Town of Fountain Hills, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Issued by: Administration Department Finance Division TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS INTRODUCTORY SECTION Letters of Transmittal Page 1 List of Principal Officials 12 GFOA Certificate of Achievement 13 Organizational Chart 14 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT 17 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 21 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 34 Statement of Activities 35 Fund Financial Statements: Balance Sheet – Governmental Funds 38 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 41 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 44 Notes to Financial Statements 45 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION Page REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues Expenditures and Changes in Fund Balances – Budget and Actual: General Fund 66 Highway User Revenue Fund 67 Grants Fund 68 Note to Required Supplementary Information 69 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Special Revenue Funds: Combining Balance Sheet 74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 76 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 78 Debt Service Funds: Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 84 Capital Projects Fund: Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 88 STATISTICAL SECTION Financial Trends: Net Position by Component 92 Changes in Net Position 94 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION Page Financial Trends: Fund Balances – Governmental Funds 96 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 98 Revenue Capacity: Governmental Activities – Tax Revenues by Source 100 Assessed Value and Estimated Actual Value of Taxable Property 101 Principal Property Taxpayers 102 Property Tax Levies and Collections 103 Taxable Sales by Category 104 Direct and Overlapping Sales Tax Rates 106 Debt Capacity: Ratios of Outstanding Debt by Type 107 Ratios of General Bonded Debt Outstanding 108 Direct and Overlapping Governmental Activities Debt 109 Legal Debt Margin Information 110 Calculation of Legal Debt Margin 112 Revenue Bond Coverage 113 Demographic and Economic Information: Demographic and Economic Statistics 114 Principal Employers 116 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION Page Operating Information: Authorized Full-Time Equivalent Government Employees by Function 117 Operating Indicators by Function 118 Capital Assets Statistics by Function 120 (This page intentionally left blank) INTRODUCTORY SECTION (This page intentionally left blank) TOWN OF FOUNTAIN HILLS 16705 E. Avenue of the Fountains, Fountain Hills, AZ 85268 480.816.5100 | Fax: 480.837.3145 October 16, 2017 To the Honorable Mayor, Members of the Town Council, and Citizens of the Town of Fountain Hills: State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States by a 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 Town of Fountain Hills (Town) for the fiscal year ended June 30, 2017. This report consists of management’s representations concerning the finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town of Fountain Hills’s 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 Town’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Town’s financial statements have been audited by Heinfeld, Meech & Co., P.C., a certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended June 30, 2017, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town’s financial statements for the fiscal year ended June 30, 2017, 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. www.fh.az.gov Accounting principles generally accepted in the Unites States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Town of Fountain Hills’s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE GOVERNMENT The Town of Fountain Hills overlooks the Verde River Valley and the east valley of the metro Phoenix area. The Town is a master planned community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the late 1960s and the community designed by Charles Wood, Jr. (designer of Disneyland in southern California). The centerpiece of Fountain Hills is one of the world's tallest man-made fountains, a focal point that attracts thousands of visitors each year. Located on 13,006 acres of land, Fountain Hills is surrounded by the McDowell Mountains and Scottsdale on the west, the Fort McDowell Yavapai Nation on the east, the Salt River Pima-Maricopa Indian Community on the south, and by the McDowell Mountain Regional Park on the north. The elevation is 1,520 feet at the fountain, 2,130 feet at the Golden Eagle Trailhead, and is approximately 500 feet above Phoenix. Over the past twenty plus years, Fountain Hills has grown from 10,190 residents to a town of 23,899 in 2015. On June 5, 2006, the Town of Fountain Hills became twenty square miles and about ten percent larger by annexing 1,300 acres of State Trust Land. The process to annex the State Trust Land occurred over a two and one-half year period and development of the land will occur over the next decade. Annexing this property into the Town ensures that its future development will be of the highest quality under Town standards. The Town offers a wide range of living accommodations, from small condominium complexes to large custom homes. Fountain Hills also offers recreational and cultural programs and services that contribute to a high quality of life for its residents. The community consists of primarily residential property and open space; of the total 20.32 square miles of land only 0.5% of the total is zoned commercial and/or industrial, 23.3% is preserved as open space and 51.1% is residential. Page 2 The Town’s Mission Statement The Town of Fountain Hills’ purpose is to serve the best interests of the community by:  providing for its safety and well-being;  respecting its special, small-town character and quality of life;  providing superior public services;  sustaining the public trust through open and responsive government;  and maintaining the stewardship and preservation of its financial and natural resources. To serve, respect, and provide trust and stewardship. Fountain Hills Town Hall The Town of Fountain Hills is an Arizona Municipal Corporation, acting as a general law town as prescribed in the Arizona Revised Statutes. The Town was incorporated on December 5, 1989, with the governmental and administrative affairs of the Town operating under the CouncilManager form of government. Legislative authority is vested in a seven member Town Council. The Mayor is a member of the Town Council who is directly elected by voters and chairs the Town Council meetings. The members of the Council are elected at large and serve four year overlapping terms. The Town Council is responsible for the adoption of local ordinances, budget adoption, appointment of residents to citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and overall management of the Town through department directors and approximately 54 FTE employees. The Presiding Judge, Town Attorney, and Town Prosecutor are under the direction of the Town Council. The Town provides or administers a full range of services including public safety (law enforcement, fire, animal control); development services, code enforcement, planning, building inspection, zoning and public works; construction and maintenance of streets and infrastructure, municipal court, recreational activities, community center, senior services and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise funds. Page 3 The financial reporting entity (the Town) includes all the funds of the primary government (i.e., the Town of Fountain Hills as legally defined) as well as all of its component units. The component units consist of legally separate entities for which the primary government is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the primary government’s operations and are included as part of the primary government. Accordingly, the Cottonwoods Maintenance District, the Eagle Mountain Community Facilities District and the Fountain Hills Municipal Property Corporation are included in the financial report of the Town. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Town of Fountain Hills operates. Internal Controls. As earlier noted, the management of the Town of Fountain Hills, Arizona, is responsible for establishing and maintaining a system of internal control. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding; 1) Safeguarding of assets against loss from unauthorized use or deposition, and 2) Reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes: 1) The cost of a control should not exceed the benefits likely to be derived, and 2) The valuation of costs and benefits requires estimates and judgments by management. The system of internal control is subject to periodic evaluation by management and is also considered by the independent auditors in connection with the annual audit of the Town’s financial statements. All internal control evaluations occur within the above framework. The Town's internal accounting controls are considered to adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Budgetary Controls. The budget process is a cyclical process and begins each year with the preparation of the base budget by each department head. Each budget is based on expenditures to date and the previous years’ experience. The departments’ base budgets, along with any requests for new positions, programs or services are reviewed by the Town Manager. The Town Manager then meets with department heads to review their base budgets and requests for new services and/or programs. Once management has reviewed the departments’ requests, a tentative budget is presented to the Town Council by the Town Manager. The Town Council formally adopts the budget and appropriates funding for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds. Therefore, these funds have appropriated budgets, and budget to actual information is presented. On or before the second Town Council meeting in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the proposed budget and to adopt a final budget by June 30, the close of the Town of Fountain Hills’ fiscal year. The budget is legally enacted through passage of a resolution and is prepared by fund and department. The resolution sets the limit for expenditures during the fiscal Page 4 year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article IX, Section 20. The Town is subject to the State of Arizona’s Expenditure Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carry-over of unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. All appropriations lapse at year-end. To ensure compliance with the state imposed expenditure limitation, a uniform expenditure report must be filed with the state each year. This report reconciles total Town expenditures from the audited financial statements to total expenditures for reporting in accordance with the state’s uniform expenditure reporting system (ARS Section 41-1279.07). Public hearings on the budget are held each year in accordance with legal requirements in order to obtain comments from local taxpayers. The appropriated budget is prepared by fund and department. Department heads may make transfers of appropriations within the department. Transfers of appropriations between departments, however, require Town Council approval. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. Budget-to-actual comparisons for the General Fund and Major Special Revenue Funds are presented in the Required Supplementary Information and all other funds are presented in Combining and Individual Fund Financial Statements and Schedules. Local Economy. The Town of Fountain Hills, Arizona, continues to face many issues during these slow growth economic times. Its citizens, governing body, and municipal government are committed to finding solutions for each of the issues. In order to address these issues, the Town has proposed a baseline budget requiring any new positions to be deemed mission critical. All vacancies will be evaluated to access the need for replacement, elimination or modification to the job description. The Town will be closely monitoring its revenue sources and make adjustments accordingly. The Great Recession appears to be recovering modestly in Fountain Hills; this recovery is indicated by the stable level of local sales tax receipts. Even though construction activity has decreased almost 21% from the prior year, other categories have increased which we interpret as an indicator of a recovering economy. The Town of Fountain Hills’ local tax revenue base consists of two major tax categories, the most significant being wholesale/retail sales and transportation/ communication/utilities (construction had been a third significant category in prior years). The following chart is a look at the past five years’ significant local sales tax activity by sector: Page 5 As can be seen in the chart, sales tax collections continue to show signs of moderate growth. Retail sales experienced a 2.7% increase over the prior year; restaurant/bar revenues have exceeded any prior year and an increase of 8.4% from FY15-16. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and decreased 20.6% from the prior year; recent building permit activity indicates that construction sales tax is likely to increase over the next years. Transportation/communication/utilities tax revenues also posted a decrease of 11.7%. Construction activity provides revenue to the Town through local sales tax, the proceeds of which are utilized for general operations and capital expenditures. Without the resources to fund capital projects, the Town must find additional funds to pay for necessary infrastructure projects. For operating costs, the Town is dependent upon state shared revenues and local sales tax as a major source of operating revenue, accounting for 86% of total General Fund revenue for fiscal year 2016-17. State shared revenues are derived as a proportionate share of state sales, income and vehicle license taxes which are distributed based on the Town’s population compared to all other incorporated cities and towns in Arizona (currently 0.4%). State shared income tax revenue category is based on two years prior personal and corporate earnings; revenue from the State income tax increased by 8.0% in FY16-17. After decreases in State sales tax from FY08-09 through FY11-12, this revenue increased by 2.8% in FY16-17 compared to the prior year. Other local activity has remained fairly level during the recessionary period due to the lack of major retailers (the Town has three grocery stores and one major retailer). Fountain Hills is past the historic period of rapid growth and the long-term economic outlook for the Town must recognize this fact. The opportunity to further expand the retail tax base in Fountain Hills is limited by the lack of available commercial land – over 75% of the currently available commercial lots are already developed. Page 6 Development Activity over the past year: Development Services has been involved with the following development activities during fiscal year 2016-17 (7/1/2016 – 6/30/2017): Two Development Agreements were approved by Council: Park Place Copper Ridge Three Site Plans were approved by the Planning & Zoning Commission during the period: Park Place Fountain View Village Multi-family condominium Six Special Use Permits were granted. Twenty-nine Administrative Use Permits were issued. Fifty-five new Single-Family Residential Building Permits were issued. Ten Multi-family permits were issued. There were six new Commercial Building Permits issued. There were nine commercial tenant improvement permits issued during the last fiscal year. A summary of the activity, by month, is shown below: Permits Issued T.I. & Comm Pools, Fences & Other DUP/MULTI Add Ons (Not Garages Garages & Carports MONTH TOTAL Fiscal year SFR