position: Net Investments in Capital Assets Restricted Unrestricted Total Net Position 9,479,546 9,402,108 716,976 718,370 (2,407,848) (2,158,052) $ 7,788,674 $ 7,962,426 At year-end, the net position of the City totaled $43,941,856, an increase of $4,037,063 over the prior fiscal year. Of this amount, $35,979,430 was in governmental activities, a 12% increase and $7,962,426 was in the business-type activities, a 2% increase from the prior fiscal year. Page 23 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position consists of three components. The largest portion of the City’s net position ($31,825,675 or 72%) reflects its investment in capital assets net of accumulated depreciation and any related outstanding debt used to acquire or construct those assets. The City uses these capital assets to provide services to its citizens; consequently, it is not the City’s intention to sell these assets and they are therefore not available for future spending. The restricted portion of the City’s net position ($5,463,389 or 12%) represents resources subject to external restrictions on how they may be spent. This component is primarily made up of required fund balance reserves and accumulated development impact fees collected by the City. The third portion consists of unrestricted net position ($6,652,792 or 15%), which may be used to meet the City’s ongoing obligations to citizens and creditors. The following are significant current year transactions, which had affected the change in net position.  Completed asphalt road reconstructed for Main Street, Toltec Road, 11th Street, Sunshine Blvd. and Alsdorf Road in the amount of $1,538,031.  Completed double chip seal road work projects on Cocopah, Kiva, Tewa, Chaco, Maya and Grace Circle in the amount of $197,175.  Installed new water mains on 11th and Main Streets in the amount of $1,123,311.  Completed parks improvements to fields and equipment at Jones and Shumway Parks in the amount of $300,996. Page 24 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS Changes in Net Position The City’s total revenue for the year ended June 30, 2016 was $21,576,986. The total cost of all programs and services was $17,539,923. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2015 and June 30, 2016. Governmental Activities Business-Type Activities 2015 2016 2015 2016 REVENUES Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenue: City Sales Tax Property Taxes Franchise Taxes Share of State Income Tax Share of State Sales Tax County Auto Lieu Tax Investment Earnings (losses) Other Revenue Total Revenues EXPENSES Program Expenses: General Government Public Safety Public Works Culture and Recreation Community Development Health and Welfare Interest on Long-Term Debt Water Sewer Sanitation Total Expenses Excess before Transfers Transfers Change in Net Position Net Position, 6/30/14 as previously reported Net Pension Liability Net Position, 7/1/15 as restated Net Position, Ending Page 25 $ 1,243,265 $ 1,694,672 2,065,313 Totals 2015 2016 $ 6,178,420 $ 6,726,181 $ 4,935,155 $5,031,509 2,175,316 - - 2,065,313 2,175,316 656,941 1,267,399 - - 656,941 1,267,399 4,801,113 951,247 144,163 2,013,285 1,519,806 831,046 37,981 53,810 $14,317,970 5,561,071 1,000,499 145,408 2,002,370 1,571,675 900,658 157,229 66,815 $16,543,112 8,837 $ 4,943,992 2,365 $5,033,874 4,801,113 951,247 144,163 2,013,285 1,519,806 831,046 46,818 53,810 $19,261,962 5,561,071 1,000,499 145,408 2,002,370 1,571,675 900,658 159,594 66,815 $21,576,986 $ 3,413,448 4,260,754 2,380,812 1,493,063 1,021,468 191,679 82,075 - $ 2,990,284 4,064,775 2,601,939 1,465,764 1,282,378 155,982 79,352 - $ $ $ 2,990,284 4,064,775 2,601,939 1,465,764 1,282,378 155,982 79,352 2,179,624 1,288,523 1,431,302 17,539,923 4,037,063 4,037,063 12,843,299 1,474,671 (618,537) 856,134 38,267,389 (7,007,404) 31,259,985 $32,116,119 12,640,474 3,902,638 (39,327) 3,863,311 32,116,119 $35,979,430 2,207,156 1,222,770 1,509,258 2,179,624 1,288,523 1,431,302 $ 3,413,448 4,260,754 2,380,812 1,493,063 1,021,468 191,679 82,075 2,207,156 1,222,770 1,509,258 4,939,184 4,808 618,537 623,345 4,899,449 134,425 39,327 173,752 17,782,483 1,479,479 1,479,479 - 8,573,995 (1,408,666) 7,165,329 $ 7,788,674 - 7,788,674 $7,962,426 46,841,384 (8,416,070) 38,425,314 $39,904,793 39,904,793 $43,941,856 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS Government Activities During the year, net position for governmental activities increased, $3,863,311 or 12% more than the change in net position last year. Significant variances between fiscal year 2015 and 2016 program revenues are explained below:  Capital grants and contributions increased $610,458 or 93% over the prior fiscal year as the City received more federal grants during the fiscal year for Housing Rehabilitation, Airport Improvements and Infrastructure Projects.  General revenues increased $1,053,273 to $11,405,725, which comprised 69% of all governmental activities revenue sources. Explanations for the primary impacts are: o City Sales Taxes were $759,958 or 16% more than last year. This increase is primarily attributed to higher than anticipated construction activity along with reestablishing the food tax for home base consumption. o Investment Earnings were $119,248 or 314% more than last year. The City entered into a contract with PFM Asset Management to manage reserve funds. As shown on the chart below, all functions had greater program expenses than program revenues. Accordingly, general revenues were used to fund each of these functions. Page 26 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS Business-Type Activities The City’s net position for Business-Type activities, after transfers, increased $173,752 in fiscal year 2016. Last year, the change in net position was a positive $623,345, a difference of $449,593 when compared to the current year change. Significant variances between fiscal year 2015 and 2016 program revenues are explained below:  Charges for services were $96,354 or 2% more than last fiscal year. The primary cause was an increase in water collection during the year.  Transfers were $579,210 or 94% less than last fiscal year. The primary cause for the decrease was the reduction of General Fund subsidy for general operating purposes. Business-Type Activities Revenues by Source (In Thousands) $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Charges for Services 2015 Page 27 2016 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental funds The focus of the City’s governmental fund financial statements (pages 44-51) is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, discretionary (i.e., unassigned, committed and assigned) fund balances may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. For fiscal year ending June 30, 2016, governmental funds reflect a combined fund balance of $21,416,453, an increase of $1,745,080 compared to last fiscal year. Approximately 69% of this total amount, $14,692,428, constitutes fund balance of the General Fund, which is available for contribution to assigned or committed fund balance. Page 28 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 FINANCIAL ANALYSIS OF THE CITY’S FUNDS The General Fund is the principal operating fund of the City and accounts for many functions of the government, including public safety, culture and recreation, and general government. The general fund revenues total $12,659,657 for fiscal year ending June 30, 2016. The expenditures before other financing sources and uses totaled $9,614,692. The net change of fund balance for the General Fund was $1,407,678 after other financing sources and uses. This positive change was due to fiscal spending constraints, conservative budgeting forecasts, along with an increase in revenue from city sales tax, property taxes, permits/fees and intergovernmental revenues. The Highway User Revenue Fund (HURF) is required by state statute to track the state allocation of gasoline taxes and other state revenues shared with local governments and are required to be used for transportation purposes. Revenues in this fund totaled $1,943,995, while expenses totaled $2,783,372 for the fiscal year ending June 30, 2016. The net change of fund balance for the HURF Fund, prior to transfers, was a negative $839,377. The primary reason for this negative decrease was due to the completion of road improvement projects to Main Street, Toltec Road, 11th Street, Sunshine Blvd. and Alsdorf Road Other non-major governmental funds of the City include funds from the Public Works Facility, LTAF, Economic and Community Development, Impact Fee, Grants, JCEF, Court Recovery, Cemetery, Airport, and Capital Projects. All non-major funds of the City are combined into one column on the governmental fund statements. The fund balance for all other major governmental funds has increased by $337,403. This increase can be attributed to increases in fees and taxes from the Impact Fees and Public Works Facility Funds. Page 29 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 FINANCIAL ANALYSIS OF THE CITY’S FUNDS Proprietary Funds The proprietary fund financial statements are prepared on the same accounting basis and measurement focus as the government-wide financial statements, but provide additional detail since each major enterprise fund is shown discreetly on the fund statements. Net position of the Proprietary Funds was $7,962,426 as of June 30, 2016. Total operating revenues in fiscal year 2016 were $5,020,097, while total operating expenses totaled $4,663,592 resulting in an operating income of $356,505 before transfers. Page 30 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 BUDGETARY HIGHLIGHTS The City’s annual budget is the legally adopted expenditure control document of the City. Budgetary comparison statements are required for the General Fund and all major special revenue funds and can be found on pages 92-94. These statements compare the original adopted budget, the budget as amended throughout the fiscal year, and the actual expenditures prepared on a budgetary basis. Amendments to the adopted budget may occur throughout the year in a legally permissible manner (see page 66 for more information on budget policies). No amendments increasing the City’s total adopted budget of $39,464,545 occurred during fiscal year 2016. Budget amendments between funds or from budgeted contingencies into operational expense/expenditures accounts did not occur. Budgetary comparison highlights for the General Fund are as follows:  General fund expenditures of $9,614,692 were only 90% of budgeted expenditures. Reduced expenditures and unfunded personnel were some of the unspent budget items.  General fund revenue of $12,659,657 exceed final budget of $11,611,195 by $1,048,462 or 8%. The primary factors to this increase were increased sales taxes, license and permits along with higher than anticipated charges for services.  Sales Taxes exceeded budget expectations by $617,377 or 13% primarily due to increase construction activity.  Licenses and Permits were $153,452 or 54% more than budget expectations due to increases in housing permits and construction permits for a prison expansion. Page 31 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2016, the City had invested $31,825,672 in various capital assets, net of accumulated depreciation and related debt. The capital assets of the City (net of depreciation, but not capital debt) are $44,096,343. This is a net increase of $2,356,603. There was an increase in capital assets of $1,937,578 within governmental activities. While within business-type activities capital assets increased by $419,025. The following table provides a breakdown of capital assets of the City at June 30, 2015 and 2016. Additional information on the City’s capital assets can be found in Note 6 on pages 69-70. Land Land Improvements Construction In Progress Buildings and Improvements Infrastructure Furniture, equipment and vehicles Sewer lines and equipment Water lines and equipment Total Governmental Activities 2015 2016 $ 7,163,628 $ 7,331,305 664,757 1,046,843 1,229,466 415,144 4,609,988 4,514,267 7,224,659 9,406,964 2,161,784 2,277,337 $23,054,282 $ 24,991,860 Business-Type Activities 2015 2016 $ 347,468 $ 455,060 28,579 31,564 152,730 1,533 1,443 1,160,517 1,032,094 8,408,477 7,962,453 8,735,899 9,472,124 $ 18,685,458 $ 19,104,483 Totals 2015 2016 $ 7,511,096 $ 7,786,365 664,757 1,075,422 1,261,030 567,874 4,611,521 4,515,710 7,224,659 9,406,964 3,322,301 3,309,431 8,408,477 7,962,453 8,735,899 9,472,124 $ 41,739,740 $44,096,343 Major additions to capital assets during the fiscal year included the following:  The City installed a new water main on Main Street in the amount of $892,105.  The City completed 1.87 miles of double chip seal of residential roadways in the Toltec area in the amount of $232,852.  The City installed a new water main and completed reconstruction of 11th Street in the amount of $704,465.  The City purchased three police vehicles and associated equipment in the amount of $196,473.  The City completed new tennis and basketball courts at Shumway Park in the amount of $236,777. Page 32 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 CAPITAL ASSETS AND DEBT ADMINISTRATION Long-term Debt The City’s outstanding long-term debt, including compensated absences, bonds, loans, landfill costs, and pension liability, was $26,955,162 at June 30, 2016. Of this total, $11,742,688 was in governmental activities, while business-type activities were $15,212,474. All outstanding debt is secured by pledges of specific revenue sources of the City. Additional information on the City’s long-term debt can be found in Notes 7-9 on pages 71-75. The following schedule shows the outstanding debt of the City (both current and long-term) as of June 30, 2015 and 2016. Loans Payable Revenue Bonds Compensated Absences Landfill Closure and PostClosure Costs Payable Net Pension Liability Governmental Activities 2015 2016 $ 2,786,211 $ 2,568,293 654,022 666,924 - - 7,699,424 $11,139,657 8,507,471 $11,742,688 Business-Type Activities 2015 2016 $ 8,660,501 $ 9,181,503 545,411 520,875 56,683 53,079 Totals 2015 2016 $11,446,712 $ 11,749,796 545,411 520,875 710,705 720,003 4,004,446 4,063,461 4,004,446 4,063,461 1,271,897 $14,538,938 1,393,556 $15,212,474 8,971,321 $25,678,595 9,901,027 $ 26,955,162 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET City officials considered several factors during the process of developing the budget for FY 20162017. When developing the FY 2016-2017 budget staff considered four primary factors in the development of the budget. Those factors were a stagnant revenue base, the increasing cost to conduct business, aging water and sewer infrastructure, and the deteriorating state of roadways. Also, considered in the development of the budget was the local economy. The adopted FY 20162017 budget expects general fund revenues to increase by $648,960 before record fund balance. The primary cause of this increase is City Sales Taxes which should increase by $338,500 over the prior fiscal year. This increase to City Sales Taxes is based on historical data collection along with current construction projects which are anticipated to continue during the fiscal year. The overall budget for FY 2016-2017 is expected to decrease by $2,184,180 over FY 2015-2016. The primary reasons for this decrease are less special revenue projects occurring during the fiscal year. The City’s population should remain stable in the upcoming year. The unemployment rate in Eloy should remain stable at 10.2%, which is above the national average of 4.9% and Pinal County rate of 6.3%. These indicators were considered when adopting the budget for FY 2016-2017. Page 33 CITY OF ELOY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 FINANCIAL CONTACT This financial report is designed to provide a general overview of the City of Eloy, Arizona’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 directed to the Finance Department, City of Eloy, 624 North Main Street, Eloy, AZ 85131. Page 34 BASIC FINANCIAL STATEMENTS Page 35 (This page intentionally left blank) Page 36 GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 37 (This page intentionally left blank) Page 38 CITY OF ELOY, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2016 Governmental Activities ASSETS Current assets: Cash and Cash Equivalents Other Receivables Property Taxes Receivable Due from Governmental Entities Accounts Receivable (Net of Allowance) Loan Proceeds Receivable Inventory Internal Balances Total current assets $ Noncurrent assets: Restricted Cash and Investments Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net) Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Pension Plan Items LIABILITIES Current liabilities: Accounts Payable Accrued Salaries and Wages