Town of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2012-2013, ending June 30, 2013 Page 3 Page 5 Page 7 Page 8 Page 9 2012-2013 Financial Overview Net Position Property Taxes Capital Investments Community Profile Page 2 2012-2013 Popular Annual Financial Report The height of desert living. Welcome Members of the Administration Department, Finance Division, are pleased to present the Town of Fountain Hills Popular Annual Financial Report for the fiscal year ended June 30, 2013. This report is intended to present an accessible overview of the Town’s financial position and policies, and its commitment to providing responsive services and programs in a fiscally responsible manner. We share with you details of how the Town’s revenue is generated, where the dollars are spent, and how the local economy impacts Fountain Hills’ overall financial status. Above all, our goal is to provide you with an opportunity to better understand the many financial aspects that affect your local government. The financial information provided here is drawn from detailed information found within the fiscal year 2012-2013 Comprehensive Annual Financial Report (CAFR). The financial statements were prepared in conformance with Generally Accepted Accounting Principles (GAAP) and audited by an independent accounting firm, receiving an unqualified (or clean) opinion. The numbers contained within the CAFR were obtained by employing the basis of accounting as prescribed by the Governmental Accounting Standards Board (GASB). In short, the highest standards of accounting principles have been utilized to ensure full financial disclosure and accountability. Recognition of this commitment is evidenced by the Town attaining the Certificate of Achievement for Excellence in Financial Reporting for 16 consecutive years, the Distinguished Budget Presentation Award for 12 consecutive years, and the Award for Outstanding Achievement in Popular Financial Reporting for one year. These awards are presented by the Government Finance Officer’s Association of the United States and Canada. While the numbers in this Popular Report come from an audited source, they are presented in an abridged, unaudited non-GAAP format. Citizens who wish to review audited GAAPbasis financial statements can refer to the Town’s 2012-2013 CAFR, which is available online at www.fh.az.gov/financial-reports.aspx. Members of the Finance Division and staff across the organization are proud to serve this fine community. We hope that the 2012-2013 Popular Annual Financial Report serves its purpose and helps assure you that every effort is made to manage the community’s resources wisely for the benefit of all. Julie A. Ghetti, MPA, CPA, CGFM Deputy Town Manager/Finance Director The height of desert living. 2012-2013 Popular Annual Financial Report Page 3 2012-2013 Financial Overview In this section, we present an overview of monies in and monies out for the Town of Fountain Hills for the fiscal year ended June 30, 2013. MONIES IN As a governmental entity, the Town uses fund accounting, or self-balancing sets of accounts segregated for specific activities. Governmental funds are used to account for tax supported activities and the Town receives the funding it needs to provide services to the community from a variety of sources. The table below presents a summary of governmental revenues by primary type for fiscal years 2012-2013 and 2011-2012, in order to present a picture of typical revenues from year to year. The improving national and local economy contributed to an increase in revenues of $631,132 or 3.6% compared to 2012. Although actual investment revenues have increased the Town’s investment category includes unrealized losses as securities are exchanged for better long term returns. Intergovernmental revenue includes income and sales tax shared from the State and distributed based on population—these revenues saw increases consistent with a recovering economy. Governmental Funds Two Year Revenues Summary by Type Revenues 2013 2012 Taxes: Sales Property Franchise Intergovernmental Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Investment Revenue Other Total Revenues $ 7,957,163 1,421,614 334,668 6,323,047 187,251 570,904 162,086 213,871 69,998 300,899 $ 7,787,489 1,457,702 332,130 6,035,448 223,673 194,976 405,663 206,018 88,877 178,393 $ 17,541,501 $ 16,910,369 Taxes Intergovernmental Fines and Forfeitures Licenses and Permits 2012 Charges for Services 2013 Rents and Royalties Investment Revenue Other $- $2 $4 $6 $8 $10 Millions of Dollars REVENUE TYPE DEFINTIONS Taxes - Sales - the Town charges a local sales tax of 2.6% on most goods purchased in the Town. This tax is in addition to the State of Arizona rate of 5.6% and the Maricopa County rate of .7%, for a total sales tax rate of 8.9%. Taxes - Property - the Town does not charge a primary property tax, only a secondary property tax. The secondary