Bldgs. Total Units JULY 3 0 0 0 2 51 2 0 58 AUGUST 3 1 2 1 1 27 3 0 35 SEPTEMBER 2 0 0 0 0 30 3 2 37 OCTOBER 3 5 10 5 1 33 2 0 44 NOVEMBER 3 0 0 0 0 25 3 1 32 DECEMBER 5 0 0 0 0 25 6 1 37 JANUARY 6 1 8 4 2 27 4 0 43 FEBRUARY 5 0 0 0 1 40 2 4 52 MARCH 3 0 0 0 0 32 2 1 38 APRIL 7 0 0 0 1 27 5 0 40 MAY 7 0 0 0 5 30 4 0 47 JUNE YEARLY TOTAL 8 0 0 0 2 29 7 1 46 55 7 20 10 15 376 43 10 509 Page 7 Economic Outlook. Retail Sales – Not having a property tax, the Town of Fountain Hills relies heavily on Town transaction privilege tax (TPT), sometimes called a sales tax. Overall, Town TPT revenues provide over 50% of the General Fund revenues. The Town's TPT rate is currently at 2.6%. The construction TPT is equally divided between the General Fund and the Capital Projects Fund. State Shared Revenues – The Town of Fountain Hills receives significant revenue allocations from the State. These "State Shared Revenues" include allocations of the state-collected income tax, sales tax, fuel tax and motor vehicle-in-lieu taxes. All but the fuel tax is placed in the Town's General Fund, where it is used to sustain a large portion of the Town's day-to-day activities. These revenue sources have improved recently with the economy showing signs of recovery. Highway User Revenue Fund (HURF) – The state shared fuel tax, as it is often called, is placed in this fund to be used specifically for street maintenance and related activity. In recent years, the state legislature has reduced the formula distribution of state-shared revenues to cities. The state shared revenue formula generally allocate revenues based on official census data Long-term Financial Planning. Fountain Hills’ Financial Policies are balanced on sound financial reserves and conservative revenue growth forecasts for the foreseeable future. Potential for State legislative impacts to revenue-sharing or local revenues and additional demands for essential Town services remain. The Town’s financial policies set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. The Town’s Financial Policies have helped weather the slow economic recovery. This policy continues to require the Town to internally restrict an amount equal to 20% of the average actual General Fund revenues for the preceding five fiscal years as part of its General Fund balance. This amount is estimated to be about 60 days of expenditures coverage and is considered a “Rainy Day” fund. Additionally, a reserve of 10% of the average actual General Fund revenues for the preceding five fiscal years is set aside for “pay-as-you-go” capital replacement expenditures, vehicle or equipment replacement, capital projects, prepaying or defeasing existing Town debt, or any other expenditure that is non-recurring in nature. The Council also adopted Financial Policies that include guidelines for the issuance of debt for capital expenditures, community facility districts, financing alternatives, expenditure controls and financial planning. The policy was amended during FY 09-10 to reduce the allocation of the local construction sales tax to the Capital Projects Fund from 85% to 50%, reflecting the transition from one-time building activity to ongoing redevelopment activity. The debt policy was prepared with a preference for “pay-as-you-go” financing for capital spending, however, the policy did not anticipate the lack of funding for capital projects and bond funding needs to be reconsidered. Page 8 In early 2009, the Strategic Planning Advisory Commission (SPAC) began the process of gathering public input to update the Strategic Plan’s vision, confirm residents’ values, and create a fresh structure for the Strategic Plan revision. Subsequently, Strategic Plan 2010 was built upon the foundation of a clearly defined vision statement and eight key values, with specific indicators to evaluate Council and staff priorities. In 2017, SPAC again updated the Strategic Plan. Based on citizen input, the newest Strategic Plan is designed to guide our future decisions grounded on these common values: 1. Economic Growth 2. Infrastructure Maintenance 3. Demographic Balance 4. Financial Stability and Sustainability 5. Community and Quality of Life These values guide the Town’s annual budget process. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS The Town of Fountain Hills’ adopted FY16-17 budget reflected the continued recession in the local economy, which is also somewhat mirrored at the national and state levels. Due to the challenging current economic conditions, the Town has made significant reductions in staff and service levels. This reduction was accomplished by a thorough assessment of all existing and proposed programs and workload; as a result, Town staffing was reduced from 115 to 54 FTE’s (full time equivalents) over the past years. The Town Council established priorities for FY16-17 of which the top two are Economic Development and Pavement Management. In order to implement the Pavement Management program, the Council approved the use of Vehicle License Tax revenues to be dedicated to annual pavement maintenance with an effective date of July 1, 2013. Economic Development initiatives are funded through a dedicated local sales tax which provides funding for business attraction, retention and expansion. Page 9 For the Year. The following list depicts the continued commitment of the Town of Fountain Hills to make the community a better place to live. Fiscal year 2016-17 goals attained are summarized within this list of accomplishments:                      Completion of Ashbrook Wash channelization improvements – Bayfield to Del Cambre Initiation of Fire Station 2 relocation design and construction Installation of a new chiller Completion of the new Lake Aeration System at Fountain Park Demolition of the Bus Barn at Four Peaks Park Resurfaced the basketball courts at Golden Eagle Park Completion of the reconstruction of the tennis courts, mainly financed through the AZSTA (Arizona Sports and Tourism Authority) grant, at Golden Eagle and Four Peaks Parks Added several new monthly and special educational programs, workshops and support groups at the Community Center New public art installed: Selfie Gate, Sky Totem, Ascendo, Strength to the People, Gahn Dancer II and Mounted Carousel Horse Completion and dedication of the Rotary Harmony Musical Playground Completion of the East Loop Sonoran Trail in the Preserve APRA (Arizona Parks & Recreation Association) Outstanding Sports Program recognition for Archery Awarded Playful City USA for 6th time Bronze award for Best Onsite décor for Turkey Trot from IFEA (International Festival and Events Association) Silver awards for Best Single Display Ad and Best Ad Series from IFEA (International Festival and Events Association) Gold Award for Best Organizational Website from IFEA (International Festival and Events Association) Secured grant funding from the Arizona Office of Tourism - Proposition 302 Secured grant funding from Salt River Pima Indian Community - Proposition 202 Secured grant funding from Fort McDowell Yavapai Nation - Proposition 202 Voted one of the Best Cities for Building Wealth from Lending EDU Recognized in the Top 50 of the Most Beautiful Places in the Country by Expedia AWARDS AND ACKNOWLEDGEMENTS Awards. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Fountain Hills for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2016. This was the twenty-first consecutive year that the Town has received this prestigious award. In order to be awarded a Certificate of Achievement, the Town published an easily readable and efficiently organized CAFR. This report satisfied both accounting principles generally accepted in the United States of America (GAAP) and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement program’s requirements and we are submitting it to the GFOA to determine its eligibility for the fiscal year ended 2017 Certificate. Page 10 For the fifth year, The Town was also given the Award for Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended June 30, 2016. In addition, the government received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2016. In order to qualify for the Distinguished Budget Presentation Award, the government’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. This is the fifteenth consecutive year that the Town has received the award. An investment policy was adopted and was awarded the Investment Policy Certification from the Association of Public Treasurers of United States and Canada. Acknowledgments. The preparation of this Comprehensive Annual Financial Report could not have been accomplished without the efficient and dedicated services of the entire team of the Finance Division. I also wish to extend my appreciation to the Mayor and members of Town Council for their leadership and support in planning and conducting the financial affairs of the Town in a responsible and progressive manner. Each employee of the Town has my sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, Grady E. Miller Town Manager Page 11 TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2017 ELECTED OFFICIALS Linda M. Kavanagh, Mayor Alan Magazine, Vice-Mayor Dennis Brown, Councilmember Nick DePorter, Councilmember Henry Leger, Councilmember Art Tolis, Councilmember Cecil A. Yates, Councilmember DEPARTMENT DIRECTORS Grady Miller, Town Manager Craig Rudolphy, Finance Director Robert Melton, Presiding Judge Rachael Goodwin, Interim Community Services Director Robert Rogers, Development Services Director Justin Weldy, Interim Public Works Director Captain Dave Ott, Rural Metro Corporation, Fire Chief Captain Hank Brandimarte, Maricopa County Sheriff’s Office, District Commander Mark Iacovino, The Law Office of Mark Iacovino, Town Prosecutor Andrew McGuire, Gust Rosenfeld, P.L.C., Town Attorney Page 12 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Fountain Hills Arizona For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 Executive Director/CEO Page 13 Fire / EMS Presiding Judge Page 14 Volunteer Program Economic Development Code Enforcement Town Clerk Administrative Services Planning Inspection Facilities Finance / Information Technology Senior Services GIS Recreation / Tourism Streets Administration Building Safety Engineering Parks Public Works Town Attorney Community Center Development Services Town Manager Community Services Town Prosecutor Mayor and Town Council Citizens of Fountain Hills Town of Fountain Hills Organization Contracted Appointed by Council Law Enforcement FINANCIAL SECTION Page 15 (This page intentionally left blank) Page 16 INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Town of Fountain Hills, Arizona (Town), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona, as of June 30, 2017, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Page 17 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and budgetary comparison information, 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 Town’s basic financial statements. The Introductory Section, Combining and Individual Fund Financial Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Financial Statements and Schedules 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 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 October 16, 2017, on our consideration of the Town of Fountain Hills, 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 solely 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 effectiveness of the Town’s 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 the Town of Fountain Hills, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 16, 2017 Page 18 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) Page 19 (This page intentionally left blank) Page 20 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 As management of the Town of Fountain Hills, Arizona (Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2017. This discussion and analysis is intended to be an easily readable breakdown of the Town of Fountain Hills’ financial activities based on currently known facts, decisions and conditions. This analysis focuses on current year activities and operations and should be read in combination with the transmittal letter and the financial statements that follow. The management’s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. FINANCIAL HIGHLIGHTS  The Town’s total net position of governmental activities decreased $451.3 thousand to $ 117.0 million, representing a .4% percent decrease of the total net position.  General revenues from governmental activities accounted for $18.2 million in revenue, or 79.0 percent of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $4.9 million or 21.0 percent of total governmental activities revenues.  The Town had $23.5 million in expenses related to governmental activities, an increase of 8.0 percent from the prior fiscal year primarily due to increased public works costs.  Among major governmental funds, the General Fund had $15.0 million in current fiscal year revenues, which primarily consisted of taxes and intergovernmental revenues. The total expenditures of the General Fund were $13.9 million. The General Fund’s fund balance decreased $3.0 million to $7.2 million at the end of the current fiscal year. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) 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 themselves. Page 21 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 OVERVIEW OF FINANCIAL STATEMENTS – continued Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a privatesector business. The accrual basis of accounting is used for the government-wide financial statements. The Statement of Net Position presents information on all of the Town’s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The Statement of Activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused compensated absences). The government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the Town include general government, development services, public safety, public works, and culture and recreation. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town are included in governmental funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the Town’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Town’s near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Page 22 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 OVERVIEW OF FINANCIAL STATEMENTS – continued 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, Highway Users Revenue (HURF), Grants, Capital Projects, Development Fees and all Debt Service Funds, all of which are considered to be major funds. Data from 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. 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. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s budget process. The Town adopts an annual 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 major Special Revenue Funds as required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the Town to provide services to our citizens, the Statement of Net Position and the Statement of Activities serve to provide an answer to the question of how the Town, as a whole, did financially throughout the year. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by the private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the Town’s assets and the changes in those assets. The change in assets is important because it tells the reader whether the financial position of the Town as a whole has improved or diminished. However, in evaluating the overall position of the Town, nonfinancial information such as changes in the Town’s tax base and the condition of the Town’s capital assets will also need to be evaluated. Analysis of Net Position. Net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town, governmental activities assets exceeded liabilities by $117.0 million at the current fiscal year end. Page 23 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The largest portion of the Town’s governmental activities net position reflects its investment in capital assets (e.g., land, infrastructure, buildings and improvements, vehicles, machinery and equipment and construction in progress), less any related outstanding debt used to acquire those assets. The Town uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related outstanding debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In addition, a portion of the Town’s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance is unrestricted and may be used to meet the Town’s ongoing obligations to its citizens and creditors. The following tables present a summary of the Town’s net position for the fiscal years ended June 30, 2017 and June 30, 2016. Current and other assets Capital assets, net Total assets Governmental Activities As of As of June 30, 2017 June 30, 2016 $ 24,037,642 $ 23,190,907 103,179,955 106,661,659 127,217,597 129,852,566 Current and other liabilities Long-term liabilities Total liabilities Net position Net investment in capital assets Restricted Unrestricted Total net position 4,588,747 5,669,418 10,258,165 $ 4,025,377 8,416,454 12,441,831 94,909,703 95,647,990 4,471,661 4,530,239 17,578,068 17,232,506 116,959,432 $ 117,410,735 At the end of the current fiscal year the Town reported positive balances in all three categories of net position for governmental activities. The Town reported positive balances in all net position categories in the prior fiscal year. Page 24 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The Town’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. The following are significant current year transactions that had an impact on the Statement of Net Position.  The reduction of $3.5 million of governmental capital assets is due primarily to depreciation expense. Changes in net position. The Town’s total revenues for the current fiscal year were $23.1 million. The total cost of all programs and services was $23.5 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2017 and June 30, 2016. Governmental Activities Fiscal Fiscal Year Ended Year Ended June 30, 2017 June 30, 2016 Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues Property taxes Sales taxes Franchise taxes State Shared revenue Vehicle License taxes Investment earnings Miscellaneous Total revenues Expenses General government Development services Public safety Public Works Culture and recreation Interest on long-term debt Total expenses Changes in net position Net position, beginning Net position, ending $ 2,664,463 1,699,931 494,328 2,296,199 9,415,151 367,119 5,115,914 941,364 55,127 28,839 23,078,435 $ 2,016,451 1,615,973 381,011 2,569,504 9,395,667 360,320 4,886,238 927,440 219,058 13,826 22,385,488 3,142,722 2,516,966 1,364,378 2,253,208 7,563,898 7,178,890 7,904,577 6,476,688 3,375,414 3,124,523 178,749 241,694 23,529,738 21,791,969 (451,303) 593,519 117,410,735 116,817,216 $ 116,959,432 $ 117,410,735 Page 25 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The charts below compare the governmental expenses from fiscal years 2016-17 and 2015-16. Page 26 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The following items are significant current year transactions that have had an impact on the change of net position.  Fees, Fines and Charges for Services revenue increased 32.1 percent compared to the prior year due in large part to the collection of the new environmental fee.  Interest on long-term debt decreased 26.0 percent due to the prior year refunding of old debt and reissuance of new bonds.  Public safety costs include contracts for police and fire; one contract is multi-year with automatic increases while the other is a cost reimbursement contract.  Investment income decreased in the current year 74.8 percent over the prior year due to low overall market returns.  Overall, expenses increased 8.0 percent due primarily to a general increase in the cost of obtaining goods and services. The following table presents the cost of the Town’s major functional activities. The table also shows each function’s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the Town’s taxpayers by each of these functions. Year Ended June 30, 2017 Net Total (Expense)/ Expenses Revenue Governmental Activities General government $ 3,142,722 $ (2,506,081) Development services 1,364,378 (298,295) Public safety 7,563,898 (7,186,135) Public Works 7,904,577 (6,148,913) Culture and recreation 3,375,414 (2,352,843) Interest on long-term debt 178,749 (178,749) $23,529,738 $(18,671,016) Total expenses    Year Ended June 30, 2016 Total Expenses Net (Expense)/ Revenue $ 2,516,966 2,253,208 7,178,890 6,476,688 3,124,523 241,694 $21,791,969 $ (2,068,504) (995,716) (7,087,802) (4,816,682) (2,568,136) (241,694) $(17,778,534) The cost of all governmental activities this year was $23.5 million. Federal, State, and county governments and charges for services subsidized certain governmental programs with charges for services of $4.9 million. Net cost of governmental activities of $18.7 million was financed by general revenues, which are made up of primarily sales taxes of $9.4 million and State Shared revenues of $6.1 million. Page 27 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 FINANCIAL ANALYSIS OF THE TOWN’S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the Town’s net resources available for spending at the end of the fiscal year. The financial performance of the Town as a whole is reflected in its governmental funds. As the Town completed the year, its governmental funds reported no change in the combined fund balance of $22.0 million. The General Fund comprises 32.7 percent of the total fund balance. Approximately $2.7 million or 37.6 percent of the General Fund’s fund balance is unassigned. The General Fund is the principal operating fund of the Town. The fund balance decreased by $3.0 million to $7.2 million as of fiscal year end. General Fund revenues increased $267,181 primarily due to increased State-shared revenues. General Fund expenditures increased $941,373. This increase was a result of increased public safety costs and the purchase of eight new vehicles that were due to be replaced. The Highway User Revenue Fund comprises 10.5 percent of total fund balance. The fund balance increased $656,238 from the prior year due to the increase in sales tax revenues. The Capital Projects Fund comprises 37.1 percent of the total fund balance. All of the fund balance is committed or assigned to capital projects. The fund balance increased $2.7 million due to the delays involving ongoing capital projects during the fiscal year. The Development Fees Fund is 8.8 percent of the total fund balance. The fund balance decreased primarily because of transfers out to projects utilizing the development fees. BUDGETARY HIGHLIGHTS Over the course of the year, the Town revised the General Fund annual expenditure budget primarily due to changes in the contingency amount. The difference between the original budget and the final amended budget was a $85,280 decrease, or .6 percent. Page 28 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 BUDGETARY HIGHLIGHTS – continued A schedule showing the budget amounts compared to the Town’s actual financial activity for the General Fund is provided in this report as required supplementary information. The significant variances are summarized as follows:  The negative variance of $156,233 in overall revenues is primarily due to less than expected licenses and permits revenue, mostly attributable to the delay in commercial construction projects assumed to begin in FY 2016-2017.  The favorable total expenditures variance of $1,423,435 includes all departments. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. As of the end of the current fiscal year, the Town had invested $103.2 million in governmental capital assets, including buildings, facilities, vehicles, computers, equipment, infrastructure assets and artwork. These amounts represent net increases prior to depreciation of $1.3 million from the prior fiscal year for governmental activities. The increases were primarily due to park and street improvements. Total depreciation expense for the current fiscal year was $5.2 million for governmental activities. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2017 and June 30, 2016. Capital assets – non-depreciable Capital assets – depreciable, net Total Governmental Activities As of As of June 30, 2017 June 30, 2016 $ 27,134,114 $ 27,522,240 76,045,841 79,139,419 $103,179,955 $106,661,659 The estimated construction commitments amount is $286,836. Additional information on the Town’s capital assets can be found in Note 5. Debt Administration. At year-end, the Town had $8.3 million in governmental long-term debt outstanding with $2.7 million due within one year. Long-term debt decreased by $2.7 million for governmental activities. Page 29 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 CAPITAL ASSETS AND DEBT ADMINISTRATION – continued State statutes currently limit the amount of general obligation debt a Town may issue a percentage of its total assessed valuation for water, sewer, lights, open space preserves parks, playgrounds and recreational facilities. The current 20 percent debt limitation for the Town is $84.7 million. State statutes also currently limit the amount of general obligation debt a Town may issue to a percentage of its total assessed valuation for all other purposes. The current six percent debt limitation for the Town is $25.4 million. Additional information on the Town’s long-term debt can be found in Notes 6 and 7 in the notes to the financial statements. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the Town’s finances and to demonstrate the Town’s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Finance Division, Town of Fountain Hills, 16705 East Avenue of the Fountains, Fountain Hills, Arizona 85268 or visit our website at: www.fh.az.gov. Page 30 BASIC FINANCIAL STATEMENTS Page 31 (This page intentionally left blank) Page 32 GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 33 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2017 Governmental Activities ASSETS Current assets: Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Inventory, at cost Prepaid items Cash and investments - restricted Total current assets $ Noncurrent assets: Capital assets not being depreciated Capital assets, net of accumulated depreciation Total noncurrent assets Total assets 27,134,114 76,045,841 103,179,955 127,217,597 LIABILITIES Current liabilities: Accounts payable Accrued wages and benefits Other liabilities Customer deposits Compensated absences payable Revenue bonds payable General obligation bonds payable Unearned revenues Total current liabilities 1,035,703 70,322 8,922 151,547 300,219 360,000 2,360,000 302,034 4,588,747 Noncurrent liabilities: Non-current portion of long-term liabilities Total noncurrent liabilities Total liabilities NET POSITION Net investment in capital assets Restricted for: Streets and highways Capital outlay Debt service Unrestricted Total net position 22,274,126 656,587 913,745 62,522 38,452 5,872 17,342 68,996 24,037,642 5,669,418 5,669,418 10,258,165 94,909,703 $ 1,999,080 1,959,320 513,261 17,578,068 116,959,432 The notes to the basic financial statements are an integral part of this statement. Page 34 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Net (Expense) Revenue and Changes in Net Position Program Revenues Functions/Programs Governmental activities: General government Development services Public safety Public works Culture and recreation Interest on long-term debt Total governmental activities Expenses $ $ 3,142,722 $ 1,364,378 7,563,898 7,904,577 3,375,414 178,749 23,529,738 $ Charges for Services Operating Grants and Contributions Capital Grants and Contributions 415,883 $ 1,066,083 273,515 216,724 692,258 82,182 $ 50,112 1,538,940 28,697 301,616 2,664,463 $ 1,699,931 $ 494,328 Governmental Activities 138,576 $ 54,136 General revenues: Taxes: Property taxes Sales taxes Franchise taxes State sales & income tax revenue sharing - unrestricted Vehicle license tax revenue sharing - unrestricted Investment earnings Miscellaneous Total general revenues (2,506,081) (298,295) (7,186,135) (6,148,913) (2,352,843) (178,749) (18,671,016) 2,296,199 9,415,151 367,119 5,115,914 941,364 55,127 28,839 18,219,713 (451,303) Changes in net position 117,410,735 Net position, beginning of year Net position, end of year $ 116,959,432 The notes to the basic financial statements are an integral part of this statement. Page 35 (This page intentionally left blank) Page 36 FUND FINANCIAL STATEMENTS Page 37 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2017 General ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Due from other funds Inventory, at cost Prepaid items Cash and investments - restricted Total assets $ $ 2,227,457 6,849 215,469 Grants $ 177,892 General Obligation Debt Service $ 238,076 54,367 17,675 96,900 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Other liabilities Customer deposits Unearned revenues Due to other funds Total liabilities $ Deferred inflows of resources: Unavailable revenues - property taxes Unavailable revenues - other Total deferred inflows of resources 5,872 16,868 68,996 7,909,036 340,944 60,501 8,544 151,547 37,488 91,334 690,358 $ 2,449,775 $ 274,792 $ $ 136,954 6,280 $ 10,246 $ 292,443 264,546 143,234 274,792 31,029 41,036 41,036 Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances 3,989 3,989 31,029 1,995,090 261,414 22,740 2,714,135 1,743,768 2,696,999 7,177,642 Total liabilities, deferred inflows of resources and fund balances Page 38 6,972,039 148,773 678,813 Highway User Revenue $ 7,909,036 307,462 2,302,552 $ 2,449,775 261,414 $ The notes to the basic financial statements are an integral part of this statement. 274,792 $ 292,443 Eagle Mountain Debt Service $ 43,147 Municipal Property Corporation Debt Service $ 169,563 Capital Projects Development Fees Non-Major Governmental Funds Total Governmental Funds $ $ $ $ 8,597,333 54,136 1,939,113 417,291 8,107 13,655 4,135 1,909,506 29,538 19,463 48 2,987 7,294 474 $ 51,254 $ $ 169,563 $ $ 8,665,124 $ $ 505,435 $ 2,360,539 $ 1,969,310 $ $ 42,124 3,541 378 $ 12,860 518,295 46,043 3,932 47,322 169,563 474 16,073 1,448,949 457,771 1,943,248 7,127,301 1,019,528 47,322 $ 51,254 169,563 $ 169,563 8,146,829 $ 8,665,124 1,943,248 $ 2,360,539 1,035,703 70,322 8,922 151,547 302,034 104,194 1,672,722 34,961 462,316 497,277 417,291 417,291 3,932 22,274,126 656,587 913,745 62,522 38,452 104,194 5,872 17,342 68,996 24,141,836 23,214 4,432,710 11,290,385 3,528,529 2,696,999 21,971,837 1,923,267 $ 1,969,310 $ 24,141,836 Page 39 (This page intentionally left blank) Page 40 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Total governmental fund balances $ 21,971,837 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 $ 211,759,485 (108,579,530) 103,179,955 Some receivables are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in the funds. Property taxes Other 34,961 462,316 497,277 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Compensated absences payable Bonds payable (419,385) (8,270,252) Net position of governmental activities (8,689,637) $ 116,959,432 The notes to the basic financial statements are an integral part of this statement. Page 41 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2017 General Revenues: Property taxes Sales taxes Franchise taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues $ Highway User Revenue $ 7,970,576 367,119 698,808 284,090 5,160,526 181,106 94,117 211,190 7,379 14,974,911 Expenditures: Current General government Development services Public safety Public works Culture and recreation Capital outlay Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures Grants $ General Obligation Debt Service $ 1,902,919 719,662 2,480,304 170,370 4,492 206,161 7,023 3,381,851 2,495,993 780,509 7,420,032 672,806 2,286,053 217,265 4,408 1,907,327 206,161 47,068 2,925,613 324,001 13,872,658 2,925,613 371,069 1,930,000 188,250 1,000 2,119,250 1,102,253 456,238 (164,908) (211,923) Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): 39,828 (4,185,083) (4,145,255) 200,000 164,908 200,000 164,908 Changes in fund balances (3,043,002) 656,238 (211,923) Fund balances, beginning of year 10,220,644 1,646,314 473,337 Excess (deficiency) of revenues over expenditures Fund balances, end of year Page 42 $ 7,177,642 $ 2,302,552 $ The notes to the basic financial statements are an integral part of this statement. $ 261,414 Eagle Mountain Debt Service $ 378,872 Municipal Property Corporation Debt Service $ Capital Projects Development Fees Non-Major Governmental Funds Total Governmental Funds $ $ $ $ 365,082 111,434 5,653 359,831 500,731 70,660 54,136 938 379,810 2,315 2,315 23,898 443,116 693 46,537 4,746 988,851 4,420 115,854 2,207 168,280 494,638 1,151,999 2,713,548 1,275,147 7,420,032 3,954,450 2,484,940 1,693,265 352,233 3,798 198,352 535 $ 2,287,444 9,415,151 367,119 1,310,973 284,090 7,917,651 351,476 153,438 257,727 55,127 22,400,196 375,000 34,056 170 409,226 370,000 22,680 1,010 393,690 1,506,439 535 865,068 2,675,000 244,986 2,180 22,463,548 (29,416) (391,375) (1,063,323) 115,319 123,783 (63,352) 249,055 (419,200) (419,200) 429,570 (224,947) 204,623 5,194,138 (5,194,138) 249,055 4,110,777 (364,908) 3,745,869 (29,416) (142,320) 2,682,546 (303,881) 328,406 (63,352) 76,738 311,883 5,464,283 2,247,129 1,594,861 22,035,189 47,322 $ 169,563 $ 8,146,829 $ 1,943,248 $ 1,923,267 $ 21,971,837 Page 43 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Changes in fund balances - total governmental funds $ (63,352) 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 $ 1,696,612 (5,193,321) (3,496,709) Donated items are not reported in the governmental funds. However, in the Statement of Activities, the costs of those assets are reported as capital grants and contributions. 