Payable Unearned revenue Customer Deposits Bonds Payable Loans Payable Compensated Absences Interest Payable Other Current Liabilities Total current liabilities $ DEFERRED INFLOWS OF RESOURCES Pension Plan Items $ 2,952,156 $ 24,578,240 15,098 44,447 1,062,735 648,946 222,144 94,768 194,051 22,942,415 85,120 7,746,449 17,245,411 25,076,980 48,019,395 718,370 607,790 18,496,693 19,822,853 23,546,816 803,490 8,354,239 35,742,104 44,899,833 71,566,211 1,996,395 130,553 2,126,948 942,317 510,596 7,074 97,621 29,603 117,635 1,868,026 166,846 25,664 646,298 5,308 97,842 350 1,069,532 1,039,938 540,199 7,074 166,846 25,664 870,010 72,000 97,842 117,985 2,937,558 11,452,284 11,452,284 13,320,310 14,535,201 14,535,201 15,604,733 25,987,485 25,987,485 28,925,043 716,050 110,210 826,260 22,423,567 9,402,108 31,825,675 718,370 718,370 2,354,567 146,919 1,995,424 248,109 6,652,792 43,941,856 2,354,567 146,919 1,995,424 248,109 8,810,844 35,979,430 $ (2,158,052) 7,962,426 The notes to the basic financial statements are an integral part of this statement. Page 39 Total 648,946 222,144 94,768 (194,051) 3,723,963 223,712 66,692 Noncurrent liabilities: Noncurrent Portion of Long-Term Obligations Total noncurrent liabilities Total liabilities NET POSITION Net Investment in Capital Assets Restricted for: Debt Service Highways and Streets Grants Capital Projects Other Purposes Unrestricted Total net position 21,626,084 15,098 44,447 1,062,735 Business-type Activities 26,666,378 $ CITY OF ELOY, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Net (Expense) Revenue and Changes in Net Position Program Revenues Functions/Programs Primary Government Governmental activities: General Government Public Safety Public Works Community Development Health and Welfare Culture and Recreation Interest on Long Term Debt Total governmental activities Business-type activities: Water Sewer Sanitation Total business-type activities Total primary government Expenses $ $ 2,990,284 $ 4,064,775 2,601,939 1,282,378 155,982 1,465,764 79,352 12,640,474 2,179,624 1,288,523 1,431,302 4,899,449 17,539,923 $ Charges for Services Operating Grants and Contributions 947,386 $ 29,560 163,363 511,015 Capital Grants and Contributions $ Governmental Activities 200,657 1,931,798 251,815 381,909 541,956 $ 43,348 42,861 91,719 1,694,672 2,175,316 1,267,399 (2,042,898) (3,582,743) (124,869) (229,407) (155,982) (1,287,836) (79,352) (7,503,087) 2,450,421 1,304,684 1,276,404 5,031,509 6,726,181 $ 2,175,316 $ 1,267,399 (7,503,087) General revenues: Taxes: Sales Taxes Propert Taxes Levied for General Purposes Franchise Taxes County Auto Lieu Tax Unrestricted State Revenues Investment Income Other Revenues Transfers Total general revenues and transfers 5,561,071 1,000,499 145,408 900,658 3,574,045 157,229 66,815 (39,327) 11,366,398 3,863,311 Changes in net position 32,116,119 Net position, beginning of year Net position, end of year The notes to the basic financial statements are an integral part of this statement. Page 40 $ 35,979,430 Net (Expense) Revenue and Changes in Net Position Business-type Activities $ Totals $ 270,797 16,161 (154,898) 132,060 132,060 2,365 $ (2,042,898) (3,582,743) (124,869) (229,407) (155,982) (1,287,836) (79,352) (7,503,087) 270,797 16,161 (154,898) 132,060 (7,371,027) 5,561,071 1,000,499 145,408 900,658 3,574,045 159,594 66,815 39,327 41,692 11,408,090 173,752 4,037,063 7,788,674 39,904,793 7,962,426 $ 43,941,856 Page 41 (This page intentionally left blank) Page 42 FUND FINANCIAL STATEMENTS Page 43 CITY OF ELOY, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2016 Highway User Revenue Fund Non-Major Governmental Funds 14,613,913 85,120 9,673 44,447 437,705 465,210 15,656,068 $ $ $ 2,923,598 $ 4,719,028 329,672 486,456 $ 476,860 21,585 $ 135,785 2,555 7,074 271,159 3,583 420,156 General ASSETS Cash and Cash Equivalents Restricted Cash and Investments Other Receivables Property Taxes Receivable Due from Governmental Entities Due from Other Funds Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable Accrued Salaries and Wages Payable Unearned revenue Due to Other Funds Other Current Liabilities Total liabilities $ $ $ 498,445 14,692,428 14,692,428 $ 15,656,068 $ 2,354,567 70,586 2,390,452 665,010 1,243,410 2,425,153 4,298,872 2,923,598 The notes to the basic financial statements are an integral part of this statement. Page 44 445,296 179,734 33,460 Fund balances: Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances 4,268,307 5,425 114,052 930,180 Deferred inflows of resources: Unavailable Revenue - Property Taxes 2,743,864 $ 4,719,028 Total Governmental Funds $ $ $ 21,626,084 85,120 15,098 44,447 1,062,735 465,210 23,298,694 942,317 510,596 7,074 271,159 117,635 1,848,781 33,460 4,745,019 735,596 1,243,410 14,692,428 21,416,453 $ 23,298,694 Page 45 (This page intentionally left blank) Page 46 CITY OF ELOY, ARIZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2016 Total governmental fund balances $ 21,416,453 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Less accumulated depreciation $ 34,362,340 (9,370,480) 24,991,860 Some property tax receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenues in the funds. 33,460 Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the funds. Deferred outflows of resources related to pensions Deferred inflows of resources related to pensions 1,996,395 (716,050) 1,280,345 (666,924) (2,568,293) (8,507,471) (11,742,688) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Compensated absences payable Loans payable Net pension liability Net position of governmental activities The notes to the basic financial statements are an integral part of this statement. Page 47 $ 35,979,430 CITY OF ELOY, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 General Revenues: Sales Taxes Property Taxes Franchise Taxes Licenses, Permits, and Fees Intergovernmental Revenue Charges for Services Fines and Forfeitures Investment Income Impact Fees Other Revenues Total revenues $ Non-Major Governmental Funds $ $ 51,850 12,659,657 Expenditures: Current General Government Public Safety Public Works Community Development Health and Welfare Culture and Recreation Capital Outlay Debt service Principal Retirement Interest and Fiscal Charges Total expenditures Changes in fund balances Fund balances, beginning of year $ 1,272,655 244,635 7,298 4,054 179,974 14,965 1,934,977 164,190 280,092 1,249,971 1,533,401 681,986 34,957 23,773 1,093,869 150,008 69,971 9,614,692 2,783,372 67,910 9,381 2,356,158 3,044,965 (839,377) (421,181) 839,376 1,455,310 426,893 Other financing sources (uses): Transfers In Transfers Out Total other financing sources (uses): (1,637,287) (1,637,287) 839,376 797,911 (39,327) 758,584 1,407,678 (1) 337,403 13,284,750 2,425,154 3,961,469 14,692,428 $ 2,425,153 The notes to the basic financial statements are an integral part of this statement. Page 48 218,694 1,936,697 1,943,995 2,617,592 3,526,848 765,995 602,075 Excess (deficiency) of revenues over expenditures Fund balances, end of year 5,342,377 996,016 145,408 439,952 4,559,203 737,512 241,462 145,877 Highway User Revenue Fund $ 4,298,872 Total Governmental Funds $ 5,561,071 996,016 145,408 439,952 7,768,555 982,147 241,462 157,229 179,974 66,815 16,538,629 2,781,782 3,806,940 2,015,966 1,284,061 34,957 1,479,083 3,054,163 217,918 79,352 14,754,222 1,784,407 1,637,287 (1,676,614) (39,327) 1,745,080 19,671,373 $ 21,416,453 Page 49 (This page intentionally left blank) Page 50 CITY OF ELOY, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Changes in fund balances - total governmental funds $ 1,745,080 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the portion of capital outlay for capitalized assets as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. Expenditures for capitalized assets Less current year depreciation $ 2,951,801 (1,014,223) 1,937,578 Property taxes in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 4,483 Repayments of loan principal are expenditures in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. 217,918 Governmental funds report pension contributions as expenditures. However, they are reported as deferred outflows of resources in the Statement of Net Position. The change in the net pension liability, adjusted for deferred pension items, is reported as pension expense in the Statement of Activities. Current year pension contributions Pension expense 718,591 (747,437) (28,846) Expenses for compensated absences reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Changes in net position in governmental activities The notes to the basic financial statements are an integral part of this statement. Page 51 (12,902) $ 3,863,311 CITY OF ELOY, ARIZONA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2016 Enterprise Funds Sewer Water ASSETS Current assets: Cash and Cash Equivalents Accounts Receivable (Net of Allowance) Loan Proceeds Receivable Inventory Total current assets $ Noncurrent assets: Restricted Cash and Investments Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net) Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Pension Plan Items LIABILITIES Current liabilities: Accounts Payable Accrued Salaries and Wages Payable Customer Deposits Due to Other Funds Bonds Payable Loans Payable Compensated Absences Interest Payable Other Current Liabilities Total current liabilities $ $ 145,704 123,569 1,468,980 86,647 97,827 9,604,682 9,789,156 11,968,917 631,723 509,963 8,390,504 9,532,190 9,801,463 501,507 501,507 1,970,487 97,692 17,888 14,973 55,524 21,484 147,706 22,797 3,932 7,980 194,051 19,300 4,187 11,160 374,966 638 58,602 662,328 $ 5,742 4,063,461 495,211 2,831,383 762,267 4,130,890 4,696,860 5,703,819 126,948 5,830,767 6,493,095 504,341 4,573,544 4,608,829 84,278 12,966 12,966 6,078,919 2,821,682 501,507 86,647 1,119,905 7,285,471 631,723 (140,115) 3,313,290 $ The notes to the basic financial statements are an integral part of this statement. Page 52 35,285 42,029 DEFERRED INFLOWS OF RESOURCES Pension Plan Items 1,372,151 96,829 269,273 25,664 271,332 4,670 39,240 350 565,970 Noncurrent liabilities: Compensated Absences Landfill Closure and Post Closure Costs Bonds Payable Loans Payable Net Pension Liability Total noncurrent liabilities Total liabilities NET POSITION Net Investment in Capital Assets Restricted for: Debt Service Unrestricted Total net position 1,580,005 406,413 98,575 94,768 2,179,761 Sanitation $ (3,137,842) (2,636,335) Enterprise Funds Totals $ 2,952,156 648,946 222,144 94,768 3,918,014 718,370 607,790 18,496,693 19,822,853 23,740,867 130,553 97,621 29,603 166,846 194,051 25,664 646,298 5,308 97,842 350 1,263,583 47,771 4,063,461 495,211 8,535,202 1,393,556 14,535,201 15,798,784 110,210 9,402,108 $ 718,370 (2,158,052) 7,962,426 Page 53 CITY OF ELOY, ARIZONA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Enterprise Funds Sewer Water Operating revenues: Charges for Services Rent and Other Revenues Total operating revenues $ 2,442,997 $ 1,300,696 Sanitation $ 1,275,963 441 1,276,404 2,442,997 1,300,696 470,711 195,079 1,034,630 140,197 51,968 418,667 400,172 2,100,592 520,866 1,131,698 82,049 41,308 1,160,791 59,015 88,139 1,431,302 Operating income (loss) 342,405 168,998 (154,898) Nonoperating revenues (expenses): Investment Income Impact Fees Interest Expense and Fiscal Charges Total nonoperating revenues (expenses) 671 7,424 (79,032) (70,937) 1,694 3,988 (156,825) (151,143) Income (loss) before transfers 271,468 17,855 11,542 27,785 283,010 45,640 (154,898) 7,002,461 3,267,650 (2,481,437) Operating expenses: Salaries Employee Benefits Service, Supplies and Other Landfill Closure and Post Closure Expense Depreciation Total operating expenses Transfers In Changes in net position Total net position, beginning of year Total net position, end of year $ 7,285,471 $ 3,313,290 The notes to the basic financial statements are an integral part of this statement. Page 54 (154,898) $ (2,636,335) Enterprise Funds Totals $ 5,019,656 441 5,020,097 692,957 288,355 2,614,088 59,015 1,009,177 4,663,592 356,505 2,365 11,412 (235,857) (222,080) 134,425 39,327 173,752 7,788,674 $ 7,962,426 Page 55 CITY OF ELOY, ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016 Enterprise Funds Water Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities: Cash received from Customers, Service Fees Cash received from Customers, Other Cash paid to Suppliers Cash paid to Employees $ 2,481,053 $ (1,312,029) (472,919) Net cash provided by operating activities Cash flows from non-capital financing activities: Interfund borrowing Transfers in Net cash provided by (used for) non-capital financing activities Cash flows from capital and related financing activities: Acquisition of capital assets Loan proceeds Decrease in loan receivable Principal paid on debt Interest paid on debt Impact Fees Net cash used for capital and related financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year 1,305,409 Sanitation $ (459,177) (146,368) 1,292,374 441 (1,191,698) (91,916) Total $ 9,201 5,078,836 441 (2,962,904) (711,203) 696,105 699,864 11,542 (55,592) 27,785 (55,592) 39,327 11,542 (27,807) (16,265) 1,405,170 (1,191,339) 1,019,814 91,461 (289,788) (80,999) 7,424 (207,881) 133,658 (74,292) (367,221) (160,739) 3,988 (28,982) (1,428,202) 1,153,472 17,169 (657,009) (241,738) 11,412 (443,427) (672,487) (28,982) (1,144,896) Cash flows from investing activities: Investment income Net cash provided by investing activities Cash and cash equivalents, end of year Sewer 671 671 1,694 1,694 264,891 1,264 1,401,761 630,459 $ 1,666,652 $ Reconciliation of Cash and Cash Equivalents to the Statement of Net Position Cash and cash equivalents $ Restricted cash and investments Total cash and cash equivalents $ 1,580,005 86,647 1,666,652 $ 631,723 2,365 2,365 (19,781) 246,374 1,391,932 3,424,152 $ 1,372,151 $ 3,670,526 $ 1,372,151 $ $ 631,723 631,723 $ 1,372,151 $ 2,952,156 718,370 3,670,526 $ 168,998 $ $ 356,505 Reconciliation of Operating Income (loss) to Net Cash Provided by Operating Activities Operating income (loss) $ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation Changes in assets and liabilities: (Increase) decrease in accounts receivable Decrease in inventory Decrease in compensated absences payable Increase in deposits held for others Increase (decrease) in accrued payroll and employee benefits Increase (decrease) in accounts payable Increase in landfill closure and post closure payable Decrease in pension items Total adjustments Net cash provided by operating activities Page 56 342,405 400,172 $ 520,866 36,306 11,871 (100) 1,750 3,824 (94,191) 7,980 (2,400) 11,458 (5,932) 353,700 (3,771) 530,866 696,105 (3,267) $ 699,864 The notes to the basic financial statements are an integral part of this statement. (154,898) 88,139 1,009,177 5,251 38,290 11,871 (3,604) 20,890 (4,083) (72,332) 59,015 (10,559) 1,048,665 (3,504) 11,160 (5,507) 10,401 59,015 (856) 164,099 $ 9,201 $ 1,405,170 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Eloy, Arizona have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. During the year ended June 30, 2016, the City implemented the provisions of GASB Statement No. 72, Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements and establishes a hierarchy of inputs to valuation techniques used to measure fair value. This Statement also enhances accountability and transparency through revised note disclosures. The more significant of the City’s accounting policies are described below. A. Reporting Entity The City is a municipal entity governed by an elected mayor and council. As required by accounting principles generally accepted in the United States of America, these financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The City is a primary government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, component units combined with the City for financial statement presentation purposes, and the City, are not included in any other governmental reporting entity. Blended component units, although legally separate entities, are, in substance, part of the City’s operations and so data from these units are combined with data of the City, the primary government. Consequently, the City’s financial statements include the funds of those organizational entities for which its elected governing body is financially accountable. Blended Component Unit – Eloy Municipal Property Corporation (MPC). The MPC Board of Directors consists of six members which are appointed by the City of Eloy, Arizona, City 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 City in obtaining financing for various projects of the City. For financial reporting purposes, transactions of the MPC are combined together and included as if they were part of the City’s operations. Page 57 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) present financial information about the City as a whole. The reported information includes all of the nonfiduciary activities of the City. For the most part, the effect of internal activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the City. Governmental activities normally are supported by taxes and intergovernmental revenues, and are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. 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, unrestricted state aid, investment income and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and the major individual enterprise fund are reported as separate columns in the fund financial statements. The City does not present funds that do not have activity. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-Wide Financial Statements – The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the government-wide financial statements; however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. Page 58 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements – Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses and permits, charges for services, and investment income associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. Unearned revenue arise when resources are received by the City before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. Delinquent property taxes and other receivables that will not be collected within the available period have been reported as unavailable revenues on the governmental fund financial statements. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The City reports the following major governmental funds. General Fund – This fund accounts for all financial resources of the City, except those required to be accounted for in other funds. Highway User Revenue (HURF) Fund – This fund accounts for state and county shared revenue sources that are legally restricted for road construction and maintenance. The City reports the following major proprietary funds. Water Fund – This fund is used to account for the activities related to the City’s water storage and distribution system. Page 59 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Sewer Fund – This fund is used to account for the activities related to the City’s sewer collection and treatment operations. Sanitation Fund – This fund is used to account for the activities related to the City’s garbage collection and treatment operations. The Proprietary Fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting and are presented in a single column. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise fund are charges to customers for water, sewer and sanitation. Operating expenses for these funds include the cost of sales and services and depreciation expense. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. D. Cash and Investments For purposes of the Statement of Cash Flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at year end were cash on hand, restricted and unrestricted cash in bank and investments. E. Inventory Water Fund inventories consist of supplies and fixtures used in the Water Department’s operations and are valued using the first in/first out (FIFO) method. Inventories are recorded as expenses when consumed in the government-wide and fund financial statements. Arizona statute requires a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102 percent of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. Page 60 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nonparticipating interest-earning investment contracts are stated at cost. Money market investments and participating interest investment contracts with a remaining maturity of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. F. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. Investment income is included in other local revenue in the governmental fund financial statements and in nonoperating revenues in the proprietary fund financial statements. G. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Interfund balances between governmental funds are eliminated on the Statement of Net Position. All receivables, including and property tax receivables, are shown net of an allowance for uncollectibles. H. Property Tax Calendar The County Treasurer is responsible for collecting property taxes for all governmental entities within the county. The county levies real and personal property taxes are levied 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. Pursuant to A.R.S., a lien against assessed real and personal property attaches on the first day of January preceding assessment and levy; however according to case law, an enforceable legal claim to the asset does not arise. Page 61 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. Capital Assets Capital assets, which include land, land improvements, buildings and improvements, sewer plant, water mains and lines, sewer collection system, vehicles, machinery, equipment, construction in progress, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of $5,000 or more and an estimated useful life of more than one year. Such assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at estimated fair market value at the date of donation. General government infrastructure capital assets include only those assets acquired or constructed since July 1, 2003. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Certain capital assets of the City are depreciated using the straight line method over the following estimated useful lives: Assets Buildings and Improvements Land Improvements Furniture, Equipment, and Vehicles Infrastructure Water and Sewer System J. Years 40 5-50 5-20 10-50 50 Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. Page 62 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. K. Compensated Absences For governmental funds, amounts of vested or accumulated vacation and sick leave that are not expected to be liquidated with expendable available financial resources are reported as liabilities in the government-wide statement of net position and as expenses in the governmentwide statement of activities. No expenditures are reported for these amounts in the fund financial statements. Vested or accumulated vacation and sick leave in the proprietary fund are recorded as an expense and a liability of that fund as the benefits accrue to the employees and are thus recorded in both the government-wide financial statements and the individual fund financial statements. Generally, resources from the General Fund are used to pay for compensated absences. L. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. M. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities on the statement of net position. Debt premiums and discounts, are amortized over the life of the bonds using the straight-line method. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt In the fund financial statements, governmental fund types recognize debt premiums and discounts, as well as debt 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. Page 63 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES N. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the Statement of Activities. Interfund transfers in the fund statements are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietary funds. O. Net Position Flow Assumption In the government-wide and proprietary fund financial statements the City applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted amounts are available. P. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 – FUND BALANCE CLASSIFICATIONS Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, and unrestricted, which includes committed, assigned, and unassigned fund balance classifications. Nonspendable. The nonspendable fund balance classification includes amounts that cannot be spent because they are not in spendable form, or legally or contractually required to be maintained intact. Restricted. Restricted fund balance is reported when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or is imposed by law through constitutional provisions or enabling legislation. Page 64 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 – FUND BALANCE CLASSIFICATIONS Committed. Committed fund balance can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision making authority, the City Council. A resolution or ordinance are equally binding actions of the City Council which is required to establish, modify or rescind a fund balance commitment. Assigned. Assigned fund balance is constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed. The City Manager is authorized to assign amounts to a specific purpose in accordance with the City’s budget policy. Unassigned. Unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had be restricted, committed, or assigned. The City applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. The table below provides detail of the major components of the City’s fund balance classifications at year end. Highway User Revenue Fund General Fund Fund Balances: Restricted: Highways and Streets Grants Capital Projects Court Equipment Cemetery Committed: Highways and Streets Airport Cemetery Community Development Assigned: Capital Projects Unassigned Total Fund Balances Page 65 $ $ Non-Major Governmental Funds 2,354,567 $ 146,919 1,995,424 126,524 121,585 70,586 292,104 270,215 72,689 30,002 1,243,410 14,692,428 $ 14,692,428 $ 2,425,153 $ 4,298,872 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 3 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Stewardship, compliance, and accountability are key concepts in defining the responsibilities of the City. The use of budgets and monitoring of equity status facilitate the City’s compliance with legal requirements. Budgets and Budgetary Accounting – The City Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Arizona Revised Statutes, the City Manager submits a proposed budget, for the fiscal year commencing the following July 1 to the City Council. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain public comment. 3. Prior to the third Monday in August, the expenditure limitation for the City is legally enacted through passage of an ordinance. 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 City expenditures from the audited financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S. §41-1279.07). 4. The City follows a voter-approved alternative expenditure limitation that was adopted on September 8, 2014. 5. Expenditures may not legally exceed the expenditure limitation of all fund types as a whole. For management purposes, the City adopts a budget by department for the General Fund and in total by fund for other funds. The City Manager subject to City 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 City Council approval. 6. Formal budgetary integration is employed as a management control device during the year for the General and Special Revenue Funds on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. The City is subject to the State of Arizona’s Spending Limitation Law for Cities and Towns. This law does not permit the City 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 City complied with this law during the year. No supplementary budgetary appropriations were made during the year. Individual Deficit Net Position – At year end, the Sanitation Fund, a major fund, reported a deficit of $2,636,800 in net position. The deficit arose because of the City’s operation of the landfill and the associated closure and postclosure costs associated with landfill. Additional revenues received in future fiscal years due to user rate increases are expected to help reduce the deficit. Page 66 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 – CASH AND INVESTMENTS Custodial Credit Risk – Deposits. Custodial credit risk is the risk that in the event of bank failure the City’s deposits may not be returned to the City. The City does not have a deposit policy for custodial credit risk. At year end, the carrying amount of the City’s deposits was $15,065,588 and the bank balance was $15,510,055. At year the City’s deposits were entirely covered by collateral held by the pledging financial institution in the City’s name. Additionally, the City had cash on hand of $1,200. Fair Value Measurements. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset.    Level 1 inputs are quoted prices in active markets for identical assets Level 2 inputs are significant other observable inputs Level 3 inputs are significant unobservable inputs The State Treasurer’s pools are external investment pools, the Local Government Investment Pool (Pool 5) and Local Government Investment Pool-Government (Pool 7), with no regulatory oversight. The pools are not required to register (and are not registered) with the Securities and Exchange Commission. The activity and performance of the pools are reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pools approximates the value of the participant’s shares in the pool and the participants’ shares are not identified with specific investments. Participants in the pools are not required to categorize the value of shares in accordance with the fair value hierarchy. All investments in which the fair value hierarchy is applicable are measured at fair value on a recurring basis. At year end, the City’s investments consisted of the following: Investment Type U.S. Treasuries U.S. Agencies Cash Category Level 2 Level 2 Not Applicable Fair Value $ 3,768,520 6,320,709 26,868 State Treasurer’s investment pool 5 State Treasurer’s investment pool 7 Total Not Applicable Not Applicable 32,562 167,483 $ 10,316,142 Page 67 Investment Maturities (in Years) Less than 1 1-5 $ $ 3,768,520 2,401,109 3,919,600 26,868 $ 2,427,977 $ 7,688,120 22 days average maturities 73 days average maturities CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 – CASH AND INVESTMENTS Interest Rate Risk. The City has implemented an investment policy that will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will decline due to increases in market interest rates by the following: 1. Investing funds primarily in shorter-term securities or similar investment pools and limiting the weighted average duration of the investment portfolio; and 2. Utilizing external research and advice regarding the current interest rate outlook and global economic condition to optimize portfolio duration strategy. Credit Risk. The City has implemented an investment policy that will minimize credit risk, which is the risk of loss due to the insolvency of the security issuer or underlying borrower by the following: 1. Limiting investments in the portfolio to the asset classes designated as acceptable in A.R.S. §35-323; 2. Diversifying the investment portfolio so that the impact of potential losses from any one individual issuer held in the portfolio will be limited; 3. Utilizing external research and advice regarding the current global economic condition and its impact on the outlook for domestic corporate credit quality. As of year-end, the City’s investment in the State’s investment pool 5 received a credit quality rating of AAAf/S1+ from Standard & Poor’s and the State’s investment pool 7 had a weighted average rating of AAA at year end as it was invested in obligations of the U.S. Government or obligations guaranteed by the U.S. Government. Custodial Credit Risk – Investments. The City’s investment in the State Treasurer’s investment pools represents a proportionate interest in the pool’s portfolio; however, the City’s portion is not identified with specific investments and is not subject to custodial credit risk. Page 68 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 5 – RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of due from governmental entities. Due from governmental entities, net of allowance for uncollectibles, as of year end for the City’s individual major funds and non-major governmental funds in the aggregate were as follows: Highway Non-Major User Revenue Governmental Fund Funds General Fund Due from Other Governmental Entities: Due from federal government $ Due from state government Due from county government Net Due from Governmental Entities $ $ $ 397,917 39,788 437,705 $ 108,310 71,424 179,734 $ 269,685 50,004 125,607 445,296 NOTE 6 – CAPITAL ASSETS A summary of capital asset activity for the current fiscal year follows: Governmental Activities Capital Assets, not being Depreciated: Land Construction in Progress Total Capital Assets, not being Depreciated Capital Assets, being Depreciated: Buildings and Improvements Furniture, Equipment and Vehicles Land Improvements Infrastructure Total Capital Assets being Depreciated Less Accumulated Depreciation for: Buildings and Improvements Furniture, Equipment and Vehicles Land Improvements Infrastructure Total Accumulated Depreciation Total Capital Assets, being depreciated, net Governmental Activities Capital Assets, net Page 69 Beginning Balance $ 7,163,628 1,229,466 8,393,094 Increase $ 167,677 334,118 501,795 7,280,696 6,254,667 718,916 9,144,071 23,398,350 109,631 511,108 413,887 2,563,820 3,598,446 (2,670,708) (4,092,883) (54,159) (1,919,412) (8,737,162) (205,352) (395,555) (31,801) (381,515) (1,014,223) 14,661,188 $ 23,054,282 2,584,223 $ 3,086,018 Decrease $ 1,148,440 1,148,440 380,905 380,905 Ending Balance $ 7,331,305 415,144 7,746,449 7,390,327 6,384,870 1,132,803 11,707,891 26,615,891 (380,905) (2,876,060) (4,107,533) (85,960) (2,300,927) (9,370,480) $ 1,148,440 17,245,411 $ 24,991,860 (380,905) CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 6 – CAPITAL ASSETS Depreciation expense was charged to governmental functions as follows: General Government Public Safety Public Works Health and Welfare Total Depreciation Expense Business-Type Activities Capital Assets, not being Depreciated: Land and Water Rights Construction in Progress Total Capital Assets, being Depreciated: Water System Sewer System Land improvements Buildings and Improvements Furniture, Equipment and Vehicles Total Capital Assets being Depreciated Less Accumulated Depreciation for: Water System Sewer System Land improvements Buildings and Improvements Furniture, Equipment and Vehicles Total Accumulated Depreciation Total Capital Assets, being Depreciated, net Business-Type Activities Capital Assets, net $ 108,529 193,345 591,324 121,025 $ 1,014,223 Beginning Balance $ 347,468 31,564 379,032 Increase $ 14,044,701 14,734,923 19,939 1,199,444 (5,308,802) (6,326,446) (387,086) (473,236) (403) (90) (148,362) (1,009,177) (31,171) (1,938,562) (13,604,981) 18,306,426 18,685,458 $ $ 1,123,311 27,212 28,982 32,704 3,099,079 31,911,407 $ 107,592 121,166 228,758 $ 190,267 419,025 Ending Balance Decrease 455,060 152,730 607,790 100,648 100,648 15,168,012 14,762,135 28,982 32,704 3,018,370 33,010,203 (100,648) (100,648) (5,695,888) (6,799,682) (403) (31,261) (1,986,276) (14,513,510) $ 18,496,693 $ 19,104,483 Depreciation expense was charged to business-type activities as follows: Water Sewer Sanitation Total Depreciation Expense $ 400,171 520,866 88,140 $ 1,009,177 Construction Commitments – At year end, the City had contractual commitments related to a capital project for the construction of infrastructure improvements. At year end, the City had spent $567,874 on the projects and had an estimated remaining contractual commitment of $3.5 million. Page 70 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 – LONG-TERM DEBT At year end, the City had outstanding revenue bonds and loans from the Water Infrastructure Finance Authority of Arizona. These balances are being repaid from Business-Type Activities revenues. Bonds Payable - Business-Type Activities: Water Revenue Bonds, Series 1997A, bearing interest at 4.5% due in semiannual principal and interest installments, maturing January 1, 2031. $ 207,045 Water Revenue Bonds, Series 1997B, bearing interest at 4.5% due in semiannual principal and interest installments, maturing January 1, 2031. 313,830 Total Revenue Bonds Payable 520,875 Less Current Portion 25,664 Total revenue bonds, net of current portion $ 495,211 Principal and interest payments on the business-type activities bonds payable at year end are summarized as follows: Year Ending June 30: 2017 2018 2019 2020 2021 2022-26 2027-31 Total Business-Type Activities Principal Interest $ 25,664 $ 23,439 26,843 22,284 28,076 21,076 29,365 19,814 30,714 18,492 176,082 70,412 204,131 26,982 $ 520,875 $ 202,499 Pledged Revenues – Business-Type Activities. The City has pledged future water and sewer revenues to repay the outstanding Water Revenue Bonds loans of $794,709. Proceeds from the original bond issuances provided financing for improvements to the City’s water and sewer systems infrastructure. The bonds are paid solely from water and sewer revenues and are payable through 2031. The total principal and interest to be paid on the bonds is $723,374. The current total customer gross revenues were $3.7 million and the total principal and interest paid on the bonds was $49,080, or one percent of gross revenues. Page 71 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 – LONG-TERM DEBT Loans Payable - Business-Type Activities: Water Infrastructure Finance Authority (WIFA) Loan 910103-09, bearing interest at 2.312% to 3.24% due in semiannual principal and interest installments, maturing July 1, 2021. $ 4,959,985 Water Infrastructure Finance Authority (WIFA) Loan 92A150-10, bearing interest at 2.933% due in semiannual principal and interest installments, maturing on July 1, 2029. 374,498 Water Infrastructure Finance Authority (WIFA) Loan 920216-12, bearing interest at 2.625% due in semiannual principal and interest installments maturing July 1, 2031. 1,678,354 Water Infrastructure Finance Authority (WIFA) Loan 910164-15 bearing interest at 2.168% due in semiannual principal and interest installments maturing at July 1, 2034. $950,000 has been authorized by WIFA with a $475,000 forgivable portion; however, at June 30, 2016, the City had only drawn down $182,935. The City expects to draw down the remaining balance during fiscal years 2017 and 2018. 163,710 Water Infrastructure Finance Authority (WIFA) Loan 920256-15 bearing interest at 2.033% due in semiannual principal and interest installments maturing at July 1, 2034. $4,500,000 has been authorized by WIFA with a $600,000 forgivable portion; however, at June 30, 2016, the City had only drawn down $1,209,850. The City expects to draw down the remaining balance during fiscal years 2017 and 2018. 1,049,866 United States Department of Agriculture (USDA), bearing interest at 4.125% due in annual principal and interest installments beginning September 1, 2008, maturing September 1, 2045. 955,090 Total Loans Payable 9,181,503 Less Current Portion 646,298 Total Loans Payable, net of Current Portion Page 72 $ 8,535,205 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 – LONG-TERM DEBT Principal and interest payments on the business-type activities loans payable at year end are summarized as follows: Year Ending June 30: 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 2037-41 2042-45 Total Business-Type Activities Principal Interest $ 646,298 $ 206,173 473,817 194,446 484,460 189,563 495,352 183,753 506,501 169,880 2,709,187 645,707 2,108,542 264,001 302,591 111,511 216,358 70,345 207,697 21,830 $ 8,150,803 $ 2,057,209 Pledged Revenues – Business-Type Activities. The City has pledged future excise, transaction privilege, franchise, and income tax revenues to repay outstanding WIFA loan 910103-09 and 92A150-10 of $7.5 million. Proceeds from the original loan issuances provided financing for improvements to the City’s water and sewer systems infrastructure. The loans are paid solely from excise, transaction privilege, franchise, and income tax revenues and are payable through 2021 and 2029, respectively. The total principal and interest to be paid on the loans is $6.3 million. The current total excise, transaction privilege, franchise, and income tax revenues were $9.3 million and the total principal and interest paid on the loans was $481,106, or 5.2 percent of gross revenues. The City has pledged future water revenues to repay WIFA loan 920216-12, 910164-15, and 920256-15 of $7.5 million. Proceeds from the original loan issuances provided financing for improvements to the City’s water and sewer systems infrastructure. The loans are paid solely from water revenues and are payable through 2034. The total principal and interest to be paid on the loans is $2.3 million. The current total water customer gross revenues were $3.7 million and the total principal paid on the loans was $306,829, or 8.1 percent of gross revenues. Page 73 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 – LONG-TERM DEBT The City has pledged future excise, transaction privilege, franchise, and income tax revenues to repay the outstanding USDA loan of $1.1 million. Proceeds from the original loan issuances provided financing for improvements to the City’s sewer system infrastructure. The loan is paid solely from excise, transaction privilege, franchise, and income tax revenues and is payable through 2045. The total principal and interest to be paid on the loans is $1.7 million. The current total excise, transaction privilege, franchise, and income tax revenues were $9.3 million and the total principal and interest paid on the loan was $56,844, or 0.61 percent of gross revenues. Loans Payable – Governmental Activities: Great Western Bank, bearing interest at 0.05%, due in monthly principal and interest installments, maturing October 1, 2022. The interest rate is variable and will be adjusted on September 1, 2017. Great Western Bank, bearing interest at 3.1%, due in monthly principal and interest installments, maturing November 1, 2027. $ 227,824 2,340,469 Total Loans Payable 2,568,293 Less Current Portion 223,712 Total Loans Payable, net of Current Portion $ 2,344,581 Principal and interest payments on the governmental activities loans payable at year end are summarized as follows: Year Ending June 30: 2017 2018 2019 2020 2021 2022-26 2027-28 Total Page 74 Governmental Activities Principal Interest $ 223,712 $ 73,547 229,476 67,785 235,412 61,848 241,380 55,880 214,250 49,489 1,071,297 150,764 352,766 11,258 $ 2,568,293 $ 470,571 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 8 – LANDFILL CLOSURE AND POSTCLOSURE COSTS State and federal laws and regulations require the City to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure. Although closure and postclosure care costs will not be paid until near or after the date that the landfill stops accepting waste, the City reports a portion of these closure and postclosure care costs as an addition to long term liabilities on the Statement of Net Position in each period based on the landfill capacity the City used as of fiscal year end. The $4,063,461 reported as landfill closure and postclosure care liability at year end, represents the cumulative amount reported to date based on prior closure and post closure costs recognized and the use of 57 percent of the estimated additional capacity added to the landfill during the fiscal year. The City will recognize the remaining estimated cost of closure and postclosure care of $3,111,880 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and postclosure care in the current fiscal year. Resources from the Landfill Fund will be used to liquidate the landfill closure and postclosure payable. The estimated remaining life of the landfill site is 30 years. NOTE 9 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Governmental activities: Loans payable Compensated absences Net pension liability Governmental activity long-term liabilities Business-type activities: Revenue bonds payable Loans payable Compensated absences Landfill closure and post-closure costs payable Net pension liability Business-type activity long-term liabilities Page 75 $ 2,786,211 $ 654,022 7,699,424 Ending Balance Reductions Due Within One Year $ 217,918 312,147 $ 2,568,293 $ 666,924 8,507,471 223,712 66,692 $ 1,133,096 $ 530,065 $ 11,742,688 $ 290,404 545,411 $ 8,660,501 1,153,472 56,683 32,230 $ 24,536 632,473 35,834 520,875 9,181,500 53,079 25,664 646,298 5,308 $ 11,139,657 $ Additions 325,049 808,047 4,004,446 1,271,897 59,015 121,659 $ 14,538,938 $ 1,366,376 4,063,461 1,393,556 692,843 15,212,471 677,270 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 10 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS At year end, interfund balances were as follows: Due To/From Other Funds: Non-Major Governmental Funds Sewer Fund Total Due from Other Funds General Fund $ 271,159 194,051 $ 465,210 Interfund balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. Residual balances outstanding between the governmental activities and the business-type activities are netted and reported in the government-wide financial statements as internal balances. The terms for repayment of the interfund balances will be determined by the City Council and any amounts expected to be repaid within one year have not been determined as of the date of the financial statements. Interfund Transfers: Transfers Out General Fund Non-Major Governmental Funds Total Transfers in Non-Major Water Sewer Highway User Governmental Funds Fund Fund Total Revenue Fund $ 839,376 $ 797,911 $ $ $ 1,637,287 11,542 27,785 39,327 $ 839,376 $ 797,911 $ 11,542 $ 27,785 $ 1,676,614 Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in certain funds to finance various programs accounted for in other funds in accordance with budgetary authorizations. Page 76 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 11 – CONTINGENT LIABILITIES Compliance – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be determined at this time, although the District expects such amounts, if any, to be immaterial. Lawsuits – The City is a party to a number of various types of lawsuits, many of which normally occur in governmental operations. The ultimate outcome of the actions is not determinable, however, City management believes that the outcome of these proceedings, either individually or in the aggregate, will not have a materially adverse effect on the accompanying financial statements. NOTE 12 – RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City’s insurance protection is provided by the Arizona Municipal Risk Retention Pool, of which the City is a participating member. The limit for basic coverage is $2.0 million per occurrence on a claims made basis. Excess coverage is for an additional $8.0 million per occurrence on a follow form, claims made basis. The aggregate limit is also $2.0 million. 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 member’s additional premiums should reserves and annual premiums be insufficient to meet the Pool’s obligations. 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 City is insured by Arizona State Workers Compensation Fund for potential worker related accidents. The City continues to carry commercial insurance for all other risks of loss to include employee health and life insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. Page 77 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The City contributes to the pension plans described below. The plans are component units of the State of Arizona. The City reported $747,437 of pension expense in the governmental activities and $58,011 in enterprise funds related to all pension plans to which it contributes. A. Arizona State Retirement System Plan Description. City employees not covered by the other pension plans described after this section participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multipleemployer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on the ASRS website at www.azasrs.gov. Benefits Provided. The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Years of service and age required to receive benefit Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Sum of years and age equals 80 30 years age 55 10 years age 62 25 years age 60 5 years age 50* 10 years age 62 Any years age 65 5 years age 50* Any years age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits Page 78 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a members’ death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions. In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the current fiscal year, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.47 percent (11.35 percent for retirement and 0.12 percent for long-term disability) of the members’ annual covered payroll, and the City was required by statute to contribute at the actuarially determined rate of 11.47 percent (10.85 percent for retirement, 0.50 percent for health insurance premium benefit, and 0.12 percent for long-term disability) of the members’ annual covered payroll. The City’s contributions to the pension plan for the year ended June 30, 2016 were $399,030. The City’s contributions for the current and two preceding years for the Arizona State Retirement System OPEB, all of which were equal to the required contributions, were as follows: Health Benefit Supplement Fund Long-Term Disability Fund $ $ Year ending June 30: 2016 2015 2014 Page 79 18,388 22,073 21,133 4,413 4,489 8,453 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Pension Liability. At June 30, 2016, the City reported a liability of $6.3 million for its proportionate share of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2014, to the measurement date of June 30, 2015. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2015, the City’s proportion was 0.041 percent, which was an increase of 0.002 from its proportion measured as of June 30, 2014. Pension Expense and Deferred Outflows/Inflows of Resources. For the year ended June 30, 2016, the City recognized pension expense for ASRS of $341,242 and reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources $ 173,208 $ 332,612 Differences between expected and actual experience Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between contributions and proportionate share of contributions Contributions subsequent to the measurement date Total 203,421 $ 191,397 399,030 763,635 $ 112,259 648,292 The deferred outflows of resources related to ASRS pensions resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year Ending June 30: 2017 2018 2019 2020 Page 80 $ (134,060) (166,879) (129,593) 146,845 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Actuarial Assumptions. The significant actuarial assumptions used to measure the total ASRS pension liability are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent base increases Mortality rates June 30, 2014 June 30, 2015 Entry age normal 8.0% 3.0-6.75% 3.0% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2011. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class of ASRS are summarized in the following table: Asset Class Equity Fixed income Real estate Multi-asset Commodities Total Page 81 Target Allocation 58% 25% 10% 5% 2% 100% Long-Term Expected Real Rate of Return 6.79% 3.70 4.25 3.41 3.93 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Discount Rate. The discount rate used to measure the ASRS total pension liability was 8.0 percent, which is less than the long-term expected rate of return of 8.79 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 8.0 percent, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate: 1% Decrease (7.0%) City’s proportionate share of the net pension liability $8,317,301 Current Discount Rate (8.0%) $6,347,429 1% Increase (9.0%) $4,997,421 Pension Plan Fiduciary Net Position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. B. Public Safety Personnel Retirement System Plan Descriptions. City public safety employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multipleemployer defined benefit health insurance premium benefit (OPEB) plan. A seven-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The PSPRS issues a publicly available financial report that includes their financial statements and required supplementary information. The report is available on the PSPRS website at www.psprs.com. Page 82 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Benefits Provided. The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Certain retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows. See the publicly available PSPRS financial report for additional benefits information. Years of service and age required to receive benefit Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 20 years any age 25 years and age 52.5 15 years age 62 Final average salary is based on Highest 36 months of last 20 years Normal retirement 50% less 2.0% for each year of 2.5% per year of credited service, credited service less than 20 years not to exceed 80% or plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 50% or normal retirement, whichever is greater Accidental disability retirement Survivor benefit: Retired members Active members Highest 60 months of last 20 years 80% of retired member’s pension benefit 80% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. In addition, from and after December 31, 2015 the Legislature may enact permanent one-time benefit increases after a Joint Legislative Budget Committee analysis of the increase’s effects on the plan. PSPRS also provides temporary disability benefits of 50 percent of the member's compensation for up to 12 months. Employees Covered by Benefit Terms. At June 30, 2016, the following employees were covered by the agent pension plan’s benefit terms: Retirees and beneficiaries Inactive, non-retired members Active members Total Page 83 PSPRS – Police 8 10 26 44 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Contributions and Annual OPEB Cost. State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contributions rates for the year ended June 30, 2016, are indicated below. Rates are a percentage of active members’ annual covered payroll. Active members – pension City: Pension Health insurance PSPRS – Police 11.65% 23.40% 0.00% In addition, the City was required by statute to contribute at the actuarially determined rate of 28.62 percent for the PSPRS of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to the PSPRS. For the agent plans, the contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended were: PSPRS – Police Pension: Contributions made Health insurance premium benefit: Annual OPEB cost Contributions made $ 388,131 -0-0- Pension Liability. At June 30, 2016, the City reported $3,553,598 in net pension liability for police. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2015, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption. In May 2016 voters approved Proposition 124 that authorized certain statutory adjustments to PSPRS’ automatic cost-of-living adjustments. The statutory adjustments change the basis for future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of two percent. The change in the City’s net pension liability as a result of the statutory adjustments is not known. Page 84 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2015 Entry age normal 7.85% 4.0 - 8.0% 4.0% Included RP-2000 mortality table, adjusted by 105% for both males and females Actuarial assumptions used in the June 30, 2015, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.85 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Short-term investments Absolute return Risk parity Fixed income Real assets GTAA Private equity Real estate Credit opportunities Non-U.S. equity U.S. equity Total Page 85 Target Allocation 2% 5% 4% 7% 8% 10% 11% 10% 13% 14% 16% 100% Long-Term Expected Real Rate of Return 0.75% 4.11% 5.13% 2.92% 4.77% 4.38% 9.50% 4.48% 7.08% 8.25% 6.23% CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Pension Discount Rates. The discount rate of 7.85 percent was used to measure the total pension liability. The projection of cash flows used to determine the PSPRS discount rates assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the actuarially determined contribution rates and the member rate. Based on those assumptions, the pension PSPRS plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the Agent Plans Net Pension Liability PSPRS – Police Balances at June 30, 2015 Changes for the year: Service cost Interest on the total pension liability Differences between expected and actual experience in the measurement of the pension liability Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2016 Page 86 Total Pension Liability $ 9,214,306 Increase/Decrease Plan Fiduciary Net Position $ 6,024,335 Net Pension Liability $ 3,189,971 333,771 723,594 333,771 723,594 86,283 (326,877) $ 816,771 10,031,077 $ 284,427 290,218 225,871 86,283 (284,427) (290,218) (225,871) (326,877) (5,892) (14,603) 453,144 6,477,479 5,892 14,603 363,627 3,553,598 $ CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s net pension liability calculated using the discount rates noted above, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate: PSPRS – Police: Rate Net pension liability 1% Decrease 6.85% $4,842,120 Current 1% Discount Increase Rate 7.85% 8.85% $3,553,598 $2,490,806 Pension Plan Fiduciary Net Position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. Pension Expense. For the year ended June 30, 2016, the City recognized $464,206 as pension expense. Pension Deferred Outflows/Inflows of Resources. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PSPRS – Police Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Contributions subsequent to the measurement date Total Page 87 Deferred Deferred Outflows of Inflows of Resources Resources $ 156,223 $ 614,191 204,768 388,131 $ 1,363,313 $ 177,968 177,968 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The amounts reported as deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30: 2017 2018 2019 2020 2021 Thereafter $ 158,084 158,084 158,082 217,406 100,629 4,929 Agent Plan OPEB Trend Information. The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Fiscal Year Ended PSPRS – Police: June 30, 2016 June 30, 2015 June 30, 2014 Annual OPEB Cost $ -017,731 17,179 Percentage of Annual Cost Contributed Net OPEB Obligation 100% 100% 100% $-0-0-0- Agent Plan OPEB Actuarial Assumptions. Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plan and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plan’s assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Page 88 CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Projections of benefits are based on (1) the plan as understood by the City and plan’s members and include the types of benefits inforce at the valuation date, and (2) the pattern of sharing benefit costs between the City and plan’s members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The actuarial methods and assumptions used to establish the fiscal year 2016 contribution requirements, are as follows: Actuarial valuation date June 30, 2014 Actuarial cost method Entry age normal Amortization method Level percent of pay closed Remaining amortization period 22 years for unfunded actuarial accrued liability, 20 years for excess Asset valuation method 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.85% Projected salary increases 4%-8% includes inflation at 4% The funded status of the PSPRS health insurance premium benefit plan in the June 30, 2015, actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement. Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation at Page 89 June 30, 2015 Entry age normal Level percent of pay closed 21 years for unfunded actuarial accrued liability, 20 years for funding excess 7-year smoothed market value (80%/120% market) 7.85% 4%-8% 4% CITY OF ELOY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Agent Plan OPEB Funded Status. The following table presents the funded status of the health insurance premium benefit plan as of the most recent valuation date, June 30, 2015. Actuarial value of assets Actuarial accrued liability Funding excess Funded ratio Annual covered payroll Funding excess as a percentage of covered payroll PSPRS – Police $ 321,427 203,892 117,535 157.65% 1,738,237 6.8% The schedule of funding progress for the health insurance premium benefit plan is disclosed immediately following the notes to the financial statements and includes multi-year trend information. Page 90 REQUIRED SUPPLEMENTARY INFORMATION Page 91 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND YEAR ENDED JUNE 30, 2016 Budgeted Amounts Variance with Final Budget Original & Final Actual Positive (Negative) Revenues: Sales Taxes Property Taxes Franchise Taxes Licenses, Permits, and Fees Intergovernmental Revenue Charges for Services Fines and Forfetures Investment income Other Revenues Total revenues $ 4,725,000 1,012,475 143,375 286,500 4,493,645 620,650 232,500 65,000 32,050 11,611,195 $ 5,342,377 996,016 145,408 439,952 4,559,203 737,512 241,462 145,877 51,850 12,659,657 $ 617,377 (16,459) 2,033 153,452 65,558 116,862 8,962 80,877 19,800 1,048,462 Expenditures: Current General Government Mayor and Council City Clerk Magistrate City Manager Finance Legal and Professional Contingency Total General Government Public Safety Law Enforcement Total Public Safety Public Works Vehicle Maintenance Facilities Maintenance Public Works Administration G.I.S Total Public Works Community Development Community Development Total Community Development 188,465 387,695 385,225 555,280 587,975 134,845 550,000 2,789,485 172,137 340,157 362,216 540,400 542,678 132,833 527,171 2,617,592 16,328 47,538 23,009 14,880 45,297 2,012 22,829 171,893 3,929,735 3,929,735 3,526,848 3,526,848 402,887 402,887 256,650 279,825 196,470 102,670 835,615 227,950 254,551 184,790 98,704 765,995 28,700 25,274 11,680 3,966 69,620 638,355 602,075 36,280 638,355 602,075 36,280 (Continued) See accompanying notes to this schedule. Page 92 Budgeted Amounts Variance with Final Budget Original & Final Culture and Recreation Park Maintenance Parks and Recreation Library Recreation Total Culture and Recreation Capital Outlay Total Capital Outlay Debt Services Principal Retirement Interest and Fiscal Charges Total Debt Services Total expenditures Excess (deficiency) of revenues over expenditures Actual Positive (Negative) 372,020 523,475 297,620 362,195 1,555,310 772,390 772,390 321,508 486,077 285,771 361,954 1,455,310 426,893 426,893 50,512 37,398 11,849 241 100,000 345,497 345,497 150,008 69,962 219,970 150,008 69,971 219,979 10,740,860 9,614,692 1,126,168 870,335 3,044,965 (2,174,630) (2,920,905) (1,637,287) 1,283,618 (2,920,905) (1,637,287) 1,283,618 (2,050,570) 1,407,678 (3,458,248) 2,487,070 13,284,750 10,797,680 (9) (9) Other financing sources (uses): Transfers Out Total other financing sources (uses) Change in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Page 93 $ 436,500 $ 14,692,428 $ 14,255,928 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HIGHWAY USER REVENUE FUND YEAR ENDED JUNE 30, 2016 Variance with Final Budget Positive (Negative) Budgeted Amounts Original & Final Revenues: Intergovernmental Revenue Investment Income Other Revenues Total revenues $ Expenditures: Current Public Works Capital Outlay Debt service Principal Retirement Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers In Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year $ 1,837,765 14,500 500 1,852,765 Actual $ 1,943,995 98,932 (7,202) (500) 91,230 1,547,795 2,352,665 1,249,971 1,533,401 297,824 819,264 29,540 3,930,000 2,783,372 29,540 1,146,628 (2,077,235) (839,377) 1,237,858 1,077,235 1,077,235 839,376 839,376 (237,859) (237,859) (1,000,000) (1) 999,999 1,000,000 2,425,154 1,425,154 $ 1,936,697 7,298 2,425,153 See accompanying notes to this schedule. Page 94 $ $ 2,425,153 CITY OF ELOY, ARIZONA SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY ARIZONA STATE RETIREMENT SYSTEM LAST TWO FISCAL YEARS 2016 City's proportion of the net pension liability (asset) 2015 0.04% 2014 0.04% 0.00% City's proportionate share of the net pension liability (asset) $ 6,347,429 $ 5,781,350 $ City's covered payroll $ 3,739,605 $ 3,522,084 $ City's proportionate share of the net pension liability (asset) as a percentage of its covered payroll 169.74% 164.15% Plan fiduciary net position as a percentage of the total pension liability 68.35% 69.49% 0.00% 2010 2011 City's proportion of the net pension liability (asset) #DIV/0! 0.00% 2009 0.00% 0.00% City's proportionate share of the net pension liability (asset) $ $ $ City's covered payroll $ $ $ City's proportionate share of the net pension liability (asset) as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability #DIV/0! #DIV/0! 0.00% 0.00% #DIV/0! 0.00% NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See accompanying notes to this schedule. Page 95 CITY OF ELOY, ARIZONA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM - POLICE LAST TWO FISCAL YEARS 2016 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability—beginning Total pension liability—ending Plan fiduciary net position Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position—beginning Plan fiduciary net position—ending Net pension liability—ending $ $ $ (326,877) 816,771 9,214,306 10,031,077 284,427 290,218 225,871 $ $ 326,003 590,306 130,020 120,039 882,961 (383,684) 1,665,645 7,548,661 9,214,306 306,183 220,644 725,455 $ (326,877) (5,892) (14,603) 453,144 6,024,335 6,477,479 $ (383,684) (5,842) (67,854) 794,902 5,229,433 6,024,335 $ 3,553,598 $ 3,189,971 64.57% $ Net pension liability as a percentage of covered payroll $ 86,283 Plan fiduciary net position as a percentage of the total pension liability Covered payroll 333,771 723,594 2015 1,738,327 204.43% 65.38% $ 1,172,432 272.08% NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See accompanying notes to this schedule. Page 96 CITY OF ELOY, ARIZONA SCHEDULE OF CONTRIBUTIONS ALL PENSION PLANS LAST TWO FISCAL YEARS 2016 Arizona State Retirement System: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 399,030 $ 399,030 Contribution deficiency (excess) $ City's covered payroll $ Contributions as a percentage of covered payroll 3,677,696 388,131 Contributions in relation to the actuarially determined contribution 388,131 $ City's covered payroll $ $ $ $ 3,739,605 $ 10.89% $ 284,738 #DIV/0! $ 284,738 $ 1,658,679 2014 407,409 10.85% Contribution deficiency (excess) 407,409 $ Public Safety Personnel Retirement System - Police: Actuarially determined contribution $ Contributions as a percentage of covered payroll 2015 $ 23.40% $ 1,738,327 16.38% $ #DIV/0! NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See accompanying notes to this schedule. Page 97 CITY OF ELOY, ARIZONA SCHEDULE OF FUNDING PROGRESS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OTHER POSTEMPLOYMENT BENEFITS LAST THREE ACTUARIAL VALUATIONS Actuarial Valuation Date Actuarial Valuation of Assets Actuarial Accrued Liability (AAL) Unfunded AAL (UAAL) Public Safety Personnel Retirement System - Police: 2015 $ 321,427 $ 203,892 $ 117,535 2014 292,853 189,537 103,316 2013 187,325 (187,325) Funded Ratio 157.65 % 154.51 - See accompanying notes to this schedule. Page 98 Covered Payroll $ 1,738,327 1,760,803 1,747,297 UAAL as a percentage of Covered Payroll (6.76) % (5.87) 10.72 CITY OF ELOY, ARIZONA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2016 NOTE 1 – BUDGETARY BASIS OF ACCOUNTING The adopted budget of the City is prepared on a basis of accounting consistent with accounting principles generally accepted in the United States of America. NOTE 2 – PENSION PLAN SCHEDULES Change in Accounting Principle. For the year ended June 30, 2016, the City implemented the provisions of GASB Statement No. 82, Pension Issues. The statement changed the measure of payroll that is required to be presented in required supplementary information from coveredemployee payroll to covered payroll. Accordingly, payroll amounts presented in the pension plan schedules and related ratios for prior periods have been restated. Actuarial Assumptions for Valuations Performed. The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated, which is the most recent actuarial valuation. The actuarial assumptions used are disclosed in the notes to the financial statements. Factors that Affect Trends. The actuarial assumptions used in the June 30, 2014, valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2014, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The actuarial assumptions used in the June 30, 2015, valuation for PSPRS were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The total pension liability used to calculate the net pension liability for PSPRS was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2015, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption from 4.5% to 4.0%. Page 99 (This page intentionally left blank) Page 100 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Page 101 (This page intentionally left blank) Page 102 NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds account for the proceeds of specific revenue sources, other than major capital projects, that are restricted to expenditures for specified purposes. Public Works Facility – accounts for the collection of sales tax revenues which are set aside for the maintaining, repairing, and upgrading of streets. Local Transportation Assistance (LTAF) – accounts for the City’s share of lottery proceeds which are set aside for transportation costs and the maintaining, repairing, and upgrading of streets. Economic and Community Development Fund – accounts for the collection of sales tax revenues which are set aside for economic and community development projects. Impact Fee – accounts for the collection of impact fees and the various infrastructure projects they fund. Grants - accounts for federal and state grants and other contributions that are restricted for a specific use Judicial Collection Enhancement (JCEF) – accounts for monies received to improve the city’s court operations. Court Recovery – accounts for court enhancement fee revenues and the capital outlays funded by these revenues. Cemetery – accounts for the activities of the city’s cemetery. Airport – accounts for fuel sales, charges for services and related costs and expenses for operation of the City airport. Capital Projects Fund Capital Projects Funds are used to account for the construction and acquisition of capital assets. Capital Projects – accounts for the construction and acquisition of capital assets to be utilized by the City’s governmental funds. Permanent Fund Permanent Funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government’s programs. Perpetual Care – accounts for principal trust amounts received and related interest income. The interest portion of the trust can be used to maintain the community cemetery. Page 103 CITY OF ELOY, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 Special Revenue Public Works Facility ASSETS Cash and Cash Equivalents Other Receivables Due from Governmental Entities Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Accrued Salaries and Wages Payable Unearned revenue Due to Other Funds Other Current Liabilities Total liabilities Page 104 Impact Fee $ 381,490 $ 9,911 $ 30,002 $ 1,995,424 $ 381,490 $ 9,911 $ 30,002 $ 1,995,424 $ 89,386 $ $ $ 89,386 Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances LTAF Economic and Community Development Fund 9,911 1,995,424 292,104 30,002 292,104 $ 381,490 9,911 $ 9,911 30,002 $ 30,002 1,995,424 $ 1,995,424 Capital Projects Special Revenue Grants $ $ $ 445,293 445,293 24,924 2,291 Court Recovery JCEF Capital Projects Airport Cemetery Permanent Perpetual Care Total NonMajor Governmental Funds $ 83,607 300 $ 35,641 1,469 $ 74,685 3,656 $ 282,786 $ 1,253,179 $ 121,582 $ $ 83,907 $ 37,110 $ 78,341 $ 282,786 $ 1,253,179 $ 3 121,585 $ $ 4,404 $ 5,652 $ 1,650 264 7,074 $ 9,769 $ $ $ 271,159 298,374 4,404 146,919 83,907 146,919 $ 445,293 Page 105 83,907 3,583 12,571 72,689 270,215 72,689 270,215 9,769 32,706 $ 37,110 $ 78,341 $ 282,786 1,243,410 1,243,410 $ 1,253,179 121,585 $ 121,585 135,785 2,555 7,074 271,159 3,583 420,156 2,390,452 665,010 1,243,410 4,298,872 121,585 32,706 83,907 $ 5,652 4,268,307 5,425 445,296 4,719,028 $ 4,719,028 CITY OF ELOY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Special Revenue Public Works Facility Revenues: Sales Taxes Intergovernmental Revenue Charges for Services Investment Income Impact Fees Other Revenues Total revenues $ 188,692 Economic and Community Development Fund LTAF $ $ 30,002 Impact Fee $ 189 188,692 Expenditures: Current General Government Public Safety Community Development Health and Welfare Culture and Recreation Capital Outlay Debt service Principal Retirement Interest and Fiscal Charges Total expenditures 3,542 179,974 189 30,002 183,516 89,386 86,777 89,386 Excess (deficiency) of revenues over expenditures 86,777 99,306 189 30,002 96,739 99,306 189 30,002 96,739 192,798 9,722 Other financing sources (uses): Transfers In Transfers Out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 106 $ 292,104 $ 9,911 1,898,685 $ 30,002 $ 1,995,424 Capital Projects Special Revenue Grants $ Court Recovery JCEF $ 1,246,444 $ 7,835 $ $ 7,835 $ 116 14,965 101,136 158,671 116 45,582 29,222 64,890 56,051 51,250 1,599 52,849 (34,473) 18,376 1,358,178 7,835 139,320 (11,542) 127,778 $ $ 158,464 207 280,092 681,986 34,957 23,773 337,370 (111,734) $ Perpetual Care Total NonMajor Governmental Funds 18,376 86,171 1,246,444 Capital Projects Airport Cemetery Permanent 218,694 1,272,655 244,635 4,054 179,974 14,965 1,934,977 548,781 164,190 280,092 681,986 34,957 23,773 1,093,869 110,472 16,660 7,782 109,715 548,781 67,910 9,381 2,356,158 (9,336) 48,956 (548,781) 29,350 116 (421,181) 629,241 (27,785) 601,456 29,350 797,911 (39,327) 758,584 16,044 7,835 (5,123) (9,336) 48,956 52,675 116 337,403 130,875 76,072 37,829 82,025 221,259 1,190,735 121,469 3,961,469 146,919 Page 107 $ 83,907 $ 32,706 $ 72,689 $ 270,215 $ 1,243,410 $ 121,585 $ 4,298,872 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL PUBLIC WORKS FACILITY YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Sales Taxes Total revenues $ Expenditures: Current General Government Total expenditures Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 108 $ 195,000 195,000 Actual $ 188,692 188,692 Variance with Final Budget Positive (Negative) $ (6,308) (6,308) 315,000 315,000 89,386 89,386 225,614 225,614 (120,000) 99,306 219,306 120,000 192,798 72,798 $ 292,104 $ 292,104 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL LTAF YEAR ENDED JUNE 30, 2016 Variance with Final Budget Positive (Negative) Budgeted Amounts Original & Final Revenues: Investment Income Total revenues $ Expenditures: Current Public Works Total expenditures Fund balances, beginning of year Page 109 $ 189 189 $ 9,950 9,950 Changes in fund balances Fund balances, end of year 240 240 Actual $ (51) (51) 9,950 9,950 (9,710) 189 9,899 9,710 9,722 12 $ 9,911 $ 9,911 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL ECONOMIC AND COMMUNITY DEVELOPMENT FUND YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Sales Taxes Total revenues $ Actual $ 30,002 30,002 Variance with Final Budget Positive (Negative) $ 30,002 Changes in fund balances 30,002 30,002 30,002 Fund balances, beginning of year Fund balances, end of year Page 110 $ $ 30,002 $ 30,002 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL IMPACT FEE YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Investment Income Impact Fees Total revenues $ Expenditures: Current Capital Outlay Total expenditures Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 111 $ 4,105 30,000 34,105 Actual $ 3,542 179,974 183,516 Variance with Final Budget Positive (Negative) $ (563) 149,974 149,411 1,903,955 1,903,955 86,777 86,777 1,817,178 1,817,178 (1,869,850) 96,739 1,966,589 1,869,850 1,898,685 28,835 $ 1,995,424 $ 1,995,424 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GRANTS YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Intergovernmental Revenue Total revenues $ 8,257,110 8,257,110 Actual $ 1,246,444 1,246,444 Variance with Final Budget Positive (Negative) $ (7,010,666) (7,010,666) Expenditures: Current Public Safety Community Development Health and Welfare Culture and Recreation Capital Outlay Total expenditures 466,850 501,280 6,000,000 3,300 1,425,000 8,396,430 280,092 681,986 34,957 23,773 337,370 1,358,178 186,758 (180,706) 5,965,043 (20,473) 1,087,630 7,038,252 Excess (deficiency) of revenues over expenditures (139,320) (111,734) 27,586 139,320 139,320 (11,542) 127,778 (11,542) (11,542) 16,044 16,044 130,875 130,875 Other financing sources (uses): Transfers In Transfers Out Total other financing sources (uses): 139,320 Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 112 $ $ 146,919 $ 146,919 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL JCEF YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Intergovernmental Revenue Total revenues $ Expenditures: Current Capital Outlay Total expenditures 11,050 11,050 Actual $ $ (3,215) (3,215) 11,050 11,050 Fund balances, beginning of year Page 113 $ 11,050 11,050 Changes in fund balances Fund balances, end of year 7,835 7,835 Variance with Final Budget Positive (Negative) $ 7,835 7,835 76,072 76,072 83,907 $ 83,907 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL COURT RECOVERY YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Intergovernmental Revenue Total revenues $ Expenditures: Debt service Principal Retirement Interest and Fiscal Charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers In Total other financing sources (uses): 23,500 23,500 Actual $ 18,376 18,376 Variance with Final Budget Positive (Negative) $ (5,124) (5,124) 51,250 1,600 52,850 51,250 1,599 52,849 1 1 (29,350) (34,473) (5,123) 29,350 29,350 29,350 29,350 Changes in fund balances (5,123) (5,123) Fund balances, beginning of year 37,829 37,829 Fund balances, end of year Page 114 $ $ 32,706 $ 32,706 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL CEMETERY YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Charges for Services Other Revenues Total revenues $ 83,000 13,500 96,500 Actual $ 86,171 14,965 101,136 Variance with Final Budget Positive (Negative) $ 3,171 1,465 4,636 Expenditures: Current General Government Capital Outlay Total expenditures 67,645 50,000 117,645 45,582 64,890 110,472 22,063 (14,890) 7,173 Excess (deficiency) of revenues over expenditures (21,145) (9,336) 11,809 Other financing sources (uses): Transfers Out Total other financing sources (uses): (3,500) (3,500) Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 115 $ 3,500 3,500 (24,645) (9,336) 15,309 24,645 82,025 57,380 $ 72,689 $ 72,689 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL AIRPORT YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Revenues: Charges for Services Investment Income Total revenues $ 152,125 300 152,425 Actual $ 158,464 207 158,671 Variance with Final Budget Positive (Negative) $ 6,339 (93) 6,246 Expenditures: Current General Government Capital Outlay Debt service Principal Retirement Interest and Fiscal Charges Total expenditures 51,420 115,000 29,222 56,051 22,198 58,949 16,660 7,765 190,845 16,660 7,782 109,715 (17) 81,130 Changes in fund balances (38,420) 48,956 87,376 38,420 221,259 182,839 Fund balances, beginning of year Fund balances, end of year Page 116 $ $ 270,215 $ 270,215 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL CAPITAL PROJECTS YEAR ENDED JUNE 30, 2016 Budgeted Amounts Original & Final Expenditures: Current Capital Outlay Total expenditures $ Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers In Transfers Out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 117 $ 1,389,000 1,389,000 Actual $ 548,781 548,781 Variance with Final Budget Positive (Negative) $ 840,219 840,219 (1,389,000) (548,781) 840,219 600,000 600,000 629,241 (27,785) 601,456 29,241 (27,785) 1,456 (789,000) 52,675 841,675 789,000 1,190,735 401,735 $ 1,243,410 $ 1,243,410 CITY OF ELOY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL PERPETUAL CARE YEAR ENDED JUNE 30, 2016 Variance with Final Budget Positive (Negative) Budgeted Amounts Original & Final Revenues: Investment Income Total revenues $ Expenditures: Current General Government Total expenditures 250 250 Actual $ 116 3,616 3,500 3,500 (3,500) (3,500) Changes in fund balances Fund balances, beginning of year $ (134) (134) 3,750 3,750 (3,500) Other financing sources (uses): Transfers In Total other financing sources (uses): Page 118 $ 3,750 3,750 Excess (deficiency) of revenues over expenditures Fund balances, end of year 116 116 $ 116 116 121,469 121,469 121,585 $ 121,585 STATISTICAL SECTION The statistical section presents financial statement trends as well as detailed financial and operational information not available elsewhere in the report. The statistical section is intended to enhance the reader’s understanding of the information presented in the financial statements, notes to the financial statements, and other supplementary information presented in this report. The statistical section is comprised of the five categories of statistical information presented below. Contents: Page Financial Trends These schedules contain information on financial trends to help the reader understand how the City’s financial position and financial activities have changed over time. 121 Revenue Capacity These schedules contain information to help the reader assess the factors affecting the City’s ability to generate revenue. 126 Debt Capacity These schedules present information to help the reader evaluate the City’s current levels of outstanding debt as well as assess the City’s ability to make debt payments and/or issue additional debt in the future. 132 Demographic and Economic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the City’s financial activities take place and to help make comparisons with other municipalities. 136 Operating Information These schedules contain information about the City’s operations and various resources to help the reader draw conclusions as to how the City’s financial information relates to the services provided by the City. 140 Note: Fiscal year 2012 was the first year a comprehensive annual financial report was prepared by the City. Due to cost considerations for the accumulation of data, the City has elected to present less than ten years of data, or data from less than nine years prior, for certain statistical schedules or schedule elements. This information will be accumulated and reported each year until the complete ten years of data is presented. For locally assessed property (i.e., excluding mines, utilities, etc.) Proposition 117, approved by voters in 2012, amended the Arizona Constitution to require that all property taxes after fiscal year 2014-15 be based upon property values limited to five percent in annual growth. The aggregate assessed value of all taxable properties within a taxing jurisdiction (i.e., after applying assessment ratios based on the use of a property), including property values with a growth limit, is currently referred to as net limited assessed value and formerly as primary assessed value. In accordance with Proposition 117, this value is used for all taxing purposes beginning fiscal year 2015-16. Aggregate assessed value without a growth limit is currently referred to as net full cash assessed value and formerly as secondary assessed value. This remains the value utilized for determining debt capacity limits. Page 119 (This page intentionally left blank) Page 120 CITY OF ELOY, ARIZONA Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2007 Governmental Activities Net Investment in Capital Assets: Restricted Unrestricted Total Governmental Activities Net Position Business-type activities Net Investment in Capital Assets: Restricted Unrestricted Total Business-Type Activities Net Position Primary government Net Investment in Capital Assets: Restricted Unrestricted $ $ $ $ $ $ 2008 2009 2010 2012 2013 2014 2015 2016 10,520,431 $ 5,556,173 4,480,947 20,557,551 $ 10,963,272 $ 8,049,208 8,617,832 27,630,312 $ 13,325,913 $ 10,268,206 7,964,489 31,558,608 $ 16,151,406 $ 7,273,444 8,009,711 31,434,561 $ 15,002,289 $ 5,429,281 13,164,747 33,596,317 $ 15,985,323 $ 4,978,419 14,507,592 35,471,334 $ 16,961,904 $ 4,510,233 15,589,113 37,061,250 $ 18,543,869 $ 4,489,679 15,233,841 38,267,389 $ 20,268,071 $ 4,629,220 7,218,828 32,116,119 $ 22,423,567 4,745,019 8,810,844 35,979,430 5,024,582 $ 311,257 (3,145,956) 2,189,883 $ 5,415,998 $ 380,056 (3,195,169) 2,600,885 $ 7,665,730 $ 379,454 (2,739,943) 5,305,241 $ 9,775,100 $ 343,584 (2,965,864) 7,152,820 $ 9,532,520 $ 289,448 (2,760,273) 7,061,695 $ 9,090,283 $ 291,532 (2,496,712) 6,885,103 $ 8,089,091 $ 559,631 (1,574,048) 7,074,674 $ 9,575,240 $ 715,299 (1,716,544) 8,573,995 $ 9,479,546 $ 716,976 (2,407,848) 7,788,674 $ 9,402,108 718,370 (2,158,052) 7,962,426 15,545,013 $ 5,867,430 1,334,991 22,747,434 $ 16,379,270 $ 8,429,264 5,422,663 30,231,197 $ 20,991,643 $ 10,647,660 5,224,546 36,863,849 $ 25,926,506 $ 7,617,028 5,043,847 38,587,381 $ 24,534,809 $ 5,718,729 10,404,475 40,658,013 $ 25,075,606 $ 5,269,951 12,010,880 42,356,437 $ 25,050,995 $ 5,069,864 14,015,065 44,135,924 $ 28,119,109 $ 5,204,978 13,517,297 46,841,384 $ 29,747,617 $ 5,346,196 4,810,980 39,904,793 $ 31,825,675 5,463,389 6,652,792 43,941,856 Source: The source of this information is the City's financial records Note: The change in net position in fiscal year 2015 is due to the recognition of net pension liabilities. Page 121 2011 CITY OF ELOY, ARIZONA Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Expenses Governmental Activities: General Government Public Safety Public Works Culture and Recreation Community Development Health and Welfare Interest on Long-Term Debt Total Governmental Activities Expenses Business-Type Activities: Water Sewer Sanitation and Other Memorial Park Airport Total Business-Type Activities Expenses Total Primary Government Expenses Program Revenues Governmental Activities: Charges for Services: General Government Public Safety Public Works Community Development Culture and Recreation Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues Business-Type Activities: Charges for Services: Water Sewer Sanitation and Other Memorial Park Airport Operating Grants and Contributions Capital Grants and Contributions Total Business-Type Activities Program Revenues Total Primary Government Program Revenues 2007 2008 2009 $ 4,118,612 4,010,314 2,390,394 1,077,769 24,067 128,102 11,749,258 $ 3,712,010 3,805,011 2,914,884 1,248,404 103,896 179,565 11,963,770 $ 3,771,718 4,591,751 3,170,470 1,303,247 84,934 175,834 13,097,954 $ 2,449,351 1,906,929 1,978,848 1,232,493 1,094,058 1,476,568 1,270,086 1,188,915 1,178,667 4,951,930 4,189,902 4,634,083 $ 16,701,188 $ 16,153,672 $ 17,732,037 $ $ Fiscal Year 2011 2012 2010 922,983 $ 954,171 $ 873,656 $ 656,561 1,315,283 289,858 290,368 86,457 402,654 24,896 25,185 24,407 2,893,405 3,372,261 2,398,640 931,184 1,090,919 3,103,924 5,719,397 6,844,276 7,093,139 1,496,447 1,623,516 1,838,440 819,109 925,591 1,025,676 1,202,242 1,239,003 1,329,058 512,508 113,016 2,314,606 4,030,306 3,901,126 6,507,780 $ 9,749,703 $ 10,745,402 $ 13,600,919 $ 3,818,804 4,574,432 1,797,012 1,178,676 18,618 93,818 11,481,360 $ 2,878,214 3,744,811 2,609,546 1,570,243 63,294 10,866,108 $ 2,451,503 4,106,470 2,509,477 1,438,463 597,877 290,000 58,225 11,452,015 2013 2014 $ 2,535,814 4,141,860 2,007,422 1,290,178 805,789 147,876 79,484 11,008,423 $ 3,323,730 4,004,661 2,221,837 1,380,982 1,119,187 260,682 83,892 12,394,971 2015 $ 3,413,448 4,260,754 2,380,812 1,493,063 1,021,468 191,679 82,075 12,843,299 $ 2,990,284 4,064,775 2,601,939 1,465,764 1,282,378 155,982 79,352 12,640,474 1,938,888 1,800,394 1,950,484 1,921,729 1,961,170 2,207,156 2,179,624 1,442,414 1,308,335 2,264,921 1,275,294 1,213,668 1,222,770 1,288,523 5,398,863 1,375,054 1,379,485 1,498,467 1,497,411 1,509,258 1,431,302 8,780,165 4,483,783 5,594,890 4,695,490 4,672,249 4,939,184 4,899,449 20,261,525 $ 15,349,891 $ 17,046,905 $ 15,703,913 $ 17,067,220 $ 17,782,483 $ 17,539,923 650,814 $ 618,181 $ 589,588 $ 531,214 282,085 380,459 332,861 116,604 89,682 72,434 79,779 120,518 314,702 21,863 19,598 18,350 26,199 2,324,873 2,195,747 1,860,034 1,891,725 674,887 1,314,342 1,251,911 572,622 4,044,204 4,600,761 4,132,523 3,573,584 1,867,418 1,053,803 1,331,779 2,821,830 7,074,830 11,119,034 $ 1,734,300 977,215 1,312,906 69,930 4,094,351 8,695,112 $ 1,781,941 945,290 1,476,130 792,051 4,995,412 9,127,935 $ $ 1,662,936 978,252 1,523,766 10,688 4,175,642 7,749,226 $ 572,950 85,214 131,316 361,925 30,310 1,963,469 1,378,869 4,524,053 $ 1,893,647 1,141,294 1,470,157 6,170 4,511,268 9,035,321 $ 790,722 53,755 154,961 213,971 29,856 2,065,313 656,941 3,965,519 $ 947,386 29,560 163,363 511,015 43,348 2,175,316 1,267,399 5,137,387 2,195,416 2,450,421 1,217,763 1,304,684 1,521,976 1,276,404 4,935,155 5,031,509 8,900,674 $ 10,168,896 (continued) Page 122 2016 CITY OF ELOY, ARIZONA Changes in Net Position Last Ten Fiscal Years Fiscal Year 2007 Net (Expense)/Revenues Governmental Activities Business-Type Activities Total Primary Government Net Expense General Revenues and Other Changes in Net Position Governmental Activities: City Sales Tax State Sales Taxes Auto Lieu Tax State Sales Taxes-Revenue Sharing Property Tax Franchise Tax Unrestricted Investment Earnings Gain on Sale of Assets Other Revenues Transfers Total Governmental Activities Business-Type Activities: Unrestricted Investment Earnings Transfers Total Business-Type Activities Total Primary Government Change in Net Position Governmental Activities Business-Type Activities Total Primary Government $ 2008 2010 2011 2012 2013 2014 2015 2016 (6,029,861) $ (921,624) (6,951,485) $ (5,119,494) $ (288,776) (5,408,270) $ (6,004,815) $ 1,873,697 (4,131,118) $ (7,437,156) $ (1,705,335) (9,142,491) $ (6,265,347) $ (389,432) (6,654,779) $ (7,319,492) $ (599,478) (7,918,970) $ (7,434,839) $ (519,848) (7,954,687) $ (7,870,918) $ (160,982) (8,031,900) $ (8,877,780) $ (4,029) (8,881,809) $ (7,503,087) 132,060 (7,371,027) 7,113,852 $ 1,057,403 696,508 1,263,084 476,317 112,137 297,313 174,832 11,191,446 8,444,552 $ 1,022,432 753,544 1,565,622 580,882 135,324 373,733 (683,834) 12,192,255 6,446,587 $ 885,140 728,472 1,665,549 648,196 129,343 232,670 (802,846) 9,933,111 3,787,899 $ 816,412 696,980 1,436,354 713,073 121,542 137,475 (396,626) 7,313,109 5,087,733 $ 887,563 682,530 1,082,827 786,184 132,653 63,965 (296,353) 8,427,102 5,160,839 $ 1,299,551 703,979 1,403,669 846,923 135,939 64,587 (420,978) 9,194,509 4,797,681 $ 1,361,278 724,822 1,698,821 897,160 139,478 56,673 56,513 (707,671) 9,024,755 5,516,526 $ 1,447,688 774,269 1,853,736 918,511 141,905 49,941 33,058 (1,658,577) 9,077,057 4,801,113 $ 1,519,806 831,046 2,013,285 951,247 144,163 37,981 53,810 (618,537) 9,733,914 5,561,071 1,571,675 900,658 2,002,370 1,000,499 145,408 157,229 66,815 (39,327) 11,366,398 33,638 33,638 $ 11,225,084 $ 15,944 683,834 699,778 12,892,033 $ 27,813 802,846 830,659 10,763,770 $ 4,152 396,626 400,778 7,713,887 $ 1,954 296,353 298,307 8,725,409 $ 1,908 420,978 422,886 9,617,395 $ 1,748 707,671 709,419 9,734,174 $ 1,725 1,658,577 1,660,302 10,737,359 $ 8,837 618,537 627,374 10,361,288 $ 2,365 39,327 41,692 11,408,090 7,072,761 $ 411,002 7,483,763 $ 3,928,296 $ 2,704,356 6,632,652 $ (124,047) $ (1,304,557) (1,428,604) $ 2,161,755 $ (91,125) 2,070,630 $ 1,875,017 $ (176,592) 1,698,425 $ 1,589,916 $ 189,571 1,779,487 $ 1,206,139 $ 1,499,320 2,705,459 $ 856,134 $ 623,345 1,479,479 $ 3,863,311 173,752 4,037,063 $ $ $ $ 5,161,585 $ (887,986) 4,273,599 $ Source: The source of this information is the City's financial records Page 123 2009 CITY OF ELOY, ARIZONA Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) General Fund Reserved Unreserved Unassigned Total General Fund All other Governmental Funds Restricted: Highway and Streets Capital Projects Court Equipment Cemetary Other Purposes Committed for: Airport Cemetery Highway and Streets Community Development Assigned for: Capital Projects Unassigned: Total all other Governmental Funds Fiscal Year 2012 2007 2008 2009 2010 2011 $ - $ 6,130,614 - $ 8,421,061 - $ 7,954,418 - $ 8,009,884 $ 6,130,614 $ 8,421,061 7,954,418 8,009,884 $ - $ 8,766,677 8,766,677 $ - $ 9,855,191 9,855,191 $ - $ 10,968,659 10,968,659 $ - $ 12,042,236 12,042,236 $ - $ 13,284,750 13,284,750 $ 14,692,428 14,692,428 $ 1,954,498 $ 1,167,674 147,972 446,995 4,387,854 $ 3,051,765 77,675 531,914 5,391,080 $ 3,646,925 95,200 434,694 2,885,592 $ 2,171,477 101,915 108,605 161,692 2,379,018 $ 2,225,845 114,621 111,354 147,581 2,363,657 $ 1,883,212 116,956 114,339 146,408 2,364,034 $ 1,869,855 118,647 118,379 137,143 2,364,290 $ 1,898,685 113,901 121,469 130,875 2,354,567 1,995,424 126,524 121,585 146,919 $ $ $ 7,926,530 $ 4,077,563 87,644 542,002 2013 140,451 23,371 140,925 39,896 114,271 48,702 140,275 42,794 148,855 34,250 152,519 23,642 - - - - - - 3,880,961 $ 8,230,029 $ 12,796,712 $ 9,750,968 $ 1,942,442 7,554,828 $ 2,249,392 7,403,972 $ 157,852 46,337 388,304 1,999,054 7,216,119 $ 2014 145,756 92,052 724,740 1,863,627 7,434,233 $ Source: The source of this information is the City's financial records Note: The provisions of the Governmental Accounting Standards Board (GASB) Statement No. 54 were adopted in fiscal year 2011. The standard replaces the previous reserved and unreserved fund balances categories with the following four fund balance classifications; restricted, committed, assigned and unassigned fund balance. Page 124 2015 221,259 82,025 192,798 1,190,735 6,316,037 $ 2016 270,215 72,689 362,690 30,002 1,243,410 6,724,025 CITY OF ELOY, ARIZONA Changes in Fund Balance of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2007 Revenues Taxes Licenses and Permits Intergovernmental Charges for Services Impact Fees Fines and Forfeitures Interest Other Revenues Total Revenues Expenditures Current: General Government Public Safety Public Works Health and Welfare Community Development Culuture and Recreation Capital Outlay Debt Service Principal Interest and Fiscal Charges Loan Issuance Costs Total Expenditures $ 7,706,397 $ 897,405 6,653,899 103,595 530,406 364,033 297,313 187,054 $ 16,740,102 $ $ Revenues Over (Under) Expenditures Other Finance Sources (Uses) Sale of Assets Bond Proceeds Transfers In (Out) Total other Finance Scources (Uses) 3,652,678 $ 3,824,777 2,179,189 24,071 1,010,410 2,043,192 2008 2009 9,164,388 $ 7,193,555 $ 1,352,303 654,224 6,648,617 7,416,635 114,303 119,015 715,465 59,193 381,384 340,520 373,733 232,670 973,802 130,040 19,723,995 $ 16,145,852 $ 3,490,572 $ 3,644,286 2,572,959 103,790 1,163,310 1,249,583 3,093,046 $ 3,959,263 2,787,310 84,842 1,209,750 2,649,461 2010 Fiscal Year 2011 2012 4,605,355 $ 311,252 6,002,186 118,283 110,755 292,267 137,475 159,211 11,736,784 $ 6,008,308 $ 415,189 6,069,630 105,856 114,901 277,601 63,965 270,504 13,325,954 $ 2,588,439 $ 3,717,712 2,401,112 18,587 1,239,954 2,281,142 2,729,089 $ 3,462,398 2,038,234 1,209,228 1,421,235 2013 6,166,452 $ 5,845,236 $ 361,173 374,593 6,616,153 6,482,176 113,925 221,980 50,521 43,833 264,739 235,923 64,587 56,673 133,214 56,513 13,770,764 $ 13,316,927 $ 2,262,749 $ 3,727,083 2,057,173 290,000 597,877 1,270,781 1,485,800 2,419,367 $ 3,966,748 1,661,507 59,249 802,369 1,279,326 3,043,354 740,497 153,928 13,628,742 578,008 151,198 12,953,706 508,096 151,198 14,442,966 1,996,608 86,882 14,330,436 855,204 69,226 11,784,614 641,584 79,082 12,412,129 1,576,959 82,515 12,425 14,903,819 3,111,360 6,770,289 1,702,886 (2,593,652) 1,541,340 1,358,635 (1,586,892) 276,832 276,832 3,060 550,000 (683,834) (130,774) 3,200,000 (802,846) 2,397,154 (396,626) (396,626) (296,353) (296,353) (420,978) (420,978) 2,900,000 (707,671) 2,192,329 2014 2015 2016 6,580,455 $ 5,906,730 $ 6,702,495 421,266 276,596 439,952 7,586,717 7,103,658 7,768,555 250,749 680,055 982,147 49,941 24,771 179,974 290,289 244,576 241,462 50,725 37,981 157,229 33,058 53,810 66,815 15,263,200 $ 14,328,177 $ 16,538,629 2,446,351 $ 3,764,016 1,743,665 166,926 1,112,418 1,355,418 3,561,908 2,424,703 $ 3,793,653 1,856,811 89,707 1,087,171 1,472,527 3,951,342 2,781,782 3,806,940 2,015,966 34,957 1,284,061 1,479,083 3,054,163 231,411 83,892 14,466,005 227,879 82,075 14,985,868 217,918 79,352 14,754,222 797,195 (657,691) 1,784,407 (1,017,067) (1,017,067) - (39,327) (39,327) Net Change in Fund Balances $ 3,388,192 $ 6,639,515 $ 4,100,040 $ (2,990,278) $ 1,244,987 $ 937,657 $ 605,437 $ (219,872) $ (657,691) $ 1,745,080 Expenditures for capitalized assets $ 1,557,132 $ 740,438 $ 3,167,747 $ 1,491,989 $ 660,283 $ 948,465 $ 3,010,266 $ 2,170,080 $ 2,410,390 $ 2,951,801 7.41% 5.97% 5.85% 16.23% 8.31% 6.29% 13.95% 2.56% 2.46% Debt Service as a Percentage of Noncapital Expenditures Source: The source of this information is the City's financial records Page 125 2.52% CITY OF ELOY, ARIZONA Net Limited Assessed Value and Full Cash Value of Taxable Property Last Ten Fiscal Years Limited Property Value - Primary Fiscal Year Net Assessed Value Total Limited Assessed Value Full Cash Value - Secondary Net Assessed Value Total Full Cash Value Ratio of Net Assessed to Total Values 2007 35,488,716 264,545,940 36,833,437 271,302,992 13% 2008 47,148,069 353,590,419 63,489,149 456,137,673 14% 2009 70,389,857 530,151,332 119,026,192 842,248,039 14% 2010 81,605,192 616,477,382 125,354,097 900,434,027 14% 2011 101,317,831 747,069,356 115,615,201 821,585,705 14% 2012 90,183,109 659,116,219 94,517,290 675,875,514 14% 2013 86,329,516 624,646,309 88,241,336 633,233,534 14% 2014 83,479,765 620,299,568 86,184,886 629,832,601 14% 2015 86,528,930 652,106,522 95,031,182 705,184,275 13% 2016 85,416,058 669,456,687 91,942,395 722,045,373 13% Source: The source of this information is the Pinal County Assessor Page 126 CITY OF ELOY, ARIZONA Property Tax Rates - Direct and Overlapping Governments (Inclusive of Primary & Secondary Tax Rates) Per $100 of Assessed Value Last Ten Fiscal Years Tax Authority Fiscal Year 2012 2007 2008 2009 2010 2011 2013 2014 2015 2016 City of Eloy 1.2917 1.2326 0.9514 0.8363 0.8195 0.9562 1.0387 1.1378 1.1484 1.1701 Pinal County 4.3035 4.0183 3.4355 3.2316 3.9999 3.9999 3.7999 3.7999 3.9999 3.7999 Eloy Fire District 1.9792 1.9533 1.6388 1.6881 1.9655 2.2835 2.3358 2.4735 2.4693 2.4699 Pinal County Jr. College 2.0528 1.8000 1.4100 1.4636 1.5854 1.8529 1.8786 2.2507 2.2633 2.6498 Toltec Elementary School District 3.6983 3.1657 3.0585 2.3283 2.3255 2.3255 2.9326 3.7556 3.7556 3.7556 Casa Grande Union High School District 2.8074 3.2091 2.8887 2.3972 2.3624 2.486 2.5266 3.0509 3.0509 3.1498 Santa Cruz Unified School District 4.2236 4.0708 3.9656 3.7581 3.6517 3.7308 4.4195 4.3045 4.1508 4.3007 Eloy Elementary School District 6.2520 5.5102 5.4636 4.0013 3.9656 4.1156 4.7645 4.9345 4.9299 5.1967 Other Taxing Authorities 0.3834 0.3692 0.4008 0.7516 0.7878 0.8664 0.9182 1.0381 0.9933 1.0279 Source: The source of this information is the Pinal County Treasurer Page 127 CITY OF ELOY, ARIZONA Real and Personal Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 2007 Tax Levy 467,765 Collected to June 30th End of Tax Fiscal Year (a) Taxes Collections Receivable 467,248 517 Percent of Tax Levy 99.89% Adjustments 638 2008 580,442 579,979 463 99.92% (7,778) 2009 657,686 655,813 1,873 99.72% (13,616) 2010 719,688 717,834 1,854 99.74% (4,120) 2011 818,698 816,537 2,161 99.74% (14,452) 2012 832,213 829,664 2,550 99.69% (18,038) 2013 871,947 869,054 2,893 99.67% (11,639) 2014 928,831 926,348 28,972 99.73% (363) 2015 954,648 951,038 3,610 99.62% (1,193) 2016 999,788 981,586 18,202 98.18% (737) (a) Reflects collections made through June 30th, the end of the fiscal year, on such a year's levy. Property taxes are payable in two installments. The first installment is due the first day of October and becomes delinquent on November 1st. The second installment becomes due the 1st day of March and is deliquent on May 1st. The penalty for a late payment is 16% per year prorated monthly March and is deliquent on May 1st. The penalty for late payments is 16% per year prorated as of the 1st day of the month. Penalities for delinquent payments are not included in the above collection figures. Source: The source of this information is the Pinal County Treasuer. Page 128 CITY OF ELOY, ARIZONA Sales Tax Revenues by Industry Fiscal Years 2009 throught 2016 Fiscal Year 2009 Tax Paid Construction $ Manufacturing Transportation/Communication/ Utilities Wholesale Trade Retail Trade Restaurants/Bars Insurance/Real Estate Hotel/Lodging Services All Other Total $ 2,998,610 215,210 683,760 63,534 1,071,019 942,401 101,791 87,157 129,296 153,807 6,446,586 Fiscal Year 2010 Percentage of Total 46.51% 3.34% 10.61% 0.99% 16.61% 14.62% 1.58% 1.35% 2.01% 2.39% 100.00% Tax Paid $ 684,547 $ Fiscal Year 2013 Percentage of Tax Paid Total Construction $ Manufacturing Transportation/Communication/ Utilities Wholesale Trade Retail Trade Restaurants/Bars Insurance/Real Estate Hotel/Lodging Services All Other Total $ 986,143 223,290 646,302 150,107 1,181,505 959,115 247,337 71,811 170,100 150,885 4,786,595 20.60% 4.66% 13.50% 3.14% 24.68% 20.04% 5.17% 1.50% 3.55% 3.15% 100.00% 830,116 286,748 91,143 940,694 836,373 121,700 84,893 154,429 88,512 4,119,155 20.15% 6.96% 16.62% 2.21% 22.84% 20.30% 2.95% 2.06% 3.75% 2.15% 100.00% Tax Paid $ $ 1,493,389 313,380 669,495 $ 98,775 1,278,677 1,037,957 259,296 73,479 143,231 145,546 5,513,225 27.09% 5.68% 12.14% 1.79% 23.19% 18.83% 4.70% 1.33% 2.60% 2.64% 100.00% Note: The categories presented are intended to provide alternative information regarding the source of the City's revenue. 1,637,402 273,899 659,001 $ Fiscal Year 2014 Percentage of Tax Paid Total Source: The source of this information is the Arizona Department of Revenue Page 129 Fiscal Year 2011 Percentage of Total 124,332 981,398 1,042,401 219,347 84,651 126,222 104,424 5,253,077 Fiscal Year 2012 Percentage of Total 31.17% 5.21% 12.55% 2.37% 18.68% 19.84% 4.18% 1.61% 2.40% 1.99% 100.00% Tax Paid $ 638,519 $ Fiscal Year 2015 Percentage of Tax Paid Total $ 877,930 354,911 705,863 $ 115,576 1,019,897 1,064,795 272,974 94,408 143,607 138,984 4,788,945 18.33% 7.41% 14.74% 2.41% 21.30% 22.23% 5.70% 1.97% 3.00% 2.90% 100.00% 1,257,602 268,820 118,652 1,172,126 1,107,200 202,784 82,686 156,361 109,512 5,114,262 Percentage of Total 24.59% 5.26% 12.49% 2.32% 22.92% 21.65% 3.97% 1.62% 3.06% 2.14% 100.00% Fiscal Year 2016 Percentage of Tax Paid Total $ $ 1,363,593 469,659 24.52% 8.45% 721,349 12.97% 116,521 1,030,747 1,088,277 292,015 135,047 205,743 138,121 5,561,072 2.10% 18.54% 19.57% 5.25% 2.43% 3.70% 2.47% 100.00% City of Eloy Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years (Unaudited) City of Eloy Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Local Sales Tax 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Bed Tax 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% Construction Sales Tax 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% Restaurant and Bar Tax 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% Use Tax 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% State of Arizona Tax (a) 5.60% 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% Sources: The sources of this information is the City of Eloy Finance Department and Arizona Department of Revenue (a) In 2010 voters passed a temporary State Sales Tax increase of 1% beginning in June 1, 2010 and expiring on May 31, 2013. Page 130 Pinal County Tax 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% CITY OF ELOY, ARIZONA Actual Excise Tax Collections Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 City Sales Tax $ 7,113,848 8,441,969 6,446,586 4,119,155 5,253,077 5,114,262 4,786,595 5,513,225 4,788,945 5,561,071 State Shared Sales Tax $ 1,057,403 1,022,432 885,140 816,413 887,563 1,229,551 1,361,278 1,447,688 1,519,806 1,571,675 Revenue Share $ 1,263,084 1,565,622 1,665,549 1,436,354 1,082,827 1,403,669 1,698,821 1,853,736 2,013,285 2,002,370 Franchise Tax $ 112,137 135,324 129,343 121,542 132,654 135,939 139,478 141,905 144,163 145,408 Vehicle License Tax $ 696,508 753,544 728,472 696,980 682,530 703,979 724,822 774,269 831,046 900,658 Sources: The source of this information is the City's financial records and Arizona Department of Revenue Page 131 Total $ 10,242,980 11,918,891 9,855,090 7,190,444 8,038,651 8,587,400 8,710,994 9,730,823 9,297,245 10,181,182 CITY OF ELOY, ARIZONA Ratios of Outstanding Debt by Type Last Ten Fiscal Years Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Governmental Activities General Capital Obligation Loans Leases Bonds Payable $ 1,584,470 $ 1,141,332 $ 1,436,419 746,845 536,932 1,295,853 333,208 3,711,329 1,149,118 176,179 2,076,403 1,059,802 1,516,872 965,877 956,583 36,569 3,208,932 12,587 3,001,503 2,786,211 2,568,293 Capital Leases $ 172,586 93,123 35,687 12,163 - Business-Type Activities General Obligation Revenue Bonds Bonds $ 348,668 $ 1,001,632 228,155 914,502 101,792 826,585 53,821 732,845 633,244 612,743 591,299 568,870 545,411 520,875 Notes: Details regarding the City's outstanding debt can be found in the financial statements. Sources: The sources of this information is the City of Eloy Finance Department. (a) See Demographic and Economic Statistics Section for population data. Page 132 Loans Payable $ 4,573,580 4,351,499 7,548,401 8,023,437 7,735,700 7,389,455 7,526,941 8,864,520 8,660,501 9,181,503 Total Primary Government $ 8,822,268 8,307,475 13,852,855 12,223,966 10,945,618 9,924,658 11,363,741 12,447,480 11,992,123 12,270,671 Per Percentage of Capita (a) Personal Income 824 1.33 % 650 1.07 948 1.60 735 1.49 658 1.27 585 1.10 652 1.21 731 1.28 725 1.15 690 1.09 CITY OF ELOY, ARIZONA Direct and Overlapping Governmental Activities Debt As of June 30, 2016 Jurisdiction Casa Grande UHS #82 Central Arizona College $ Bonded Debt Outstanding 24,995,000 Estimated Percentage Applicable 7.81% Estimated Share of Overlapping Debt $ 1,952,110 85,940,000 4.21% 3,618,074 Toltec ESD #22 2,785,000 50.82% 1,415,337 Eloy ESD#11 1,330,000 59.11% 786,163 Santa Cruz Valley UHS#840 2,574,081 41.32% 1,063,610 Subtotal, overlapping debt 117,624,081 City direct debt Total direct and overlapping debt 2,568,293 8,835,294 100% 2,568,293 $ 11,403,587 Source: Assessed value data used to estimate applicable percentages provided by Pinal County Assessor's Office. Debt outstanding data provided by Pinal County Finance. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Eloy. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsibility for repaying the debt, of each overlapping government. The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining there portion of Pinal County's taxable assessed value that is within the government's boundaries and dividing it by the County's total taxable assessed value. Page 133 CITY OF ELOY, ARIZONA Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year Secondary Assessed Value 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $ 36,833,437 $ 63,489,149 $ 119,026,192 $ 125,354,097 $ 115,615,201 $ 94,517,290 $ 88,241,336 $ 86,184,886 $ 95,031,182 $ 91,942,395 7,366,687 12,697,830 23,805,238 25,070,819 23,123,040 18,903,458 17,648,267 17,236,977 19,006,236 18,388,479 20% Limitation (a) Debt Limit Equal to 20% of Assessed Valuation Total Debt Applicable to 20% Limit Legal 20% Debt Margin (Available Borrowing Capacity) Total Net Debt Applicable to the 20% Limit as a Percentage of 20% Debt Limit - $ - 7,366,687 $ 12,697,830 0.00% 0.00% - $ 23,805,238 - - - - - - - $ 25,070,819 $ 23,123,040 $ 18,903,458 $ 17,648,267 $ 17,236,977 $ 19,006,236 $ 18,388,479 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 6% Limitation (b) Debt Limit Equal to 6% of Assessed Valuation Total Debt Applicable to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) Total Net Debt Applicable to the 6% Limit as a Percentage of 6% Debt Limit $ 2,210,006 $ 3,809,349 - $ 2,210,006 $ 7,141,572 - $ 3,809,349 0.00% - $ 7,141,572 0.00% Source: The source of this information is the Pinal County Assessor's records (a) 20% Debt Limitation can be used for Water, Sewer, Light, Parks, and Open Space Purposes. (b) 6% Debt Limitation can be used for all other General Obligation Bonds. Page 134 $ 0.00% 7,521,246 $ - $ 7,521,246 0.00% 6,936,912 $ - $ 6,936,912 0.00% 5,671,037 - $ 5,671,037 0.00% $ 5,294,480 - $ 5,294,480 0.00% $ 5,171,093 - $ 5,171,093 0.00% $ 5,701,871 - $ 5,701,871 0.00% $ 5,516,544 - $ 5,516,544 0.00% CITY OF ELOY, ARIZONA Pledged Revenue Coverage Last Ten Fiscal Years Fiscal Year Ended June 30th 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Utility Service Charges $ 1,454,039 1,593,681 1,819,378 1,846,457 1,715,288 1,761,118 1,662,936 1,893,647 2,195,416 2,442,997 Less: Operating Expenses $ 2,097,765 1,560,635 1,543,338 1,362,606 1,386,245 1,553,018 1,529,528 1,529,720 1,742,934 1,698,839 Water Revenue Bonds Net Available Debt Service Principal Interest Revenue $ (643,726) $ 76,378 $ 50,167 33,046 81,378 46,163 276,040 87,917 41,875 483,851 93,740 37,550 329,043 99,601 32,937 208,100 20,501 28,035 133,408 21,443 27,091 363,927 22,428 26,104 452,482 23,458 25,071 744,158 24,536 23,992 Coverage (5.09) % 0.26 2.13 3.69 2.48 4.29 2.75 7.50 9.32 15.33 Fiscal Year Ended June 30th 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Utility Service Charges $ 2,273,148 2,519,272 2,845,054 2,900,260 2,692,503 2,706,408 2,641,188 3,034,941 3,413,179 3,743,693 Water Infrastructure Finance Authority Loans Less: Net Debt Service Operating Available Principal Interest Expenses Revenue $ 2,840,329 $ (567,181) $ 214,257 $ 91,620 2,154,518 364,754 219,211 86,003 2,583,412 261,642 135,316 128,110 1,977,559 922,701 344,979 137,050 2,000,169 692,334 328,493 136,349 3,124,769 (418,361) 409,349 131,488 2,121,607 519,581 418,205 124,960 2,040,588 994,353 427,256 160,486 2,318,540 1,094,639 615,715 176,960 2,312,286 1,431,407 628,839 172,245 Coverage (1.85) % 1.20 0.99 1.91 1.49 (0.77) 0.96 1.69 1.38 1.79 Fiscal Year Ended June 30th 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Utility Service Charges $ 925,591 1,025,676 1,053,803 977,215 945,290 978,252 1,141,294 1,217,763 1,300,696 United States Department of Agriculture Loan Less: Net Debt Service Operating Available Principal Interest Expenses Revenue $ $ $ $ 593,883 331,708 7,824 79,008 1,040,074 (14,398) 12,559 44,172 614,953 438,850 13,087 43,654 613,924 363,291 13,637 43,124 1,571,751 (626,461) 14,210 42,551 592,079 386,173 14,662 41,714 510,868 630,426 15,279 41,097 575,606 642,157 16,079 40,752 613,447 687,249 16,755 40,089 Source: The source of this information is the City's financial records Page 135 Coverage - % 3.82 (0.25) 7.73 6.40 (11.04) 6.85 11.18 11.30 12.09 CITY OF ELOY, ARIZONA Demographic and Economic Statistics Last Ten Fiscal Years Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 City Population 10,701 12,781 14,620 16,620 16,631 16,964 17,423 17,020 16,531 17,787 County Population 271,328 306,174 335,311 349,830 385,738 384,073 388,106 390,965 401,918 406,584 County Personal Income (in thousands) 6,634,704 7,744,706 8,642,755 8,225,804 8,610,378 9,059,539 9,372,970 9,702,897 10,387,778 11,255,255 County Per Capita Personal Income 24.45 25.30 25.78 23.51 22.32 23.59 24.15 24.82 25.85 27.68 School Enrollment 2,200 2,207 2,120 2,077 2,015 1,914 1,822 1,852 1,832 1,848 City Unemployment Rate 6.4% 10.6% 19.3% 17.9% 17.8% 15.3% 14.6% 12.5% 11.1% 10.2% Pinal County Unemployment Rate 4.2% 7.1% 12.8% 10.9% 10.9% 9.1% 8.6% 7.3% 6.6% 6.3% Sources: Population, County Per Capita Income and City Unemployment Rate - Bureau of Economic Analysis and Arizona Department of Administration. School Enrollment - Toltec Elementary School District, Eloy Elementary School District and Santa Cruz Valley High School District based on 100th day count. Note: Amount for fiscal year 2016 is based on an Bureau of Economic Analysis for personal income percent change from the proceeding year. Page 136 CITY OF ELOY, ARIZONA Principal Employers Current Year and Nine Years Ago Employer Corporation Corrections of America Eloy Elementary School District Republic Plastics City of Eloy Travel Center of America Otto Plastics Arizona, LLC Santa Cruz Valley Union High School District Schuff Steel Iron Skillet Restaurant Pilot Travel Center Employees 1,556 150 125 118 100 81 71 58 56 53 2,368 2016 Percentage of Total City Employment 60.03% 5.79% 4.82% 4.55% 3.86% 3.13% 2.74% 2.24% 2.16% 2.04% 91.36% Source: The source of this information is from various employers. Page 137 2007 Employees 415 145 130 92 58 65 63 60 1,028 Percentage of Total City Employment 21.60% 7.55% 6.77% 4.79% 3.02% 3.38% 3.28% 3.12% 53.51% CITY OF ELOY, ARIZONA Authorized Full-Time Government Employees by Function/Program Last Ten Fiscal Years Function/Program Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Government 31 34 31 27 27 26 27 27 28 30 Public Safety 51 48 46 46 43 44 44 43 44 43 Culture & Recreation 14 14 13 13 13 13 13 13 13 15 Public Works/Admin. 3 3 4 4 4 4 4 4 4 5 Public Works/Streets 11 10 10 10 10 10 10 10 10 10 Source: The source of this information is the City's adopted budget documents. Note: Information is based on authorized positions approved by Council in the Budget. Page 138 Public Works/Water 10 9 9 9 9 9 10 10 10 10 Public Works/Sewer 5 5 3 3 2 2 2 2 2 2 Public Works/Sanitation 7 7 7 7 7 7 7 7 7 3 Total 132 130 123 119 115 115 117 116 118 118 (This page intentionally left blank) Page 139 CITY OF ELOY, ARIZONA Operating Indicators by Function/Program Last Ten Fiscal Years Function/Program General Government Registered Voters Votes cast last primary election 2007 2008 2009 2010 2011 * * 3,135 369 * * 3,314 638 * * 1,428 3,005 4,557 2,985 * 15,828 1,273 2,992 4,554 4,110 * 16,118 937 702 2,504 3,905 864 16,707 1,048 1,007 2,189 3,717 1,172 14,112 Highways & Streets Street resurfacing (miles) Cold Mix for Potholes (tons) Street sweeping (miles) * * 40 3 212 42 3 271 42 Water New Residential Connections Line Breaks Average Daily Consumption 34 * 1.31 8 179 1 Sewer Average Daily Sewage Treatment (thousands of gallons) Line cleaning (feet) Line Plugs * * * Parks and Recreation Park Areas Parkland Acreage Playgrounds Afterschool Program Participants Aquatic Center Admissions 9 15 6 355 5,223 Police Arrests Citations Traffic Stops Officer Reports Photo Enforcement - Notices Printed Calls for Service Page 140 Fiscal Year 2012 2013 2014 2015 2016 3,322 891 * * 3,810 * 3,735 1,872 4,418 1,157 972 1,535 1,902 3,435 2,383 13,076 248 371 618 1,031 1,525 14,524 1,703 936 2,820 3,401 1,451 13,334 1,880 1,698 4,490 3,021 1,358 18,801 1,557 960 3,582 2,463 72 18,150 1,560 910 3,082 1,387 0 16,671 4 168 42 3 197 46 1 145 46 1 96 46 6 192 46 23 240 49 7 226 52 1 252 1 0 204 1 3 177 1 0 69 1 0 87 1 0 27 1 0 35 1 0 51 1 * * * 550 * 52 490 * 54 490 90,000 58 490 150,000 22 600 100,000 43 450 100,000 27 490 75,000 21 495 68,000 39 9 15 6 378 2,530 9 15 6 382 2,120 9 15 6 272 2,357 9 15 6 228 2,075 9 15 6 216 2,268 9 15 6 205 2,935 10 16.29 6 240 4,451 10 16.29 6 300 3,316 10 16.29 6 333 4,388 Airport Hangers T-Hangers 5 12 5 12 5 12 5 12 5 12 5 12 5 12 5 12 5 12 5 12 Economic Development Building Permits-Commercial Building Permits-Residential Housing Rehabilitations Code Enforcement Cases Planning Cases 23 113 3 * 97 38 44 4 * 75 22 35 6 1,104 58 20 78 7 1,267 50 14 48 12 2,087 24 12 37 1 1,601 25 15 96 4 1,729 32 19 99 4 4,063 32 13 74 6 2,429 31 26 114 5 1,705 24 16,386 16,381 718 9,000 307 17,809 13,433 864 9,318 628 16,362 14,559 920 11,636 790 18,924 16,544 817 16,544 1,821 19,086 32,281 858 17,490 2,204 20,857 35,398 975 17,481 2,274 23,900 35,867 991 23,107 3,629 26,540 28,187 940 22,267 5,618 23,961 28,075 937 18,996 7,807 28,305 26,610 903 18,207 7,217 Culture - Library Items in Collections Total Items Circulated Reference Transactions Computer Uses (Hrs.) Inter-Library Loan Sources: This information is obtained from the records of various City Departments Note: Voter registration is taken every two years. * Not available Page 141 CITY OF ELOY, ARIZONA Capital Asset Statistics by Function/Program Last Ten Fiscal Years Function/Program Public Safety Stations Patrol Units Highways and Streets Streets (miles) Streetlights Street poles Water Water mains (miles) Fire hydrants Sewer Sanitary Sewer (miles) Maximum daily treatment capacity (thousands of gallons) Recreation and Aquatics Parks Acreage Number of Parks Swimming Pools Tennis Courts Ball Fields 2008 2009 2010 2013 2014 2015 2016 1 12 1 12 1 12 1 12 1 12 1 12 1 12 1 15 1 11 1 14 * 605 582 85 616 593 90 598 575 90 598 575 91 598 575 93 598 598 93 598 598 93 598 598 93 598 598 93 598 598 120 315 120 321 120 321 123 321 123 326 123 326 123 327 123 327 123 327 123 340 44 45 45 47 47 47 47 47 47 47 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 15 9 1 1 3 15 9 1 1 3 15 9 1 1 3 15 9 1 1 3 15 9 1 1 3 15 9 1 1 3 15 9 1 1 3 16 9 1 1 3 16 9 1 1 3 16 10 1 2 2 Sources: This information is obtained from the records of various City Departments * Not available Page 142 Fiscal Year 2011 2012 2007