tax is for debt repayment on voter approved bonds (specifically the Library/Museum and open space). Taxes - Franchise - revenue received from utility (telecommunications) companies for the right to operate within the Town. Intergovernmental - these are revenues received from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax and vehicle license tax. Fines and Forfeitures - these are revenues received from court fines. Licenses and Permits - includes building permit fees, business and animal license fees, fire inspections, etc. Charges for Services - these are revenues received from services and/or programs provided by the Town such as recreation programs. Rents and Royalties - rental fees for use of the Community Center as well as fees from leases for cellular telephone towers. Investment Revenue - revenue received from interest on invested monies. Other - these are revenues that do not fit under another classification. Page 4 The height of desert living. 2012-2013 Popular Annual Financial Report 2012-2013 Financial Overview—continued MONIES OUT The two-year comparison below for Town expenditures shows an increase in the overall cost of operations, overall, 2013 total Governmental Fund expenditures were $943,163, or 5.4% more than in 2012. The Town contracts for law enforcement and emergency medical services—these contracts include automatic negotiated increases which are reflected in the Public Safety category. General Government expenditures decreased as a result of reallocating resources to a pavement management program—this is reflected in the increase in Highways and Streets. Development Services includes public works and facilities projects that were re-initiated after being deferred during the economic downturn. Debt service includes the annual principal and interest payment for outstanding bonds (there were no new bonds during the year). Governmental Funds Capital Outlay 3% Two Year Expenditures Summary by Type Expenditures 2013 2012 General Government Public Safety Highways and Streets Culture and Recreation Development Services Debt Service Capital Outlay $ 2,699,109 $ 2,887,321 6,022,269 5,869,445 2,058,990 1,054,930 1,791,018 1,794,332 1,643,757 1,421,787 2,847,043 2,659,887 453,002 884,323 Total Expenditures $ 17,515,188 $ 16,572,025 Development Services 9% Debt Service 16% FY 2013 Expenditures General Government 16% Public Safety 34% Culture and Recreation 10% Highways and Streets 12% EXPENDITURE TYPE DEFINTIONS  General Government - functions serving Town operations as a whole, including: Town Council, Town Manager, Town Clerk, Finance, Human Resources, Information Technology, Town Attorney, and Town Prosecutor.  Public Safety - encompasses the contracted services for Law Enforcement and Fire and Emergency Medical departments.  Highways and Streets - represents the Street division.  Culture and Recreation - encompasses the services, programs and facilities provided by Parks & Recreation, Community Center and Senior Services.  Development Services - encompasses Engineering, Facilities, Planning, Building Safety, Code Compliance and Mapping and Graphics divisions.  Capital Outlay - expenditures on the Town’s Capital Improvement Program projects.  Debt Service - interest and other related costs affiliated with the Town’s issuance of debt to support various capital improvement activities. The height of desert living. 2012-2013 Popular Annual Financial Report Page 5 The Town’s Net Position Town of Fountain Hills Net Position 2012 2013 ASSETS Current and Other Assets Capital Assets Non-Depreciable Depreciable (net) Total Assets LIABILITIES Current and Other Liabilities Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities (Restated) $ 28,460,597 $ 27,817,313 26,223,288 77,222,272 25,934,778 81,921,325 131,906,157 135,673,416 3,820,104 3,256,053 2,449,599 9,501,392 2,319,551 11,928,659 15,771,095 17,504,263 89,800,560 5,721,744 20,612,758 92,006,103 5,951,416 20,211,634 NET POSITION Net Investment in Capital Assets Restricted Unrestricted Total Net Position $ 116,135,062 $ 118,169,153 The Statement of Net Position presents information on all the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. Net position is categorized by activity type. Governmental activities include services largely funded through revenues such as sales tax and charges for services. ASSETS represent what the Town owns. Current and other assets include cash, investments, and receivables (money due to the Town). Capital assets are land, buildings, infrastructure, water system, vehicles, machinery, and equipment. They are broken down as non-depreciable (land) and depreciable (all other capital assets). LIABILITIES represent what the Town owes. Current and other liabilities consist of payables (money due from the Town to pay what it owes). Non-current liabilities represent debt that the Town must pay back and is broken out into the current year