230,956 Some revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes Other 8,755 438,528 447,283 Repayments of bond principal are expenditures in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. 2,675,000 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Loss on disposal of assets Amortization of deferred bond items Compensated absences Changes in net position in governmental activities The notes to the basic financial statements are an integral part of this statement. Page 44 (215,951) 68,417 (96,947) (244,481) $ (451,303) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity with accounting principles generally accepted in the United States of America 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. The more significant of the Town’s accounting policies are described below. A. Reporting Entity The Town’s major operations include parks and recreation, culture and recreation, public works, public safety and general administrative services. The Town is a municipal entity governed by an elected Mayor and Council. 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 Town 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, the component units combined with the Town for financial statement presentation purposes and the Town are not included in any other governmental reporting entity. Consequently, the Town’s financial statements include only the funds of those organizational entities for which its elected governing body is financially accountable. Eagle Mountain Community Facilities District and the Cottonwoods Maintenance District. As special purpose districts and separate political subdivisions under the Arizona Constitution, the Districts can levy taxes and issue bonds independently of the Town. Property owners in the designated areas are assessed taxes for the costs of operating the Districts. The Town Council serves as the Board of Directors; however, the Town has no liability for the Districts’ debt, the Districts are responsible for the debt; the debt is therefore not subject to the Town’s debt limit. The Districts cannot be part of another reporting entity. The Districts’ governing bodies are substantially the same as the Town and the Town’s management oversees operations, resulting in the Town having the ability to exercise control. As a result, for financial reporting purposes, transactions of the Districts are combined together and included as if they were part of the Town’s operations. Page 45 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Town of Fountain Hills, Arizona Municipal Property Corporation. The Town of Fountain Hills, Arizona Municipal Property Corporation’s (MPC) Board of Directors consists of three members which are appointed by the Fountain Hills Town Council. The MPC, which is a nonprofit corporation incorporated under the laws of the State of Arizona, was formed for the sole purpose of assisting the Town in obtaining financing for various projects of the Town. The Town has a “moral obligation” for the repayment of the MPC’s bonds. The MPC cannot be part of another reporting entity. The MPC provides services exclusively to the Town. As a result, for financial reporting purposes, transactions of the MPC are combined together and included as if they were part of the Town’s operations. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) present financial information about the Town as a whole. The reported information includes all of the nonfiduciary activities of the Town and its component units. For the most part, the effect of internal activity has been removed from these statements. Interfund services provided and used, such as interfund transfers, are not eliminated in the process of consolidation. These statements are to distinguish between the governmental and business-type activities of the Town. Governmental activities normally are supported by taxes and intergovernmental revenues. The Town does not have any business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is 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 shared revenues, investment income and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. Page 46 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-wide Financial Statements – The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. 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 governmentwide 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. Fund Financial Statements – Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service 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, state shared revenues, 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 revenues arise when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. 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. The Town reports the following major governmental funds. General Fund – The General Fund is the Town’s primary operating fund. This fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Highway User Revenue Fund (HURF) – This fund accounts for the Town’s share of motor vehicle fuel tax revenues and sales tax. Page 47 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Grants Fund – This fund accounts for the activities of various restricted grants and contributions received by the Town. General Obligation Debt Service Fund – This fund accounts for the Town’s property tax revenues received to pay the debt service of the Town’s general obligation bonds. Municipal Property Corporation Debt Service Fund – This fund accounts for the revenues received to pay the debt service on MPC revenue bonds. Eagle Mountain Debt Service Fund – This fund accounts for the property tax revenues restricted to pay the debt service of the Eagle Mountain Community Facilities District component unit. Capital Projects Fund – This fund accounts for the capital improvements to various projects and equipment purchases of the Town. Development Fees Fund – This fund accounts for restricted development fees collected from building permits. D. Cash and Investments Cash and cash equivalents at year end were cash on hand, cash in bank, restricted cash, and cash and investments held by the State Treasurer. Cash and investments are pooled, except for investments that are restricted under provisions of bond indentures or other restrictions that are required to be reported in the individual funds. Arizona Revised Statutes authorize the Town to invest public monies in the State Treasurer’s local government investment pools, the County Treasurer’s investment pool, obligations of the U.S. Government and its agencies, obligations of the state and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. Investments are stated at fair value. 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 48 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES E. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. Investment income is a component of revenue in the governmental funds financial statements. F. 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). Interfund balances between governmental funds are eliminated on the Statement of Net Position. Property taxes are levied by the Town and collected by the Maricopa County Treasurer. Property taxes are levied no later than the third Monday in August and are payable in two installments due October 1 of the current year and March 1 of the subsequent year. Taxes become delinquent after the first business day of November and May, respectively. Interest attaches on installments after the delinquency date. All receivables are shown net of an allowance for uncollectibles. G. Inventory All inventories are valued at average cost using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed in the government-wide financial statements, and as expenditures when consumed in the governmental funds. H. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. In the government-wide and fund financial statements, prepaids are recognized as expenses/expenditures when goods and/or services are received rather than when purchased. Page 49 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. Restricted Cash and Investments The Town reported restricted assets in the amount of $68,996 for funds held in an escrow account. The agreement provides that if, prior to July 1, 2017, any future Council fails to ratify this agreement or fails to provide severance when required as set forth in the agreement between the Town Council and Town Manager, the Town Manager shall be permitted to withdraw all funds from the escrow, minus any interest earned, which interest shall be payable to the Town upon the Town Manager’s withdrawal of the amounts in escrow. J. Capital Assets Capital assets, which include land and improvements, artwork, buildings and improvements, vehicles, machinery, and equipment, construction in progress, and infrastructure assets, are reported in the government-wide financial statements. Capital assets are defined be the Town as assets with an initial, individual cost in excess of $10,000 and an estimated useful life in excess of one year. Capital assets are recorded at historical cost, if purchased or constructed. Donated capital assets are recorded at the acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the life of the asset are not capitalized. Capital assets of the Town are depreciated using the straight-line method over the following estimated useful lives: Buildings and building improvements Improvements other than buildings Infrastructure Vehicles, machinery and equipment 20 - 50 years 20 years 15 - 50 years 5 - 20 years K. 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. The Town did not have any items that qualified for reporting in this category. 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. Page 50 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES L. Compensated Absences The Town’s employee vacation and sick leave policies generally provide for granting vacation and sick leave with pay. Sick leave and vacation benefits accrue as pay periods are completed at the current rate of pay. All eligible full-time and part-time regularly-scheduled employees can accrue vacation leave. Employees accrue up to a maximum of two times the yearly maximum accrual of vacation through carryover of balances, depending upon their length of service. In the event of termination, employees will be paid for any accrued, but unused, vacation hours. Full-time and part-time regularly-scheduled employees accrue sick leave, up to a maximum of 1040 hours. A portion of this balance will be paid upon a satisfactory separation of service. Part-time nonregularly-scheduled, temporary, or seasonal, and other employees accrue paid sick time for hours worked, not to exceed 40 hours per calendar year. The current and long-term liabilities, including related benefits, for accumulated vacation and sick leave are reported on the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. M. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the statement of net position. Bond premiums and discounts 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 bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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 financial statements are reported as other financing sources/uses in governmental funds. Page 51 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES O. Net Position Flow Assumption In the government-wide financial statements the Town 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, 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. Fund balance is reported as restricted 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. Committed. The committed fund balance classification includes amounts that can be used only for the specific purposes imposed by formal action of the Town Council, the Town’s highest level of decision making authority, by resolution or ordinance. Those committed amounts cannot be used for any other purpose unless the Town Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. Page 52 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 – FUND BALANCE CLASSIFICATIONS Assigned. Amounts in the assigned fund balance classification are intended to be used by the Town for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the General Fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the General Fund, assigned amounts represent intended uses established by the Town Council or a management official delegated that authority by formal Town Council action. The authority to make assignments has been delegated by the Town Council to the Finance Director. 