and future years. NET POSITION may serve, over time, as useful indicators of a government’s financial position and consist of three components. The largest portion (77%) reflects the Town’s investment in capital assets (land, buildings, infrastructure, vehicles, machinery and equipment), less any outstanding related debt used to acquire those assets. An additional portion of the Town’s net position (5%) represents resources subject to restrictions on how they may be used. These legal restrictions are imposed by outside entities such as federal or state governments. An example of such a restriction is the gasoline tax. The State of Arizona charges the gasoline tax and shares some of it with communities. These revenues are legally restricted by the State to be used only for expenditure on street projects. Portions of net assets are also restricted to pay debt service and fund capital projects. The remainder of net position is unrestricted as to purpose. Page 6 2012-2013 Popular Annual Financial Report The height of desert living. The Town’s Fund Balances Fund Accounting Fund Balances State and local governments, such the Town, employ fund accounting whereby assets and liabilities are grouped Non-Major according to the purpose for Governmental Funds which they are to be used. Municipal 19% General Fund Property Each grouping, or fund, oper30% Corporation ates as a separate selfDebt Service Fund balancing set of accounts. 10% The General Fund is the chief Capital Projects HURF operating fund of the Town Fund 3% 37% and General Fund expenditures account for 68% of governmental expenditures. Special revenue funds group revenues raised for a specific purpose. Capital project funds account for the acquisition or construction of major capital facilities. These intended uses can be demonstrated by viewing the components of governmental fund balances. The fund balance is an important component of fiscal planning and factors into the Town’s debt rating, and has been maintained during the recession due to the Town Council’s commitment to fund on-going services with on-going revenues. The height of desert living. 2012-2013 Popular Annual Financial Report Page 7 Property Taxes One of the biggest bills residents face each year is tied to the property they own. Property tax in Fountain Hills is administered by Maricopa County, and is based on property value (ad valorem) and typically included with the resident’s monthly mortgage payment. As the table indicates, only a small portion (3.3%) of your property taxes go to the Town of Fountain Hills—this portion pays for the annual payment on the bonds approved by voters for open space and the library/museum building. The majority supports Fountain Hills schools, Fountain Hills Sanitary District, and various Maricopa County districts. Currently, property taxes represent one of the smallest and most stable sources of revenue for the Town at 8.1% of total revenues. Property Tax Levy - Fiscal Year 2012-2013 Entity Maricopa County State Equalization Tax Maricopa County Community College Maricopa County Flood Control District Maricopa County Library District Fire Assistance District Central Arizona Water Conservation Maricopa Special Health Care District Fountain Hills Sanitary District East Valley Institute of Technology Fountain Hills Unified Schools #98 Town of Fountain Hills Primary Rate $ The primary property tax revenue pays for the basic operating costs of government and schools. The Town does not 0.2444 have a primary property tax for 0.1392 operations. Secondary Rate 1.2807 $ 0.5123 1.2896 2.5543 - 0.0438 0.0121 0.1000 0.1939 0.7954 0.0500 0.8512 0.2773 Revenue from the secondary property tax pays for the annual debt payment on bonds that have been approved by voters and special taxing districts such as the Sanitary District; the rate is set by the County. The rate is Total $ 5.6369 $ 2.7073 calculated using 10% of the assessed valuation of property (assigned by the County), dividing by 100 and multiplying by the tax rate. For example, a residential property with an assessed value of $350,000 would pay approximately $2,920 ($350,000 x 10% divided by 100 x 8.3442). Town of Fountain Hills Fountain Hills Unified Schools #98 East Valley Institute of Technology Fountain Hills Sanitary District Maricopa Special Health Care District Central Arizona Water Conservation Fire Assistance District Maricopa County Library District Maricopa County Flood Control District Maricopa County Community College State Equalization Tax Maricopa County $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 Composition of Property Tax Page 8 2012-2013 Popular Annual Financial Report The height of desert living. Capital Investments How Capital Investments are Funded The Town’s capital outlay consists of investments in our roads, equipment, public facilities, and parks. Every year, the Town prepares and adopts an on going, Five-Year Capital Improvement Plan that provides for a comparable annual value of infrastructure improvement projects. Town Council and staff review and update the plan each year as part of the budget process. The projects are funded using a combination of grants and existing funds. The Town’s Debt Policy provides a set of criteria to help determine when it’s best to fund capital projects using existing revenues, issuing bonds or seeking loans. The Town has an Aa3 bond rating from Moody’s Investors Service for the general obligation bonds and an A1 rating for the revenue bonds. These ratings allow the Town to receive very competitive interest rates when issuing debt. Debt Type Two Year Debt Summary All Funds 2013 General Obligation Bonds Revenue Bonds Total Debt $ 5,700,000 $ 5,905,000 DEBT TYPE DEFINTIONS General Obligation Bonds - long-term debt that is repaid from the Town’s available resources. 2012 Revenue Bonds - long-term debt with repayment to come 6,845,000 from a pledged Town revenue stream. 7,040,000 $ 11,605,000 $ 13,885,000 Repayment of Outstanding Debt Year ending June 30, 2014 2015 2016 2017 2018 2019-2021 Principal 2,415,000 1,970,000 2,830,000 1,120,000 1,150,000 2,120,000 $ 11,605,000 $ Interest 476,569 386,581 307,136 186,406 141,606 161,152 1,659,450 The repayment of debt is funded using secondary property tax and general fund revenues. Debt Margin The State imposes certain debt limitations of 20% and 6% of the net secondary assessed valuation of the Town. For projects involving water, sewer, artificial lighting, parks, open space, public safety, law enforcement, fire and emergency facilities, street and transportation facilities and recreation facilities, the Town can issue GO bonds up to 20%. For any other general purpose improvements, the Town may issue bonds up to the 6% limit. The Town’s available debt margin is $72.6 million in the 20% capacity and $22.7 million in the 6% capacity. The Town is currently using only 4% of the 20% capacity and nothing of the 6% capacity. The height of desert living. 2012-2013 Popular Annual Financial Report Page 9 Profile of Fountain Hills, Arizona The Town of Fountain Hills is a planned, familyoriented 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 designed by Charles Wood, Jr. (designer of Disneyland in southern California). The centerpiece of Fountain Hills is one of the world's tallest man-made fountains, a focal point that attracts thousands of visitors each year. Located on 13,006 acres of land, and bordering northeast Scottsdale, Fountain Hills is surrounded by the 3,500-foot McDowell Mountains on the west, the Fort McDowell Yavapai Indian Reservation on the east, the Salt River PimaMaricopa Indian Community on the south and by the McDowell Mountain Regional Park on the north. Elevation is 1,520 feet at the fountain, 3,000 feet on Golden Eagle Boulevard, and is 500 feet above Phoenix. Over the past twenty-three years, Fountain Hills has grown from 10,190 residents to a town of approximately 22,500 based on the 2010 census. 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 such Town’s standards as the cutand-fill ordinance and strict zoning regulations. Fountain Hills will have an opportunity to dem- onstrate that it is truly the best place to live in the valley. The Town offers a range of living styles, from small community subdivisions to a number of large custom homes. Fountain Hills also offers recreational, cultural and retirement programs that address the needs and lifestyles of active families and adults. The community consists of primarily residential property; of the total 20.32 square miles of land, only 2.3% of the total is zoned commercial and/or industrial, 23.0% is reserved as open space and 51.3% is residential. 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. The Town Council is responsible, among other things, for the adoption of local ordinances, budget adoption, the development of citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and administering the Town’s operations through three department directors and approximately 57 FTE employees. The Presiding Judge, Town Attorney and Town Prosecutor are under the direction of the Town Council. Page 10 2012-2013 Popular Annual Financial Report The height of desert living. The Government of Fountain Hills, Arizona The Town provides or administers a full range of services including public safety (law enforcement, fire, animal control); development services (code enforcement, planning, 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. 