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 been restricted, committed, or assigned. The Town 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 Town has established a fund balance policy which states that the combined General Fund operating fund balance should be at least 30 percent of the average actual General Fund revenues for the preceding five fiscal years. The Town has established a stabilization fund (Rainy Day fund) in the Town’s fund balance policy. The Rainy Day fund had a balance of $2,711,008, reported as a committed fund balance at June 30, 2017. The Rainy Day fund may only be used for the following: 1) to replace the loss of more than 25 percent of the Town’s local share of State shared revenues, 2) for any event that threatens the health, safety or welfare of the Town’s citizens, 3) for any event that threatens the fiscal stability of the Town, and lastly 4) to address any matter declared as an emergency by the governor of the State of Arizona or the Mayor of the Town. All withdrawals from the Rainy Day fund shall be subject to the following rules: 1) any appropriation shall require the approval by at least 2/3 vote by the Town Council, and 2) the maximum amount of Rainy Day withdrawal in any fiscal year shall not exceed one-half of the total balance in the fund. Replenishment of the Rainy Day fund when spent by the Town should not exceed a period of more than five years, and should be repaid in annual installments of not less than one percent of the previous fiscal year General Fund balance. Repayments shall be appropriated as part of the annual budget adoption. Page 53 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 – FUND BALANCE CLASSIFICATIONS The table below provides detail of the major components of the Town’s fund balance classifications at year end. General Fund General Obligation Debt Service Fund Highway User Revenue Fund Municipal Eagle Property Mountain Corporation Debt Debt Service Service Fund Fund Capital Projects Fund Non-Major Development Governmental Fees Fund Funds Total Fund Balances: Nonspendable: Inventory Prepaid items $ 5,872 $ $ $ $ $ $ $ 16,868 $ 5,872 474 17,342 16,073 16,073 Restricted: Capital Projects 261,414 Debt Service 47,322 478,299 169,563 1,995,090 Public Works 1,995,090 1,943,248 1,943,248 Development Fees Committed: Rainy Day 2,711,008 2,711,008 Public Art 3,127 3,127 Downtown Strategy 932,888 932,888 Economic Development 160,300 160,300 13,053 13,053 Tourism 7,127,301 Capital Projects 7,127,301 342,708 Local Court Enhancement 342,708 Assigned: Capital Projects 813,302 1,019,528 1,832,830 457,771 Environmental Vehicle Replacement 388,264 Equipment Replacement 542,202 542,202 2,696,999 2,696,999 Unassigned: Total fund balances Page 54 307,462 457,771 $ 7,177,642 $ 2,302,552 $ 695,726 261,414 $ 47,322 $ 169,563 $ 8,146,829 $ 1,943,248 $ 1,923,267 $ 21,971,837 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 – CASH AND INVESTMENTS Arizona Revised Statutes authorize the Town to invest public monies in the State Treasurer’s local government investment pools, the County Treasurer’s investment pool, obligations of the U.S. Government and its agencies, obligations of the state and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. The statutes do not include any requirements for credit risk, custodial credit risk, concentration of credit risk, interest rate risk, or foreign currency risk for the Town’s investments. Custodial Credit Risk – Deposits. Custodial credit risk is the risk that in the event of bank failure the Town’s deposits may not be returned to the Town. The Town does not have a deposit policy for custodial credit risk. At year end, the carrying amount of the Town’s deposits was $523,530 and the bank balance was $559,051. At year end, $60,232 of the Town’s deposits were covered by collateral held by the pledging financial institution in the Town’s name. The remaining amount is covered by FDIC. Fair Value Measurements. The Town 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 Valuation Techniques. Equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing techniques. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Real estate assets classified in Level 3 are valued by external appraisals and are generally obtained at least annually. The appraisals are performed using generally accepted valuation approaches by an independent appraiser. 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, as an investment company, 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 pool are not required to categorize the value of shares in accordance with the fair value hierarchy. Page 55 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 – CASH AND INVESTMENTS All investments in which the fair value hierarchy is applicable are measured at fair value on a recurring basis. At year end, cash and investments as of June 30, 2017, are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Cash on hand Restricted cash and investments Total pooled cash and investments $ $ 21,749,746 523,530 850 68,996 22,343,122 At year end, the Town’s investments consisted of the following: Investment Maturities (in Years) Investment Type Category Fair Value Less than 1 1-5 Credit Rating S&P AA+ Moody’s Aaa 3,022,719 AA+ Aaa U.S. Treasury Notes Level 2 $ 6,742,894 $ 1,293,736 $ 5,449,158 Federal National Mortgage Association Notes Level 2 3,022,719 Federal Home Loan Mortgage Corporation Notes Level 2 2,708,783 373,594 2,335,189 AA+ Aaa Federal Home Loan Bank Notes Level 2 3,026,897 741,885 2,285,012 AA+ Aaa Wells Fargo Money Market Funds Level 2 20,002 20,002 N/A N/A $ 2,429,217 $ 13,092,078 State Treasurer’s Investment Pool 7 Total Not applicable 6,228,451 55 days average maturities $ 21,749,746 Interest Rate Risk. Interest rate risk is the risk that changes in interest rates may reduce the market value of Town investments. In accordance with its investment policy, the Town manages its exposure to declines in fair values by the following: Page 56  Structuring the investment portfolio so that securities mature concurrent with the anticipated cash requirements for ongoing operations, thereby avoiding, as much as possible, the need to sell securities into an adverse market environment prior to maturity.  Investing funds primarily in shorter-term securities or similar investment pools and limiting the average maturity of the portfolio in accordance with the needs of the Town.  With respect to any firm or individual given responsibility for investments utilizing external research and advice regarding the current interest rate outlook and global economic condition to optimize portfolio duration strategy. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 – CASH AND INVESTMENTS Credit Risk. Credit risk is the risk of default of debt by an issuer or counterparty to an investment. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in ARS §35-323. When possible, analysis of the credit worthiness of all individual debt issuers held in the portfolio should be conducted on an annual basis in an effort to guard against investing in a weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisers with which the Town will do business. Custodial Credit Risk – Investments. Custodial credit risk is the risk that in the event of depository financial institution failure, the Town’s deposits may not be returned to the Town. The Town’s investment in the State Treasurer’s investment pool represents a proportionate interest in the pool’s portfolio; however the Town’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of Credit Risk. Concentration of credit risk is the risk of loss from over concentration of investments. In accordance with its investment policy, the Town diversifies its investment portfolio to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities. With the exception of U.S. Treasury notes and securities and authorized pools, the investment policy establishes a maximum percentage of 30 percent in insured or collateralized certificates of deposit; 20 percent in certificates of deposit registry services; 30 percent in commercial paper; and 30 percent in bonds, debentures, or notes. Investment Type U.S. Treasury Notes Federal National Mortgage Association Notes Federal Home Loan Mortgage Corporation Notes Federal Home Loan Bank Notes Wells Fargo Money Market Funds State Treasurer’s Investment Pool 7 Fair Value $ 6,742,894 3,022,719 2,708,783 3,026,897 20,002 6,228,451 $21,749,746 Percent of Town Investments 31.0% 13.9 12.5 13.9 0.1 28.6 100.0% NOTE 4 – RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of intergovernmental receivables. Intergovernmental receivables, net of allowance for uncollectibles, as of year-end for the Town’s individual major funds consisted entirely of receivables due from the State. Page 57 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 5 – CAPITAL ASSETS A summary of capital asset activity at year end is as follows: Governmental Activities Capital assets, not being depreciated: Land Artwork Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Infrastructure Buildings and building improvements Improvements other than buildings Vehicles, machinery and equipment Total capital assets being depreciated Less accumulated depreciation for: Infrastructure Buildings and building improvements Improvements other than buildings Vehicles, machinery and equipment Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net Beginning Balance $ 23,571,668 2,365,000 1,585,572 27,522,240 Increase $ $ 138,900 1,423,249 1,562,149 145,833,576 18,996,641 14,506,257 3,565,208 182,901,682 1,362,849 (87,177,483) (5,192,330) (9,019,158) (2,373,292) (103,762,263) (3,990,268) (395,919) (627,230) (179,904) (5,193,321) 79,139,419 $ 106,661,659 Decrease 1,950,275 1,950,275 463,500 643,525 309,320 2,315,694 128,505 592,005 Page 58 $ 23,571,668 2,503,900 1,058,546 27,134,114 147,196,425 18,533,141 15,149,782 3,746,023 184,625,371 (127,220) (376,054) (91,167,751) (5,339,415) (9,646,388) (2,425,976) (108,579,530) (2,877,627) 215,951 $(1,315,478) $ 2,166,226 76,045,841 $103,179,955 (248,834) Depreciation expense was charged to functions/programs as follows: Governmental activities: General government Development services Public safety Public works Culture and recreation Total depreciation expense Ending Balance $ 181,201 12,011 143,866 3,953,474 902,769 $ 5,193,321 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 5 – CAPITAL ASSETS Construction Commitments – At June 30, 2017, the Town has the following active construction commitments: Governmental Activities Remaining Project Spent-to-Date Commitment Valley Metro Bus Stop - Library $ 20,517 $ 5,761 Unpaved Alley Parking 14,658 12,342 Fire Station #2 Relocation 233,033 67,164 New Chiller 15,000 16,392 Lighting Upgrades 107,413 44,856 Lake Aeration System 171,504 9,699 Adero Canyon Trailhead 163,358 120,361 Fountain Hills Boulevard Shoulder Paving 114,460 10,261 Total commitments $ 839,943 $ 286,836 NOTE 6 – BONDS PAYABLE Bonds payable at year end consisted of the following general obligation and revenue bonds. The bonds are both callable and noncallable with interest payable semiannually. Purpose Governmental activities: General Obligation Bonds: General Obligation Refunding Bonds, Series 2005 General Obligation Bonds, Series 2014 Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2015 Revenue Bonds: Municipal Facilities Revenue Refunding Bonds, Series 2015 Total Original Amount Issued Interest Rates Outstanding Remaining Principal Maturities June 30, 2017 7/1/18-19 $ Due Within One Year 765,000 $ 455,000 $ 7,225,000 4% 7,565,000 2-3% 7/1/18-20 4,710,000 1,525,000 2,300,000 1.76% 7/1/18-21 1,560,000 380,000 1,880,000 4% 7/1/18-20 $ 1,030,000 360,000 8,065,000 $ 2,720,000 Page 59 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 6 – BONDS PAYABLE Annual debt service requirements to maturity on the bonds payable at year end are summarized as follows: Year ending June 30, 2018 2019 2020 2021 Total Governmental Activities Principal Interest $ 2,720,000 $ 185,092 2,635,000 123,872 2,310,000 67,302 400,000 7,040 $ 8,065,000 $ 383,306 Pledged Revenues The Town has pledged excise tax revenues to repay a total of $1,030,000 in outstanding Municipal Facilities Revenue Refunding Bonds. For the current fiscal year, the net revenues available to service the debt were $16.6 million. For the fiscal year ended June 30, 2017, the debt principal and interest paid on this debt was $392,680 (two percent of pledged revenues). The total principal and interest remaining to be paid on the bonds is $1,062,400. NOTE 7 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Governmental activities: Bonds payable: General obligation bonds Revenue bonds Premium Total bonds payable Compensated absences payable Governmental activity long-term liabilities Page 60 $ Additions Reductions Ending Balance Due Within One Year 9,340,000 $ 1,400,000 273,669 11,013,669 322,438 $ 2,305,000 $ 7,035,000 $ 2,360,000 370,000 1,030,000 360,000 68,417 205,252 2,743,417 8,270,252 2,720,000 347,200 250,253 419,385 300,219 $ 11,336,107 $ 347,200 $ 2,933,670 $ 8,689,637 $ 3,020,219 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS At year end, interfund balances were as follows: Due to/from other funds: General Fund Capital Projects Fund Total Due from Other Funds Non-Major Grants Governmental Fund Funds $ 91,334 $ 5,566 7,294 $ 96,900 $ 7,294 Total Due to Other Funds $ 91,334 12,860 $ 104,194 At year end, two funds had negative cash balances in the LGIP account. Negative cash in the LGIP account was reduced by interfund borrowing with other funds. All interfund balances are expected to be paid within one year. Interfund transfers: At year end, interfund transfers were as follows: Transfers out Grants Fund Transfers in General Fund $ HURF Fund Grants Fund Debt Service Funds 249,055 Capital Projects Fund 3,645,558 Non-Major Governmental Funds 290,470 Total $4,185,083 Non-Major Development Governmental Funds Total Fees $ $ $ 39,828 $ 39,828 200,000 200,000 164,908 164,908 249,055 419,200 46,019 4,110,777 139,100 429,570 $ 364,908 $ 419,200 $ 224,947 $5,194,138 Capital Projects Fund The General Fund transferred $249,055 to the Debt Service Funds to pay for debt service costs; $3,645,558 to the Capital Projects Fund for funding of facilities replacements and capital projects as well as transferring excess revenues over expenditures per the Town’s Financial Policy; and $290,470 to the Non-major Governmental Funds (Economic Development Fund $50,000) for funding economic development efforts and (Environmental Fund - $240,000) to pay for funding operations of the fund, including the billing of the environmental fee and (Tourism Fund - $470) for art walk brochures. The Capital Projects Funds transferred $200,000 to the HURF Fund for pavement management costs; and $164,908 to the Grants Fund for the Town’s portion of grant project G5203 – tennis court replacement. The Development Fees Fund transferred $419,200 to the Capital Projects Fund for the relocation of Fire Station # 2 ($255,306) and the Adero Canyon Trailhead ($163,894) projects. The Non-major Governmental Funds (Economic Development Fund) transferred $39,828 to the General Fund for Town-wide contracts and $139,100 to the Non-major Governmental Fund (Tourism Fund) to provide funding for operating costs of the tourism program; (Downtown Strategy) transferred $46,019 to the Capital Projects Fund to cover the costs installing lights at intersection with Avenue of the Fountains ($24,000) and Fountain Park access improvements ($22,019). Page 61 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 9 – CONTINGENT LIABILITIES Compliance – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state 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 Town expects such amounts, if any, to be immaterial. Lawsuits – The Town 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, Town 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. Developer Agreement – As of June 30, 2017, the Town reported a receivable from a developer in the Development Fees Fund of $417,291, which is due solely from one developer who is disputing the fees. While a portion of the receivable was collected in the subsequent fiscal year, the Town continues to work with the developer to successfully resolve the unpaid balance, which is approximately $300,000. Should the fees be reduced or credited, any outstanding fees would be paid from the General Fund. NOTE 10 – RISK MANAGEMENT The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters. The Town’s insurance protection is provided by the Arizona Municipal Risk Retention Pool (Pool). The Pool is made up of various towns and cities within Arizona that operate a common risk management and insurance program. The Pool is structured such that member premiums are based on an actuarial review that will provide adequate reserves to allow the Pool to meet its expected financial obligations. The Pool has the authority to assess its’ members additional premiums should reserves and annual premiums be insufficient to meet the Pool’s obligations. The Town joined the Arizona Municipal Workers’ Compensation Pool (Pool) together with other governments in the state for risks of loss related to workers’ compensation claims. The Pool is a public entity risk pool currently operating as a common risk management and insurance program for towns and cities in the State. The Town is responsible for paying a premium, based on an experience rating formula that allocates pool expenditures and liabilities among members. The Town continues to carry commercial insurance for all other risks of loss, including employee health, dental, and vision insurance. There were no settlements that exceeded insurance coverage in any of the past three years. Page 62 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 11 – RETIREMENT PLANS Defined Contribution Pension Plan All full-time employees of the Town participate in a defined contribution pension plan administered by the ICMA Retirement Corporation as a 401(a) plan. The contribution rates are 11 percent for both the employee and the Town. The payroll for the Town employees covered by this plan for the year ended June 30, 2017, was $2,638,552. The Town’s total payroll was $3,142,946. A defined contribution pension plan provides benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined, instead of specifying the amount of benefit the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account and the returns earned on investment of those contributions. All full-time Town employees must participate in the pension plan from the date they are hired. Contributions made by an employee vest immediately and contributions made by the Town vest on a pro rata basis for five years. Town Council has the authority to establish and amend benefit terms and to establish and amend the contribution rates. An employee that leaves the employment of the town is entitled to his or her contributions and the vested portion of the Town’s contributions, plus interest earned. During the fiscal year, the Town’s required and actual contributions amounted to $290,241. The employees’ contributions totaled $290,241. Employees may also contribute to the ICMA Retirement Corporation 457 plan on a voluntary basis (with the exception of one contract employee that is limited to 11 percent of earnings); there is no employer match for those contributions. During the fiscal year, employees contributed $131,668 to that plan. The Town contributed $5,550 for the contract employee’s 457 account. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2016-17 or as of the close of the fiscal year. Page 63 (This page intentionally left blank) Page 64 REQUIRED SUPPLEMENTARY INFORMATION Page 65 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Revenues: Sales taxes Franchise taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues $ Expenditures: Current General government Mayor and council Administration Non departmental Municipal court Total general government 7,551,057 332,418 1,292,775 254,691 5,213,309 154,050 107,147 195,685 30,012 15,131,144 Actual Final $ 7,551,057 332,418 1,292,775 254,691 5,213,309 154,050 107,147 195,685 30,012 15,131,144 $ 7,970,576 367,119 698,808 284,090 5,160,526 181,106 94,117 211,190 7,379 14,974,911 Variance with Final Budget Positive (Negative) $ 419,519 34,701 (593,967) 29,399 (52,783) 27,056 (13,030) 15,505 (22,633) (156,233) 72,545 2,164,280 981,986 321254 3,540,065 72,545 2,164,280 583,364 321,254 3,141,443 71,213 1,921,811 202,454 300,515 2,495,993 1,332 242,469 380,910 20,739 645,450 Development services 927,139 944,139 780,509 163,630 Public safety Fire and emergency Law enforcement Total public safety 3,708,717 3,930,111 7,638,828 3,708,717 3,930,111 7,638,828 3,535,439 3,884,593 7,420,032 173,278 45,518 218,796 830,201 830,201 672,806 157,395 Culture and recreation 2,217,840 2,514,182 2,286,053 228,129 Capital outlay Total expenditures 227,300 15,381,373 227,300 15,296,093 217,265 13,872,658 10,035 1,423,435 (250,229) (164,949) 1,102,253 1,267,202 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): 78,828 (2,580,525) (2,501,697) 78,828 (2,580,525) (2,501,697) 83,828 (4,229,083) (4,145,255) 5,000 (1,648,558) (1,643,558) Changes in fund balances (2,751,926) (2,666,646) (3,043,002) (376,356) Fund balances, beginning of year 10,220,644 10,220,644 10,220,644 Public works Excess (deficiency) of revenues over expenditures Fund balances (deficits), end of year $ 7,468,718 $ 7,553,998 See accompanying notes to this schedule. Page 66 $ 7,177,642 $ (376,356) TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HIGHWAY USER REVENUE YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Revenues: Sales taxes Intergovernmental Charges for services Other Investment earnings Total revenues $ 692,778 2,373,986 262,000 25,000 300 3,354,064 Final $ 692,778 2,373,986 262,000 25,000 300 3,354,064 Actual $ 719,662 2,480,304 170,370 4,492 7,023 3,381,851 Variance with Final Budget Positive (Negative) $ 26,884 106,318 (91,630) (20,508) 6,723 27,787 Expenditures: Current Public works Total expenditures 3,594,696 3,594,696 3,702,675 3,702,675 2,925,613 2,925,613 777,062 777,062 Excess (deficiency) of revenues over expenditures (240,632) (348,611) 456,238 804,849 Other financing sources (uses): Transfer in Total other financing sources (uses): 202,000 202,000 202,000 202,000 200,000 200,000 (2,000) (2,000) Changes in fund balances (38,632) (146,611) 656,238 802,849 1,646,314 1,646,314 1,646,314 Fund balances, beginning of year Fund balances, end of year $ 1,607,682 $ 1,499,703 $ 2,302,552 $ 802,849 See accompanying notes to this schedule. Page 67 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GRANTS YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Revenues: Intergovernmental Total revenues $ 1,476,000 1,476,000 Final $ 1,465,430 1,465,430 Actual $ 206,161 206,161 Variance with Final Budget Positive (Negative) $ (1,259,269) (1,259,269) Expenditures: Current General government Capital outlay Total expenditures 1,265,000 390,000 1,655,000 1,228,152 416,278 1,644,430 47,068 324,001 371,069 1,181,084 92,277 1,273,361 Excess (deficiency) of revenues over expenditures (179,000) (179,000) (164,908) 14,092 179,000 179,000 179,000 179,000 164,908 164,908 (14,092) (14,092) Other financing sources (uses): Transfer in Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year $ $ See accompanying notes to this schedule. Page 68 $ $ TOWN OF FOUNTAIN HILLS, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 NOTE 1 – BUDGETARY BASIS OF ACCOUNTING The Town Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Arizona Revised Statutes, the Town Manager submits a proposed budget for the fiscal year commencing the following July 1 to the Town Council. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comment. 3. Prior to the third Monday in August, the budget for the Town is legally enacted through passage of a resolution. To ensure compliance with the expenditure limitation, a uniform expenditure report must be filed with the State each year. This report, issued under a separate cover, reconciles total Town expenditures from the audited basic financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S 41-1279.07). 4. Expenditures may not legally exceed the expenditure limitation described below for all fund types as a whole. For management purposes, the Town adopts a budget by department for the General Fund and in total by fund for other funds. The Town Manager, subject to Town Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between a department or activity. The adopted budget cannot be amended in any way without Town Council approval. 5. Formal budgetary integration is employed as a management control device during the year for the General, Highway User Revenue, Excise Tax, Special Revenue, Debt Service, and Capital Projects Funds on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. The Town is subject to the State of Arizona’s Spending Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carryover unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. The Town complied with this law during the year. Page 69 (This page intentionally left blank) Page 70 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Page 71 (This page intentionally left blank) Page 72 NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Downtown Strategy Fund – accounts for the portion of Town sales tax committed by the Town Council for the development of the downtown area. Economic Development Fund – accounts for the portion of Town sales tax committed by the Town Council for economic development and tourism. Tourism Fund – accounts for the portion of Town sales tax committed by the Town Council as well as any grants received for all tourism activities. Local Court Enhancement Fund – accounts for a local court surcharge, committed for court enhancement. Environmental Fund – accounts for all funds received from collection of the environmental fee. Cottonwoods Maintenance Fund – accounts for all funds restricted to pay for maintenance of the Cottonwoods Maintenance District. Capital Projects Funds Facilities Replacement Fund – accounts for all funds assigned for the maintenance and repair of facilities and equipment. Page 73 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2017 Downtown Strategy ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Due from other funds Prepaid items Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Other liabilities Total liabilities $ Page 74 $ 3,806 155,850 Tourism $ 31,655 15,227 2,987 $ 932,888 $ Fund balances: Nonspendable Restricted Committed Assigned Total fund balances Total liabilities and fund balances 926,095 Economic Development $ $ 171,077 $ 31,655 $ 8,657 2,119 1 10,777 $ 17,198 1,027 377 18,602 932,888 160,300 13,053 932,888 160,300 13,053 932,888 $ 171,077 $ 31,655 Local Court Enhancement $ 335,458 Environmental $ 443,523 29,538 Cottonwoods Maintenance $ 16,925 Totals $ 430 48 $ 7,294 474 343,656 $ 473,061 $ 16,973 $ $ 474 $ 14,895 395 $ 900 $ 474 15,290 900 474 342,708 457,771 457,771 $ 343,656 $ 473,061 16,073 $ 16,973 42,124 3,541 378 46,043 474 16,073 1,448,949 457,771 1,923,267 16,073 343,182 1,909,506 29,538 19,463 48 2,987 7,294 474 1,969,310 $ 1,969,310 Page 75 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2017 Downtown Strategy Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Tourism $ 287,865 70,660 642 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Page 76 $ 71,966 Expenditures: Current General government Development services Public works Culture and recreation Total expenditures Fund balances, end of year Economic Development $ 1,487 73,453 482 288,347 34,056 134,102 34,056 134,102 198,352 198,352 39,397 154,245 (126,658) 50,000 (178,928) (128,928) 139,570 (46,019) (46,019) (6,622) 25,317 12,912 939,510 134,983 141 932,888 $ 160,300 392 71,694 139,570 $ 13,053 Local Court Enhancement $ Environmental $ Cottonwoods Maintenance $ 5,653 Totals $ 500,731 51 46,537 263 46,800 2,048 502,830 74 5,727 122 122 494,638 3,798 168,280 494,638 3,798 198,352 865,068 46,678 8,192 1,929 123,783 494,638 3,798 240,000 429,570 (224,947) 204,623 240,000 $ 5,653 359,831 500,731 70,660 693 46,537 4,746 988,851 46,678 248,192 1,929 328,406 296,504 209,579 14,144 1,594,861 343,182 $ 457,771 $ 16,073 $ 1,923,267 Page 77 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2017 Downtown Strategy Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ $ 69,278 71,966 2,688 3,036 72,314 1,487 73,453 (1,549) 1,139 46,655 34,056 12,599 46,655 34,056 12,599 25,659 39,397 13,738 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): (975,000) (975,000) (46,019) (46,019) 928,981 928,981 Changes in fund balances (949,341) (6,622) 942,719 939,510 939,510 Expenditures: Current General government Development services Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Fund balances, beginning of year Fund balances (deficits), end of year Page 78 $ (9,831) $ 932,888 $ 942,719 Economic Development Budget $ Actual $ 277,111 $ Tourism Variance Positive (Negative) $ 287,865 Budget Variance Positive (Negative) Actual $ $ $ 10,754 96 277,207 482 288,347 386 11,140 139,483 134,102 5,381 70,570 10,000 70,660 642 90 (9,358) 80,570 392 71,694 392 (8,876) 218,790 198,352 20,438 139,483 134,102 5,381 218,790 198,352 20,438 137,724 154,245 16,521 (138,220) (126,658) 11,562 50,000 (178,928) (128,928) 50,000 (178,928) (128,928) 139,570 139,570 139,570 139,570 8,796 25,317 1,350 12,912 134,983 134,983 141 141 143,779 $ 160,300 16,521 $ 16,521 $ 1,491 $ 13,053 11,562 $ 11,562 (Continued) Page 79 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2017 Local Court Enhancement Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ $ 16,350 100 16,450 46,537 263 46,800 30,187 163 30,350 58,115 122 57,993 30,000 88,115 122 30,000 87,993 (71,665) 46,678 118,343 Changes in fund balances (71,665) 46,678 118,343 Fund balances, beginning of year 296,504 296,504 Expenditures: Current General government Development services Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): Fund balances, end of year Page 80 $ 224,839 $ 343,182 $ 118,343 Environmental Budget $ Actual $ 540,000 $ Cottonwoods Maintenance Variance Positive (Negative) Budget $ $ 500,731 (39,269) 51 51 540,000 2,048 502,830 2,048 (37,170) 540,586 494,638 45,948 5,588 Variance Positive (Negative) Actual $ 5,653 $ 65 5,588 74 5,727 74 139 4,265 3,798 467 540,586 494,638 45,948 4,265 3,798 467 (586) 8,192 8,778 1,323 1,929 606 240,000 240,000 240,000 240,000 239,414 248,192 8,778 1,323 1,929 606 209,579 209,579 14,144 14,144 448,993 $ 457,771 $ 8,778 $ 15,467 $ 16,073 $ 606 (Continued) Page 81 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2017 Totals Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Expenditures: Current General government Development services Public works Culture and recreation Capital outlay Total expenditures 5,588 346,389 540,000 70,570 10,000 16,350 3,232 992,129 Variance Positive (Negative) Actual $ 5,653 359,831 500,731 70,660 693 46,537 4,746 988,851 $ 65 13,442 (39,269) 90 (9,307) 30,187 1,514 (3,278) 244,253 540,586 4,265 218,790 30,000 1,037,894 168,280 494,638 3,798 198,352 865,068 75,973 45,948 467 20,438 30,000 172,826 (45,765) 123,783 169,548 429,570 (1,153,928) (724,358) 429,570 (224,947) 204,623 928,981 928,981 Changes in fund balances (770,123) 328,406 1,098,529 Fund balances, beginning of year 1,594,861 1,594,861 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): Fund balances, end of year Page 82 $ 824,738 $ 1,923,267 $ 1,098,529 (This page intentionally left blank) Page 83 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2017 General Obligation Debt Service Budget Revenues: Property taxes Investment earnings Total revenues $ 1,894,584 210 1,894,794 Variance Positive (Negative) Actual $ 1,902,919 4,408 1,907,327 $ 8,335 4,198 12,533 Expenditures: Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 1,930,000 188,250 1,100 2,119,350 1,930,000 188,250 1,000 2,119,250 100 100 Excess (deficiency) of revenues over expenditures (224,556) (211,923) 12,633 (224,556) (211,923) 12,633 473,337 473,337 Other financing sources (uses): Transfer in Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 84 $ 248,781 $ 261,414 $ 12,633 Eagle Mountain Debt Service Budget $ $ 378,392 150 378,542 Actual $ 378,872 938 379,810 375,000 34,056 170 409,226 375,000 34,056 170 409,226 (30,684) (29,416) (30,684) (29,416) 76,738 76,738 46,054 Municipal Property Corporation Debt Service Variance Positive (Negative) $ 47,322 $ 480 788 1,268 Budget 1,268 $ 1,268 Actual $ 1,268 $ Variance Positive (Negative) $ $ 300 300 2,315 2,315 370,000 22,680 1,010 393,690 370,000 22,680 1,010 393,690 (393,390) (391,375) 249,055 249,055 249,055 249,055 (144,335) (142,320) 311,883 311,883 167,548 $ 169,563 2,015 2,015 2,015 2,015 $ 2,015 (Continued) Page 85 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2017 Totals Budget Revenues: Property taxes Investment earnings Total revenues $ 2,272,976 660 2,273,636 Variance Positive (Negative) Actual $ 2,281,791 7,661 2,289,452 $ 8,815 7,001 15,816 Expenditures: Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 2,675,000 244,986 2,280 2,922,266 2,675,000 244,986 2,180 2,922,166 100 100 Excess (deficiency) of revenues over expenditures (648,630) (632,714) 15,916 249,055 249,055 249,055 249,055 (399,575) (383,659) 861,958 861,958 Other financing sources (uses): Transfer in Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 86 $ 462,383 $ 478,299 15,916 $ 15,916 (This page intentionally left blank) Page 87 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2017 Capital Projects Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 88 $ 433,023 Variance Positive (Negative) Non-GAAP Actual $ 365,082 $ (67,941) 255,000 150,000 6,000 844,023 54,136 19,756 438,974 (255,000) (95,864) 13,756 (405,049) 1,685 350,000 2,207 259,148 (522) 90,852 8,912,200 9,263,885 1,151,999 1,413,354 7,760,201 7,850,531 (8,419,862) (974,380) 7,445,482 4,046,962 (379,000) 3,667,962 3,110,777 (364,908) 2,745,869 (936,185) 14,092 (922,093) (4,751,900) 1,771,489 6,523,389 5,355,812 5,355,812 603,912 $ 7,127,301 $ 6,523,389 Facilities Replacement Fund Non-GAAP Actual Budget $ $ 431,000 $ Development Fees Variance Positive (Negative) $ Budget Actual $ 4,142 4,142 4,142 4,142 93,085 337,915 Variance Positive (Negative) $ $ 180,571 111,434 (69,137) 6,264 186,835 4,420 115,854 (1,844) (70,981) 535 535 431,000 93,085 337,915 535 535 (431,000) (88,943) 342,057 186,300 115,319 (70,981) 1,000,000 1,000,000 1,000,000 1,000,000 (2,071,962) (2,071,962) (419,200) (419,200) 1,652,762 1,652,762 569,000 911,057 (1,885,662) (303,881) 1,581,781 108,471 108,471 2,247,129 2,247,129 677,471 $ 1,019,528 342,057 $ 342,057 $ 361,467 $ 1,943,248 $ 1,581,781 (Continued) Page 89 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2017 Totals Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures 433,023 180,571 255,000 150,000 12,264 1,030,858 Variance Positive (Negative) Non-GAAP Actual $ 365,082 111,434 $ 54,136 28,318 558,970 (67,941) (69,137) (255,000) (95,864) 16,054 (471,888) 1,685 781,000 535 8,912,200 9,695,420 2,207 352,233 535 1,151,999 1,506,974 7,760,201 8,188,446 Excess (deficiency) of revenues over expenditures (8,664,562) (948,004) 7,716,558 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): 5,046,962 (2,450,962) 2,596,000 4,110,777 (784,108) 3,326,669 (936,185) 1,666,854 730,669 Changes in fund balances (6,068,562) 2,378,665 8,447,227 7,711,412 7,711,412 Fund balances, beginning of year Fund balances, end of year Page 90 $ 1,642,850 $ 10,090,077 (522) 428,767 $ 8,447,227 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. Financial Trends These schedules contain information on financial trends to help the reader understand how the Town’s financial position and financial activities have changed over time. Revenue Capacity These schedules contain information to help the reader assess the factors affecting the Town’s ability to generate revenue. Debt Capacity These schedules present information to help the reader evaluate the Town’s current levels of outstanding debt as well as assess the Town’s ability to make debt payments and/or issue additional debt in the future. Demographic and Economic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the Town’s financial activities take place and to help make comparisons with other cities. Operating Information These schedules contain information about the Town’s operations and various resources to help the reader draw conclusions as to how the Town’s financial information relates to the services provided by the Town. Note: 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 5 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 with fiscal year 201516. Aggregate assessed value without a growth limit is currently referred to as net full cash assessed value and formerly as secondary assessed value. This value remains the value utilized for determining debt capacity limits. Page 91 Town of Fountain Hills, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year ended June 30 2008 Governmental activities: Net investment in capital assets Restricted Unrestricted Total governmental activities net position 2010 2011 $ 94,939,805 $ 94,611,110 $ 95,467,509 $ 92,579,483 12,799,502 11,828,137 11,396,116 4,385,595 13,230,726 13,765,293 12,321,090 22,598,669 $ 120,970,033 $ 120,204,540 $ 119,184,715 $ 119,563,747 Source: The source of this information is the Town's financial records. Page 92 2009 Fiscal Year ended June 30 2012 2013 2014 2015 2016 2017 $ 92,006,103 $ 89,800,560 $ 89,713,260 $ 95,325,824 $ 95,647,990 $ 94,909,703 5,951,416 5,721,744 5,480,867 6,310,810 4,530,239 4,471,661 21,064,267 20,612,758 19,186,823 15,180,582 17,232,506 17,578,068 $ 119,021,786 $ 116,135,062 $ 114,380,950 $ 116,817,216 $ 117,410,735 $ 116,959,432 Page 93 Town of Fountain Hills, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Ended June 30 2008 Expenses Governmental activities: General government Development services Public works Public safety Culture and recreation Interest on long-term debt $ Total governmental activities expenses Program Revenues Governmental activities: Fines, fees and charges for services: General government Development services Public works Public safety Culture and recreation Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Net (Expenses)/Revenues General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes Sales taxes Franchise taxes State shared revenues Investment earnings Miscellaneous Total governmental activities Changes in Net Position Governmental activities $ 3,921,588 2,861,653 5,981,347 6,532,292 3,092,661 1,132,947 $ 4,231,529 2,218,994 5,051,294 7,312,415 3,336,616 1,033,536 2010 $ 3,720,236 1,612,287 5,202,285 6,293,323 2,927,848 950,484 2011 $ 2,876,848 1,572,202 5,567,973 5,963,067 2,840,154 851,957 23,522,488 23,184,384 20,706,463 19,672,201 830,963 390,589 23,700 746,227 338,332 56,802 835,659 499,914 455,543 50,408 55,042 427,137 1,353,409 474,434 236,377 266,706 59,806 338,357 1,666,498 632,617 337,279 344,821 77,409 65,568 339,341 1,614,462 2,273,414 3,222,272 2,841,453 3,674,795 5,052,294 (20,300,216) (20,342,931) (17,031,668) (14,619,907) 1,635,542 10,489,591 336,290 8,848,199 780,935 183,963 1,531,770 8,932,374 321,964 8,456,552 258,478 76,300 1,928,028 7,644,440 285,881 6,000,923 22,831 129,740 1,349,079 8,013,480 322,659 5,217,140 28,456 68,125 22,274,520 19,577,438 16,011,843 14,998,939 1,974,304 Source: The source of this information is the Town's financial records. Page 94 2009 $ (765,493) $ (1,019,825) $ 379,032 Fiscal Year Ended June 30 2012 $ $ 3,119,113 1,442,613 4,718,047 5,820,136 2,754,731 779,576 2013 $ 2,909,443 1,633,361 5,712,817 6,100,131 2,779,294 567,043 2014 $ 2,432,965 1,237,717 6,630,875 6,958,056 2,760,690 472,999 2015 $ 2,479,365 2,074,611 4,963,979 6,816,152 2,822,954 698,542 2016 $ 2,516,966 2,253,208 6,476,688 7,178,890 3,124,523 241,694 2017 $ 3,142,722 1,364,378 7,904,577 7,563,898 3,375,414 178,749 18,634,216 19,702,089 20,493,302 19,855,603 21,791,969 23,529,738 272,469 322,984 95,201 63,926 303,508 1,285,656 1,392,706 380,926 377,483 112,521 63,824 288,745 1,266,906 150,535 215,943 531,193 250,421 74,887 340,353 1,307,738 144,570 337,655 693,670 236,706 86,641 339,158 1,431,017 2,874,796 298,737 1,257,492 48,688 90,345 321,189 1,615,973 381,011 837,163 1,062,094 216,724 155,454 393,028 1,699,931 494,328 3,736,450 2,640,940 2,865,105 5,999,643 4,013,435 4,858,722 (14,897,766) (17,061,149) (17,628,197) (13,855,960) (17,778,534) (18,671,016) 1,453,405 7,787,489 332,130 4,515,511 88,877 178,393 1,385,147 7,957,163 334,668 4,979,183 69,998 300,899 1,449,646 8,459,267 349,414 5,326,332 123,311 166,115 904,660 8,983,049 352,673 5,713,235 150,358 188,251 2,569,504 9,395,667 360,320 5,813,678 219,058 13,826 2,296,199 9,415,151 367,119 6,057,278 55,127 28,839 14,355,805 15,027,058 15,874,085 16,292,226 18,372,053 18,219,713 (541,961) $ (2,034,091) $ (1,754,112) $ 2,436,266 $ 593,519 $ (451,303) Page 95 Town of Fountain Hills, Arizona Fund Balances — Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year ended June 30 General fund Reserved Unreserved, designated Unreserved, undesignated Total general fund All other governmental funds Unreserved, designated Unreserved, undesignated reported in: Special revenue funds Capital projects funds Debt service funds Total all other governmental funds 2008 2009 2010 $ 3,053,070 $ 3,526,738 3,234,860 $ 127,916 3,302,373 3,235,811 333,796 3,418,799 $ 6,579,808 $ 6,665,149 $ 6,988,406 $ - $ 95,620 $ 159,484 3,876,927 10,764,857 1,585,740 4,198,782 10,246,395 1,218,971 4,498,523 10,020,336 1,182,834 $ 16,227,524 $ 15,759,768 $ 15,861,177 Fiscal Year ended June 30 General fund Nonspendable Inventory Prepaid items Committed Assigned Unassigned Total general fund All other governmental funds Nonspendable Cash with escrow agent Prepaid items Restricted Committed Assigned Total all other governmental funds 2011 2012 2013 2014 2015 $ 13,183 $ 29,234 8,263,549 9,332 $ 28,245 1,345,200 2,190,910 3,656,173 10,201 $ 32,493 1,345,200 2,191,063 4,117,865 14,358 $ 18,348 1,345,200 1,647,193 4,972,853 6,975 $ 9,272 $ 5,872 10,655 4,123 16,868 2,634,923 2,652,357 2,714,135 1,872,492 1,701,086 1,743,768 4,369,457 5,853,806 2,696,999 $ 8,305,966 $ 7,229,860 $ 7,696,822 $ 7,997,952 $ 8,894,502 $ 10,220,644 $ 7,177,642 $ - $ 6,217 4,379,987 11,480,869 - 2,623,895 $ 5,474 3,300,426 2,039,560 9,312,168 2,301,609 $ 4,706 3,354,189 2,175,094 9,005,276 1,973,067 $ 1,645,000 $ - $ 997 656 5,055 474 3,505,590 10,066,786 4,500,044 4,432,710 2,089,361 1,079,780 1,366,081 8,576,250 7,147,586 5,444,124 5,943,364 1,784,761 2017 $ 15,867,073 $ 17,281,523 $ 16,840,874 $ 14,716,601 $ 18,236,346 $ 11,814,544 $ 14,794,195 Source: The source of this information is the Town's financial records. Note: During fiscal year 2011, the Town implemented GASB Statement No. 54. Therefore, starting in the fiscal year ended June 30, 2011, governmental fund balances will be presented based on the GASB Statement No. 54 hierarchy. Page 96 2016 (This page intentionally left blank) Page 97 Town of Fountain Hills, Arizona Statement of Revenues, Expenditures and Changes in Fund Balances Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2008 Revenues Taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Special assessments Investment earnings $ Total revenues Expenditures Current: General government Development services Public works Public safety Culture and recreation Capital outlay Debt service: Principal Interest Other debt service Total expenditures Excess (deficiency) of revenues over (under) expenditures Other Financing Sources (Uses) Transfers in Transfers out Issuance of refunding bonds Issuance of long-term debt Bond Premium Payment to refunded bonds escrow agent 2009 2012 9,818,985 $ 399,094 215,520 7,672,037 464,036 129,740 297,030 22,831 9,704,054 $ 312,367 227,195 7,165,103 388,635 72,125 236,221 28,456 9,577,321 194,976 206,018 6,035,448 405,663 178,393 223,673 88,877 10,960,001 $ 541,627 290,083 9,607,961 316,676 43,683 339,658 4,037 258,478 25,109,392 22,362,204 19,019,273 18,134,156 16,910,369 3,548,295 2,751,740 2,214,557 6,321,669 2,257,007 5,239,169 3,514,249 2,036,295 1,199,850 6,624,141 2,215,065 3,708,277 3,186,368 1,669,449 973,746 6,200,227 2,007,737 1,254,223 2,575,975 1,564,615 1,123,230 5,772,800 1,871,446 1,043,304 2,887,321 1,421,787 1,054,930 5,869,445 1,794,332 884,323 2,153,228 1,025,321 - 2,240,000 925,663.00 3,471.00 2,460,000 825,988 16,869 2,114,999 729,077 15,254 1,965,000 639,135 55,752 25,510,986 22,467,011 18,594,607 16,810,700 16,572,025 424,666 1,323,456 338,344 (401,594) (104,807) 2,756,988 (2,756,988) - 3,759,735 (3,950,654) - - Net change in fund balances $ (401,594) $ Expenditures for capitalized assets $ 5,171,511 $ 15.6% Source: The source of this information is the Town's financial records. Page 98 2011 12,457,086 $ 1,125,957 296,434 9,353,260 620,300 183,963 287,120 4,337 780,935 Total other financing sources (uses) Debt service as a percentage of noncapital expenditures 2010 1,127,776 (1,127,776) - (190,919) - (295,726) $ 2,528,881 15.9% 431,880 (431,880) - $ - 424,666 $ 532,461 18.3% 2,470,027 (2,470,027) - $ - 1,323,456 $ 389,082 17.4% $ 338,344 1,333,785 17.5% Fiscal Year Ended June 30 2013 2014 $ 9,713,445 $ 570,904 213,871 6,323,047 162,086 300,899 187,251 69,998 2015 2016 2017 10,271,737 $ 891,782 252,584 6,677,518 161,376 134,114 170,995 123,311 10,240,382 $ 1,043,382 269,753 9,770,048 176,541 188,251 186,456 150,358 12,299,285 $ 1,372,045 258,165 7,559,436 197,109 147,662 209,380 219,058 12,069,714 1,310,973 284,090 7,917,651 351,476 153,438 257,727 55,127 17,541,501 18,683,417 22,025,171 22,262,140 22,400,196 2,699,109 1,643,757 2,058,990 6,022,269 1,791,018 453,002 2,194,845 1,774,983 3,085,559 6,890,770 1,921,939 1,750,465 2,275,124 2,073,990 1,275,779 6,675,874 1,962,585 8,799,068 2,324,026 2,217,814 2,498,714 7,034,887 2,240,865 6,471,382 2,713,548 1,275,147 3,954,450 7,420,032 2,484,940 1,693,265 2,280,000 554,860 12,183 2,415,000 460,811 12,188 1,850,000 454,957 243,585 4,260,000 308,106 2,005 2,675,000 244,986 2,180 17,515,188 20,506,560 25,610,962 27,357,799 22,463,548 (1,823,143) (3,585,791) (5,095,659) (63,352) 1,838,453 (1,838,453) - 2,519,774 (2,519,774) 4,180,000 7,565,000 342,086 (4,085,000) 562,044 (562,044) - 5,194,138 (5,194,138) - 26,313 1,279,397 (1,279,397) - - - 8,002,086 - $ 26,313 $ (1,823,143) $ 4,416,295 $ (5,095,659) $ $ 467,691 $ 2,385,168 $ 9,067,254 $ 6,394,346 $ 16.7% 15.9% 15.4% 21.8% (63,352) 1,696,612 14.1% Page 99 Town of Fountain Hills, Arizona Governmental Activities - Tax Revenues by Source Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Property Tax $ 1,631,205 1,705,663 1,888,664 1,367,915 1,457,702 1,421,615 1,463,056 904,660 2,543,298 2,287,444 Sales Tax $ 10,489,591 8,932,374 7,644,441 8,013,480 7,779,219 7,957,162 8,459,267 8,983,050 9,395,667 9,415,151 Franchise Tax $ 336,290 $ 321,964 285,881 322,659 332,130 334,668 349,414 352,673 360,320 367,119 Source: The source of this information is the Town's financial records. Page 100 Total 12,457,086 10,960,001 9,818,986 9,704,054 9,569,051 9,713,445 10,271,737 10,240,383 12,299,285 12,069,714 Town of Fountain Hills, Arizona Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net Assessed Taxable Value 610,738,122 684,742,347 651,218,464 576,535,714 451,860,136 377,521,718 366,302,672 402,965,927 402,135,304 423,652,443 Total Direct Tax Rate* 0.2124 0.1972 0.2273 0.1639 0.2258 0.2657 0.2773 0.1151 0.5246 0.4472 Estimated Actual Taxable Value 5,318,424,271 5,867,175,208 5,524,103,469 4,915,512,973 3,971,538,882 3,309,940,258 3,260,087,621 3,616,672,185 3,638,503,500 3,869,816,740 Net Assessed Taxable Value as a Percentage of Estimated Actual Taxable Value 11.48% 11.67% 11.79% 11.73% 11.38% 11.41% 11.24% 11.14% 11.05% 10.95% * Per $100 of assessed full cash value. Source: The source of this information is the Arizona Department of Revenue's Abstract of the Assessment Roll and the Town's financial records. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 101 Town of Fountain Hills, Arizona Principal Property Taxpayers June 30, 2017 and 2008 2017 Taxpayer EPCOR - Chaparral City Water Company Adero Canyon II LLC Hunter Retail LLC WSL Fountain View Investors V, LLC Whitestone Fountain Hills, LLC EN, LLC Smith's Food & Drug Centers Inc. Fountain Hills Invest Co., LLC Target Corporation 29SC Ridgeview LP FH Resort Developers, LLC Qwest Corporation Inland Western Fountain Hills Four Peaks LLC Fountain Hills AZ Development LLP Sun Tech Development, LLC Totals Net Limited Assessed Value Rank $ 3,520,260 1 3,064,932 2 2,642,580 3 1,945,963 4 1,806,848 5 1,272,884 6 1,270,476 7 1,218,492 8 1,156,964 9 1,133,315 10 $ 2008 Percentage of Total Net Limited Assessed Value 0.83% 0.72% 0.62% 0.46% 0.43% 0.30% 0.30% 0.29% 0.27% 0.27% 19,032,714 4.49% Source: The source of this information is the Maricopa County Assessor's Office. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 102 Net Full Cash Assessed Value $ 3,249,900 1,273,920 $ Percentage of Total Net Full Cash Rank Assessed Value 3 0.53% 8 0.21% 2,668,420 5 0.44% 3,267,954 1,332,351 1 0.54% 0.22% 1,716,705 7 0.28% 1,771,506 2,426,767 3,419,087 1,550,379 1,511,270 4 6 2 10 9 0.29% 0.40% 0.56% 0.25% 0.25% 24,188,259 3.97% Town of Fountain Hills, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Total Year Tax Levy 2008 $ 1,630,534 2009 1,719,105 2010 1,895,552 2011 1,340,544 2012 1,446,076 2013 1,429,285 2014 1,449,884 2015 892,104 2016 2,532,115 2017 2,278,728 Current Tax Collections $ 1,578,583 1,660,820 1,838,909 1,307,092 1,414,482 1,401,654 1,426,612 881,170 2,502,995 2,241,482 Percent of Current Taxes Collected 96.8% 96.6% 97.0% 97.5% 97.8% 98.1% 98.4% 98.8% 98.8% 98.4% Delinquent Tax Collections $ 47,835 53,379 52,189 24,924 20,255 18,835 18,441 6,993 19,370 - Total Tax Collections $ 1,626,419 1,714,199 1,891,097 1,332,016 1,434,737 1,420,488 1,445,053 888,163 2,522,365 2,241,482 Ratio of Total Tax Collections to Total Tax Levy 99.7% 99.7% 99.8% 99.4% 99.2% 99.4% 99.7% 99.6% 99.6% 98.4% Source: The source of this information is the Maricopa County Treasurer's Office. Page 103 Town of Fountain Hills, Arizona Taxable Sales by Category Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2008 Sales category: Construction Transportation/utilities Wholesale/retail Restaurants/bars Real estate, rental & leasing Services Other Total $ 2009 2011 2,063,189 1,422,158 3,912,579 582,226 983,047 327,411 1,198,981 $ 1,414,308 1,311,735 3,687,605 493,242 665,153 258,139 1,102,192 $ 538,562 1,424,828 3,556,292 509,624 650,400 241,685 723,050 $ 567,135 1,388,075 3,567,986 559,931 731,758 276,566 922,029 $ 10,489,591 $ 8,932,374 $ 7,644,441 $ 8,013,480 Note: Other includes all state and local sales tax audit adjustments. Source: The source of this information is the Town's financial records. Page 104 2010 Fiscal Year Ended June 30 2012 2013 $ 600,403 1,409,349 3,601,904 575,704 678,326 274,521 639,012 $ 567,589 1,402,734 3,598,895 645,258 720,023 310,303 712,360 $ 7,779,219 $ 7,957,162 2014 $ 2015 2016 783,064 1,375,623 3,653,181 655,654 782,453 342,079 867,213 $ 935,694 1,405,768 4,214,119 682,180 617,348 604,618 523,323 $ 918,717 1,327,441 4,815,582 742,540 552,856 779,753 258,778 $ 8,459,267 $ 8,983,050 $ 9,395,667 2017 $ 729,462 1,171,483 4,944,459 804,721 634,283 847,852 282,891 $ 9,415,151 Page 105 Town of Fountain Hills, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Town Rate 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% Maricopa County 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% State Rate 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% 5.60% Total Tax Rate 8.90% 8.90% 9.90% 9.90% 9.90% 8.90% 8.90% 8.90% 8.90% 8.90% Source: The source of this information is the Arizona Department of Revenue. Page 106 Town of Fountain Hills, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Obligation Bonds* $ 7,544,841 6,506,402 5,304,170 4,543,667 3,671,714 2,826,063 1,923,166 9,163,024 7,181,977 5,387,809 Community Facilities District Bonds* $ 4,069,520 3,859,699 3,605,048 3,361,913 3,078,906 2,791,753 2,483,885 2,233,280 1,855,411 1,508,746 Municipal Property Corporation Bonds* $ 9,215,738 8,652,918 7,878,616 6,993,694 4,300,489 3,561,814 2,721,933 1,764,338 1,088,117 860,437 Highway User Revenue Bonds Special Assessment Bonds $ 235,000 $ 130,000 - Total Outstanding Debt 3,228 $ - 21,068,327 19,149,019 16,787,834 14,899,274 11,051,109 9,179,630 7,128,984 13,160,642 10,125,505 7,756,992 Debt Per Capita $ 919 833 738 663 490 404 311 558 424 317 Source: The source of this information is the Town's financial records and the U.S. Bureau of Economic Analysis. * All amounts presented are net of original issuance discounts and premiums as well as restricted assets. Population data can be found in the Schedule of Demographic and Economic Statistics. Page 107 Town of Fountain Hills, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Estimated Actual Taxable Value Obligation Bonds* of Property $ 7,544,841 $ 5,318,424,271 6,503,402 5,867,175,208 5,304,170 5,524,103,469 4,543,667 4,915,512,973 3,671,714 3,971,538,882 2,826,063 3,309,940,258 1,923,166 3,260,087,621 9,163,024 3,616,672,185 7,181,977 3,638,503,500 5,387,809 3,869,816,740 Percentage of Estimated Actual Taxable Value of Property 0.14% 0.11% 0.10% 0.09% 0.09% 0.09% 0.06% 0.25% 0.20% 0.14% Net General Municipal Net Municipal Obligation Property Property Total Bonded Debt Corporation RevenuesCorporation per Capita Bonds* Debt per Capita All Sources $ 329 9,215,738 $ 402 $ 25,113,211 283 8,652,918 376 21,331,076 233 7,878,646 347 18,958,595 202 6,993,694 311 18,248,326 163 4,300,489 191 17,184,895 125 3,561,814 157 17,723,994 84 2,721,933 119 18,891,967 388 1,764,338 75 22,161,316 301 1,088,117 46 22,262,139 220 860,437 35 22,400,196 Source: The source of this information is the Department of Revenue and the Town's financial records. * All bond amounts are net of original issuance discounts and premiums as well as restricted assets. Population data can be found in the Schedule of Demographic and Economic Statistics. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 108 Town of Fountain Hills, Arizona Direct and Overlapping Governmental Activities Debt as of June 30, 2017 Governmental Unit Outstanding Debt Overlapping: Maricopa County Maricopa County Community College District Maricopa Integrated Health System East Valley Institute of Technology Fountain Hills Unified School District Eagle Mountain Community Facilities District* $ 445,570,000 37,000,000 11,670,000 1,935,000 Estimated Share of Overlapping Debt Estimated Percentage Applicable 1.16% $ 1.16% 1.16% 2.62% 96.18% 100.00% Total Overlapping Debt 5,168,612 429,200 11,224,206 1,560,000 18,382,018 Direct: Town of Fountain Hills, Arizona General Obligation Bonds Revenue Bonds Premium on Bonds 5,475,000 1,030,000 205,252 Total Direct Debt Total direct and overlapping debt 6,710,252 $ 25,092,270 Source: The source of this information is the Town's records, the State and County Abstract of the Assessment Roll, the Arizona Department of Revenue Report of Indebtedness and the applicable governmental unit. * The Town is not obligated for repayment of the Eagle Mountain Community Facilities District general obligation bonds. Note: The estimated percentage of debt outstanding applicable to the Town is calculated based on the Town's net limited assessed valuation as a percentage of the net limited assessed valuation of the overlapping jurisdiction. Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town of Fountain Hills. This schedule further estimates the portion of outstanding debt of those overlapping governments that is borne by residents and businesses of the Town. This process recognizes that, when considering a town's ability to issue and repay long-term debt, the entire debt burden borne by residents should be taken into account. However, this fact does not imply that every taxpayer is a resident, and, therefore, responsible for repaying the debt of each overlapping government. Page 109 Town of Fountain Hills, Arizona Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year Ended June 30 2008 2009 2010 2011 6% Debt Limit Debt limit Total net debt applicable to limit $ 36,644,287 275,000 $ 41,084,541 - $ 39,073,108 - $ 34,592,143 - Legal debt margin $ 36,369,287 $ 41,084,541 $ 39,073,108 $ 34,592,143 - - - Total debt applicable to the limit as a percentage of debt limit 1% 20% Debt Limit Debt limit Total net debt applicable to limit $ 122,147,624 7,295,000 $ 136,948,469 6,530,000 $ 130,243,693 5,415,000 $ 115,307,143 4,595,000 Legal debt margin $ 114,852,624 $ 130,418,469 $ 124,828,693 $ 110,712,143 Total debt applicable to the limit as a percentage of debt limit 6% 5% 4% Source: The source of this information is the Town's financial records. Note: All amounts presented are net of original issuance discounts and premiums. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 110 4% Fiscal Year Ended June 30 2012 2013 $ 27,111,608 - $ 22,651,303 - $ 21,978,160 - $ $ 27,111,608 $ 22,651,303 $ 21,978,160 $ - - $ 90,372,027 3,755,000 $ 75,504,344 2,900,000 $ 73,260,534 2,000,000 $ $ 86,617,027 $ 72,604,344 $ 71,260,534 $ 4% 2014 2015 - 4% 2016 2017 24,177,956 - $ 24,128,118 - $ 25,419,147 - 24,177,956 $ 24,128,118 $ 25,419,147 80,593,185 9,175,000 $ 80,427,061 7,405,000 $ 84,730,489 5,475,000 71,418,185 $ 73,022,061 $ 79,255,489 - 3% 11% 9% 6% Page 111 Town of Fountain Hills, Arizona Calculation of Legal Debt Margin as of June 30, 2017 Net full cash assessed valuation 423,652,443 Water, Sewer, Artificial Lighting, Parks, Open Space, Public Safety, Law Enforcement, Fire and Emergency Facilities, Street and Transportation Facilities, and Recreational Facility Improvements Debt limit - 20% of net full cash assessed valuation Net debt applicable to limit 20% legal debt margin $ 84,730,489 5,475,000 79,255,489 All Other General Obligation Bonds Debt limit - 6% of net full cash assessed valuation Net debt applicable to limit 6% legal debt margin Total legal debt margin 25,419,147 25,419,147 $ 104,674,636 Source: The source of this information is the Maricopa County Assessor's Office and the Town's financial records. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 112 Town of Fountain Hills Revenue Bond Coverage Last Ten Fiscal Years Municipal Facilities Corporation Revenue Bonds Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Principal $ 805,000 885,000 985,000 1,035,000 1,085,000 1,150,000 1,225,000 2,545,000 480,000 370,000 Interest $ 498,878 458,799 416,886 386,630 327,312 285,287 234,176 184,500 32,740 22,680 Total $ 1,303,878 1,343,799 1,401,886 1,421,630 1,412,312 1,435,287 1,459,176 2,729,500 512,740 392,680 Pledged Revenues $ 18,362,405 15,930,962 14,008,592 13,489,416 12,995,685 13,397,842 14,313,158 15,583,484 16,250,673 16,645,464 Coverage 14.1 11.9 10.0 9.5 9.2 9.3 9.8 5.7 31.7 42.4 Source: The source of this information is the Town's financial records. Page 113 Town of Fountain Hills, Arizona Demographic and Economic Statistics Last Ten Calendar Years Calendar Year 2007 22,932 Population Per capita personal income $ 32,230 $ Median age Public school enrollment 2008 22,984 38,439 46.4 2,307 2009 22,736 $ 38,918 48.3 2,233 2010 22,489 $ 40,672 48.9 2,203 2011 22,554 $ 44,660 53.9 2,103 53.9 1,981 Town of Fountain Hills unemployment rate 1.5% 2.6% 4.5% 4.8% 6.7% Land use Total acres Total square miles Vacant lots 13,005.7 20.32 3,355 13,005.7 20.32 1,295 13,005.7 20.32 1,253 13,005.7 20.32 1,226 13,005.7 20.32 1,218 12,850 4 53 14 12,832 4 47 19 12,927 4 52 19 12,983 4 53 20 12,990 4 56 20 4 4 1 4 4 1 4 4 1 4 4 1 4 4 1 Number of units Housing Lodging Restaurants Shopping centers Schools Public Preschool Charter Sources: The source of the "Per Capita Personal Income", "Median Age" and "Unemployment Rate" information is Sites USA. The source of the "Population" is the U.S. Census Bureau July 1, 2016 estimate. The source of School Enrollment is the Fountain Hills Unified School District No. 98. Other information is from the Town's records. Note: N/A indicates the information is not available. * Information obtained is based on calendar years; therefore, the latest information obtained was from 2016 Page 114 Calendar Year 2012 22,695 $ 47,260 2013 22,893 $ 48,244 53.9 1,886 2014 23,602 $ 46,619 53.0 1,820 2015 23,899 $ 48,240 53.7 1,692 2016* 24,482 $ 50,162 53.8 1,619 53.7 1,506 5.6% 6.0% 5.4% 2.4% 1.9% 13,005.7 20.32 1,209 13,005.7 20.32 1,196 13,005.7 20.32 1,165 13,005.7 20.32 1,247 13,005.7 20.32 1,209 12,977 4 56 20 12,991 4 54 20 12,981 4 43 20 13,002 4 46 20 13,130 4 50 20 3 6 1 3 7 1 3 7 1 3 7 1 3 7 1 Page 115 Town of Fountain Hills, Arizona Principal Employers Prior Fiscal Year and Nine Years Ago 2016* Employer Fountain Hills Unified School District No. 98 Fountain View Village Bobcat Contracting, LLC Rural Metro Corporation Target Stores Firerock Country Club Fry's Food Stores Eagle Mountain Golf Club Safeway Stores Bashas Monks Construction MCO Properties, Inc. Town of Fountain Hills Sunridge Canyon Golf Course Golf International Totals Total Town employment 2007 Percentage Number of of Total Town Employees Rank Employment 168 1 3.7% 115 2 2.5% 114 3 2.5% 111 4 2.4% 103 5 2.3% 100 6 2.2% 86 7 1.9% 70 8 1.5% 70 9 1.5% 70 10 1.5% 1,007 22.2% 4,535 Source: The source of this information is the Maricopa Association of Governments. Note: Total Town employment for 2007 was not available. * Data for 2017 was not available. Page 116 Number of Employees Rank 250 1 40 95 70 150 85 68 70 50 878 8 4 6 2 3 5 7 9 Town of Fountain Hills, Arizona Authorized Full-time Equivalent Government Employees by Function Last Ten Fiscal Years Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Municipal court 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.63 3.63 3.63 Administration 13.50 13.50 13.25 11.25 11.58 11.68 10.56 11.33 11.63 12.46 Public works 9.80 Development services 40.50 40.00 35.75 23.25 20.25 18.75 16.25 16.30 16.30 7.50 Community services 29.25 29.75 27.10 21.63 21.53 21.18 20.18 21.06 20.76 20.56 Total 88.25 88.25 81.10 61.13 58.36 56.61 50.99 52.32 52.32 53.95 Source: The source of this information is the Town's financial records. Page 117 Town of Fountain Hills, Arizona Operating Indicators by Function Last Ten Fiscal years Fiscal Year Ended June 30 Function/Program Municipal Court Cases filed Hearings/Trials held 2008 2009 N/A N/A N/A N/A Administration FTEs per 1,000 residents Registered voters - general election Voter turnout - general election 3.5 14,335 39% Development Services Building permits issued Building inspections conducted Number of code violation cases Number of zoning cases Community Services Number of Community Center bookings Number of participants in recreational programs Number of Senior Services members Number of home delivered meals 2010 2011 2012 3,520 1,089 2,584 738 2,173 731 3.3 none none 3.2 15,511 50% 2.7 none none 2.6 16,074 34% 716 5,692 N/A N/A 376 3,189 N/A N/A 411 1,936 1,024 7 350 1,546 843 14 346 1,257 804 7 N/A N/A N/A N/A N/A N/A N/A N/A 3,396 1,960 1,105 10,169 3,315 1,759 1,205 9,742 3,236 1,833 1,208 8,419 Law Enforcement (contracted) Physical arrests Traffic violations 524 2,504 825 4,900 679 2,959 645 1,909 522 1,366 Fire & Emergency Medical (contracted) Total incident responses Average response time (in minutes) 2,694 3:37 2,787 3:44 2,875 4:32 3,179 3:46 3,082 3:50 Source: The source of this information is the Town's financial records. Note: N/A indicates that the information is not available. Page 118 Fiscal Year Ended June 30 2013 2014 2015 2016 2017 1,740 703 1,649 1,665 1,738 1,585 1,593 1,564 2,014 1,844 2.5 none none 2.2 N/A N/A 2.2 16,213 38% 2.2 none none 2.2 16,387 41% 457 1,395 746 10 445 2,131 716 41 443 2,448 752 65 410 2,129 713 72 509 2,704 669 50 3,196 1,789 1,118 6,941 3,383 2,291 1,189 4,799 3,439 2,249 1,273 4,035 3,124 2,910 1,326 3,497 3,764 3,773 1,335 3,920 545 1,296 743 1,379 445 1,539 220 1,215 220 1,803 3,136 3:53 2,956 3:37 3,166 3:57 3,191 3:25 3,425 3:33 Page 119 Town of Fountain Hills, Arizona Capital Assets Statistics by Function Last Ten Fiscal Years Fiscal Year Ended June 30 Function/Program Public safety Number of fire stations Public works Streets (centerline miles) Streets (lane miles) Pedestrian lighting Traffic signals Parks and recreation Acreage-developed parks Playgrounds Baseball/softball diamonds Soccer/football fields Community centers Preserve acreage Miles of trails 2008 2009 2010 2011 2013 2 2 2 2 2 2 178.9 390 34 13 178.9 390 34 13 178.9 390 34 13 178.9 390 34 13 178.9 390 34 13 178.9 390 34 13 116 7 6 7 1 N/A N/A 116 7 6 7 1 N/A N/A 116 7 6 7 1 N/A N/A 116 7 6 7 1 N/A N/A 116 7 6 7 1 740 4.3 116 7 6 7 1 740 10.43 Source: The source of this information is the Town's facilities records. Note: N/A indicates the information is not available. Page 120 2012 Fiscal Year Ended June 30 2014 2015 2016 2017 2 2 2 2 178.9 390 34 13 178.9 390 85 13 178.9 390.5 91 13 178.9 390.5 91 13 116 7 6 7 1 740 10.43 119 7 6 7 1 807.2 15.8 119 7 6 7 1 807.2 15.8 119 7 6 7 1 807.2 18.5 Page 121 (This page intentionally left blank) Page 122 Town of Fountain Hills 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 480-816-5100 www.fh.az.gov - facebook.com/TownofFountainHills - twitter.com/fhazgov