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, Eagle Mountain Community Facilities District and Fountain Hills Municipal Property Corporation are included in the financial reports of the Town. The annual budget serves as the foundation for the Town of Fountain Hills’ financial planning and control. The Town Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, these funds have appropriated budgets. On or before the second meeting in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 30, the close of the Town of Fountain Hills’ fiscal year. The budget is legally enacted through passage of a resolution and is prepared by fund and department. The resolution sets the limit for expenditures during the fiscal year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. The height of desert living. 2012-2013 Popular Annual Financial Report Page 11 Fountain Hills, Arizona Awards Also, the GFOA recognized the Town for its June 30, 2012, submission of its Popular Annual Financial Report (PAFR). The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. The requirements are based on an evaluation of creativity, presentation, understandability, and reader appeal. This award is for the Town’s first submission of its The Government Finance Officers Association PAFR. (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Two hundred seventeen cities and towns, includTown of Fountain Hills for its Comprehensive ing Fountain Hills, earned recognition from naAnnual Financial Report (CAFR) for the fiscal tional non-profit KaBOOM! as 2013 Playful City year ended June 30, 2012. This was the 16th con- USA communities for their efforts to increase secutive year that the government has received play opportunities for children. Hailing from 43 this prestigious award. In order to be awarded a states, the 217 Playful City USA honorees range Certificate of Achievement, the government pub- from seven-time honorees to 37 first-time recipilished an easily readable and efficiently organ- ents. These Playful City USA communities are ized CAFR. This report satisfied both GAAP and making a commitment to play and physical activity by developing unique local action plans to applicable legal requirements. increase the quantity and quality of play in their In addition, the government also received the community. GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year In June 2013, Coldwell Banker identified Best ending June 30, 2013. In order to qualify for the Places to Live for “Booming Suburbs”. Each loDistinguished Budget Presentation Award, the cation was assigned a score based on 15-20 atgovernment’s budget document was judged to be tributes. Some of the attributes include access to proficient in several categories, including as a suburban amenities, proximity to good schools, policy document, a financial plan, an operations commuting by car and community safety. The guide, and a communications device. This is the list includes only those suburbs that have a popu12th consecutive year that the Town has received lation greater than 22,275. Fountain Hills was No. 1 in Arizona with a score of 874.18 out of the award. 1,000 possible. Awards Fountain Hills has had its share of accolades. We have been named one of the “10 Great Places to Raise a Family in the U.S.” and have been recognized as “The Best Place to Live in the Phoenix Metropolitan Area.” We have also been listed as “The Best Affordable Suburb” in Arizona. These honors make us proud, and we continually strive to make our community an even better place to live. Page 12 2012-2013 Popular Annual Financial Report The height of desert living. Town of Fountain Hills, Arizona Town Officials TOWN COUNCIL Mayor Ms. Linda Kavanagh Vice Mayor Mr. Tait Elkie Councilmember Mr. Dennis Brown Councilmember Ms. Ginny Dickey Councilmember Mr. Henry Leger Councilmember Ms. Cassie Hansen Councilmember Mr. Cecil Yates This Popular Annual Financial Report is intended to summarize the financial information appearing in the fiscal year 2012-2013 Comprehensive Annual Financial Report (CAFR). Copies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/financial-reports.aspx. The data included in this review is not prepared in accordance with GAAP as only a portion of the Town’s financial statements are presented. TOWN MANAGER Ken Buchanan DEPARTMENT DIRECTORS Deputy Town Manager/ Finance Director Julie A. Ghetti Presiding Judge Mitchell S. Eisenberg Community Services Director Mark Mayer Development Services Director Paul Mood Fire Chief Randy Roberts, Rural Metro Corporation District Commander Captain Joe Rodriquez, Maricopa County Sheriff’s Office Town Prosecutor Iacovino & Kayler Arizona Legislature—District 23 Town Attorney Andrew McGuire, Gust Rosenfeld, P.L.C. U.S. Congress—District 5 TOWN HALL 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Telephone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov The height of desert living. 2012-2013 Popular Annual Financial Report Page 13 The Government Finance Officers Association of the United States and Canada has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the Town of Fountain Hills, Arizona for its Popular Annual Financial Report for the fiscal year ending June 30, 2012. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports.