City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2004 Prepared by: Financial Services Department Craig Clifford, CPA Chief Financial Officer Lisa Murphy, CPA Accounting Director City of Scottsdale, Arizona Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2004 Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal – Chief Financial Officer, Financial Services ........................................................ 1 Certificate of Achievement - Government Finance Officers Association ............................................ 11 List of Elected and Appointed Officials/Organizational Chart .............................................................. 12 FINANCIAL SECTION Independent Auditors’ Report .......................................................................................................................... 15 Management’s Discussion and Analysis ......................................................................................................... 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets. ....................................................................................................................... 34 Statement of Activities ........................................................................................................................... 35 Fund Financial Statements Balance Sheet - Governmental Funds ................................................................................................ 36 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets............................................................................................. 38 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ..................................................................................... 39 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ............................... 41 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual - General Fund ................................................................... 42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund .................................................................. 43 Statement of Net Assets - Proprietary Funds .................................................................................. 44 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds ............................................................................................ 46 Statement of Cash Flows - Proprietary Funds ................................................................................. 47 Statement of Fiduciary Net Assets - Fiduciary Funds ................................................................... 49 Statement of Changes in Fiduciary Net Assets - Fiduciary Funds ............................................. 50 Notes to the Financial Statements ................................................................................................................... 51 I Summary of Significant Accounting Policies ................................................................................... 51 II Reconciliation of Government-wide and Fund Financial Statements ....................................... 55 III Stewardship, Compliance and Accountability ................................................................................... 61 IV Detailed Notes on All Funds ................................................................................................................ 63 A. Change in Accounting Policy ............................................................................................... 63 B. Cash and Investments ............................................................................................................ 64 C. Receivables ................................................................................................................................ 66 D. Capital Assets ........................................................................................................................... 67 E. Interfund Balances and Interfund Transfers .................................................................... 69 F. Operating Leases ..................................................................................................................... 71 G. Bonds, Loans, and Other Payables ...................................................................................... 72 Page V Other Information ................................................................................................................................... 86 A. Risk Management ..................................................................................................................... 86 B. Contingent Liabilities .............................................................................................................. 86 C. Commitments and Subsequent Events ............................................................................... 86 D. Joint Venture ............................................................................................................................. 88 E. Related Organization ................................................................................................................ 88 F. Retirement and Pension Plans ............................................................................................... 88 G. Other Post-Employment Benefits ........................................................................................ 90 Required Supplementary Information: Schedule of Funding Progress – Public Safety Personnel Retirement System ................................ 91 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds .............................................................. 95 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds .......................................................................... 96 Combining Balance Sheet - Nonmajor Special Revenue Governmental Funds ............................... 98 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Special Revenue Governmental Funds ........................................... 99 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: Highway User Fuel Tax – Special Revenue Fund .......................................................................... 100 Preserve Privilege Tax – Special Revenue Fund ............................................................................101 Transportation Privilege Tax – Special Revenue Fund ................................................................102 Combining Balance Sheet - Nonmajor Debt Service Governmental Funds ..................................103 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Debt Service Governmental Funds ...............................................104 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: General Obligation Bond – Debt Service Fund ............................................................................105 Municipal Property Corporation Bond – Debt Service Fund ....................................................106 Special Assessments Bond – Debt Service Fund .......................................................................... 107 Scottsdale Preserve Authority Bond – Debt Service Fund ......................................................... 108 Combining Balance Sheet - Nonmajor Capital Projects Governmental Funds .............................109 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Capital Projects Governmental Funds .......................................... 110 Schedule of Revenues and Expenses – Budget and Actual: Water and Sewer Utility – Enterprise Fund .................................................................................... 111 Explanation of Differences - Water and Sewer Utility Enterprise Fund ................................ 112 Airport – Enterprise Fund .................................................................................................................. 113 Solid Waste – Enterprise Fund ...........................................................................................................114 Combining Statement of Net Assets - Internal Service Funds ..........................................................116 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets – Internal Service Funds ..................................................................................... 117 Combining Statement of Cash Flows - Internal Service Funds ........................................................ 118 Combining Statement of Fiduciary Net Assets ..................................................................................... 120 Combining Statement of Changes in Fiduciary Net Assets ................................................................121 Combining Statement of Changes in Assets and Liabilities ............................................................... 122 Other Supplementary Information: Schedule of Changes in Long-Term Debt ................................................................................................... 124 STATISTICAL SECTION Table Government-wide Information: Page I Government-wide Expenses by Function ............................................................................... 127 II Government-wide Revenues ....................................................................................................... 128 Fund Information: III General Governmental Expenditures by Function - General, Special Revenue, and Debt Service Funds - Last Ten Fiscal Years ............................... 129 IV General Governmental Revenues by Source - General, Special Revenue, and Debt Service Funds - Last Ten Fiscal Years ................................ 130 V Tax Revenues by Source - General, Special Revenue, and Debt Service Funds - Last Ten Fiscal Years .......................................................................130 VI Excise Tax Collections By Source - General, Special Revenue, and Debt Service Funds – Last Ten Fiscal Years ................................................................................. 131 VII Privilege and Use Tax Collections by Category - General, Special Revenue, and Debt Service Funds - Last Ten Fiscal Years ............................................................... 132 VIII Privilege and Use Tax Collections by Source - General, Special Revenue, and Debt Service Funds - Last Ten Fiscal Years ............................................................... 133 IX Property Tax Levies and Collections - Last Ten Fiscal Years ............................................ 134 Xa Assessed and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years ............................................................................................ 135 Xb Assessed Values by Property Class - Last Ten Fiscal Years ................................................136 XIa Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years ...................................................................................137 XIb Property Tax Levies - Direct and Overlapping Governments - Last Ten Fiscal Years ...................................................................................138 XII Principal Taxpayers .......................................................................................................................139 XIII Special Assessment Billings and Collections - Last Ten Fiscal Years ............................... 140 XIV Ratio of Net General Obligation Bonded Debt to Assessed Value and Net Bonded Debt Per Capita - Last Ten Fiscal Years ................................................................................................141 XV Computation of Legal Debt Margins ....................................................................................... 142 XVI Summary of General Governmental Bond Expenditures and Debt Ratios - Last Ten Fiscal Years ....................................................................................... 143 XVII Summary of Water and Sewer Utility Bond Expense and Debt Ratios - Last Ten Fiscal Years .................................................................................................. 144 XVIII Total Direct and Overlapping General Obligation Debt .....................................................145 XIX Demographic Statistics - Last Ten Fiscal Years ..................................................................... 146 XX Property Value and Construction - Last Ten Fiscal Years .................................................. 147 XXI Schedule of Insurance ..................................................................................................................148 XXII Salaries and Surety Bonds of Principal Officials................................................................... 149 XXIII Miscellaneous Statistical Data ....................................................................................................150 Table of Contents September 9, 2004 The Honorable Mayor, City Council, and Citizens of the City of Scottsdale, Arizona: Transmittal Letter For the Fiscal Year Ended June 30, 2004 City of Scottsdale Scottsdale, Arizona The Comprehensive Annual Financial Report of the City of Scottsdale (the City), Arizona, for the fiscal year ended June 30, 2004, is submitted in accordance with Article 6, Section 14, of the City Charter. This report was prepared by the City’s Accounting and Budget Divisions, in conformity with U.S. generally accepted accounting principles (GAAP) and audited in accordance with U.S. generally accepted auditing standards by a firm of licensed certified public accountants. This report consists of management’s representations concerning the finances of the City of Scottsdale. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management of the City of Scottsdale 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 City of Scottsdale’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Scottsdale’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert to the best of our knowledge and belief that this financial report is complete and reliable in all material respects. The City of Scottsdale’s financial statements have been audited by Cronstrom & Trbovich, PC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Scottsdale for the fiscal year ended June 30, 2004, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Scottsdale’s financial statements for the fiscal year ended June 30, 2004 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. City of Scottsdale, Arizona 1 Table of Contents The independent audit of the financial statements of the City of Scottsdale was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Scottsdale’s separately issued Single Audit Report. GAAP requires that management provides a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Scottsdale’s MD&A can be found immediately following the report of the independent auditors. CITY OF SCOTTSDALE PROFILE Scottsdale is centrally located in Maricopa County, Arizona, with its boundaries encompassing an area approximately 184.6 square miles. Lying at an elevation of 1,260 feet above sea level, the City averages 314 days of sunshine and 7.74 inches of rainfall per year, with the average minimum and maximum temperatures ranging from 55.7 degrees to 84.6 degrees, respectively. The City is bordered to the west by Phoenix, the state capital, by Tempe to the south, and by the Salt River/Pima Maricopa Indian Community to the east. Scottsdale, together with its neighboring cities, forms the greater Phoenix metropolitan area, which is the economic, political, and population center of the state. Scottsdale was founded in the 1800’s when retired Army Chaplain Major Winfield Scott homesteaded what is now the center of the City. The City incorporated in 1951 and the City Charter, under which it is presently governed, was adopted in 1961. The City has experienced significant increases in population, with the 1950 census reporting 2,032 residents, the City’s 1990 census reporting 130,069 residents and the 2000 census reporting 202,705 residents. The City’s population is estimated to be approximately 222,600 by July 2004 and an estimated 224,320 by January 2005. Scottsdale operates under a council-manager form of government as provided by its Charter. The Mayor and six City Council members are elected at 2 large on a non-partisan ballot for a four-year term. The City Council appoints the City Manager, who has full responsibility for carrying out Council policies and administering City operations. The City Manager, in turn, appoints City employees and department General Managers under service procedures specified by Charter. City service departments provide a full range of services including police and fire protection, sanitation/ solid waste service, water and sewer services, construction and maintenance of streets, recreational activities, and cultural events. The annual budget serves as the foundation for Scottsdale’s financial planning and control. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Highway User Fuel Tax Special Revenue Fund, Preserve Privilege Tax Special Revenue Fund, Transportation Privilege Tax Special Revenue Fund, Debt Service Funds (except for the Community Facilities Districts Debt Service Funds), and Enterprise Funds. Therefore, these funds have appropriated budgets, and budget to actual information is presented. On or before the second regular Council meeting in May, the City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Two public hearings are held prior to the budget’s final adoption in order to obtain taxpayer comments. At the first regular Council meeting in June, the budget is legally enacted through passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. During FY 2003/04, there were no supplemental budgetary appropriations to the original budget. The expenditure appropriations in the adopted budget are by department. The maximum legal expenditure permitted for the fiscal year is the total budget as adopted. Departmental appropriations may be amended during the year. Upon the recommendation of the City Manager, and with the approval of the City Council: (1) transfers may be made from the appropriations for contingencies to departments; and (2) unexpended appropriations may be transferred from one department to another. Management control of budgets is further maintained at a line item level within the department. City of Scottsdale, Arizona Table of Contents FACTORS AFFECTING THE CITY’S FINANCIAL CONDITION At the time of writing this transmittal letter, the national and state economies were in the midst of a modest recovery compared to the relatively anemic performances from the past few years. Gains in productivity, retail sales, tourism, housing, and the gross domestic product all point to a continued resurgence in the economy. However, some economists have labeled the economic rebound as a “soft” recovery due to the weak job market, the lack of new jobs, and minimal increases in workers’ wages. Looking ahead, there are several key factors that will determine the strength and duration of the current economic recovery, including inflation, rising interest rates, the upcoming presidential election, acts of terrorism and the geopolitical instability in the Middle East. The City of Scottsdale continues to benefit from favorable conditions, including a stable, diversified economic base and a desirable location for work, destination, and living. Low commercial vacancy rates, current low mortgage interest rates, and the attractive developments within Scottsdale continue to bring high-end residential growth and commercial development. Commercial successes can be expected to continue because of the City’s commitment to targeted recruitment efforts that focus on industry segments that complement the existing business mix, including: corporate headquarter and regional offices; high-tech, research and development; bio-med; and business and professional services. From a long-term perspective, the nation’s economy may be significantly affected by many factors, including geopolitical instability, a growing national debt and demands on Social Security as babyboomers near retirement. On the local front, the City of Scottsdale will face critical decisions regarding redevelopment and in-fill projects as the City reaches build out and a gradual decline in population growth, which will impact distributions of state-shared revenues. The City will experience a shifting of the City’s economic base, as ample tax revenues derived from new growth will no longer be available, and intense competition from other communities in the region for quality of place. The following categories represent key factors affecting Scottsdale’s economic and financial success. Local Economy Retail Sales - Scottsdale’s largest revenue source is sales tax generated from a wellbalanced variety of business categories City of Scottsdale, Arizona including automotive, construction, food stores, hotels/motels, department stores, retail stores, restaurants, utilities and rentals. After two consecutive years of negative year-over-year sales tax growth, the City of Scottsdale sales tax receipts posted a 9.5 percent gain in FY 2003/ 04; respectable, but still well below the City’s double-digit growth that was common in prior decades. Factors contributing to a brighter economic outlook for retailers included rising consumer confidence, continued low interest rates, a red-hot housing market, increased factory orders and productivity, and tax refunds from President Bush’s economic stimulus package. Residential Activity - Residential property value in Scottsdale increased to $23.7 billion in FY 2003/04, up approximately 23.4 percent from $19.2 billion in FY 2002/03. The number of dwelling units for residential construction increased to 2,903 in FY 2003/04, up approximately 41.9 percent from 2,046 in FY 2002/03; respective residential construction value increased to $426.2 million in FY 2003/ 04, up approximately 6.4 percent from $400.5 million in FY 2002/03. Commercial Activity - Commercial property value in Scottsdale decreased slightly to $7.2 billion in FY 2003/04, down approximately 1.4 percent from $7.3 billion in FY 2002/03. The number of commercial construction permits increased to 2,512 in FY 2003/04, up approximately 13.4 percent from 2,215 in FY 2002/03; respective commercial construction value increased to $252.3 million in FY 2003/ 04, up approximately 26.7 percent from $199.2 million in FY 2002/03. Vacancy Rates - Scottsdale’s citywide vacancy rate was 15.9 percent at the end of FY 2003/04, which was below the Valley-wide average. The weighted average rent was 13.3 percent higher than the Valley-wide average, evidence that Scottsdale remains an attractive city to conduct business. The forecasted vacancy rate for FY 2004/05 indicates improvement, in line with a more positive economic outlook. Job Growth - The City of Scottsdale recruited over five new targeted firms and secured six expansions resulting in over 1,800 new jobs in FY 2003/04 with an average annual salary of $55,000. The City benefited from population growth as well as higher income levels due to higher wage jobs. Major new employers to 3 Table of Contents announce moves to Scottsdale in FY 2003/04 included TD2, Scottsdale Mitsubishi and Liberty Mutual. The City also benefited from the expansions of Nautilus Insurance, Taser International, MicroSemi and McKesson. Employment - Scottsdale is creating jobs faster than it is adding to its labor force and thus remains a net importer of labor. This creates employment opportunities for Scottsdale residents and creates a significant business component to the local tax base. Scottsdale’s current unemployment rate of 3.1 percent is lower than state and metropolitan Phoenix area levels and is lower than its 2003 unemployment rate of 3.7 percent. Tourism - Tourism is one of Scottsdale’s largest industries and is a significant contributor to the City’s economy. Numerous resorts, country clubs and convention facilities, as well as many hotels and motels, provide nearly 10,000 guest rooms and offer recreational facilities including golf courses, tennis courts and swimming pools. The number of rooms is expected to remain stable through 2006. More than 2,500 retail shops, boutiques, and galleries are located throughout the City and a selection of almost 400 restaurants is available. These services and facilities, complemented by the mild winter climate, have made Scottsdale a popular vacation spot for tourists and winter visitors. Hotel occupancy tax receipts increased by approximately 7.0 percent in FY 2003/04 compared to only a 0.1 percent increase in FY 2002/03. The current assessment for FY 2004/ 05 is that tourism will continue to experience a modest recovery from its post September 11, 2001 levels, reflected by gradual increases in occupancy and room rates. The local tourism industry continues to exhibit signs of moderate recovery as leisure and business travelers return to Scottsdale; however, hotel room rates remain relatively low compared to historic levels as hoteliers offer discounts to spur demand. Therefore, while the long-term outlook for local tourism remains cautiously optimistic, slower hotel occupancy tax growth is expected relative to historic levels. Long-term Financial Planning The City’s responsiveness to emerging economic challenges and its careful long-range planning have been key factors in Scottsdale’s fiscal health. Fiscal conservatism, a streamlined 4 budget, and operating efficiencies have resulted in a solid financial position for the City at the close of FY 2003/04. The Mayor and City Council have co-created a mission statement as well as six broad goal categories, which represent key interests and priorities of the Mayor, City Council, and reflect their constituency’s suggestions and expectations for the future. Approval by Council of these Mission and Goal statements allows staff to create strategic plans and a programmatic budget that directly responds to the Council’s and community’s goals and expectations. Plans articulated in the FY 2004/05 Adopted Budget and Five-Year Balanced Financial Plan continue to support basic government services (roads, water, sewer, solid waste management, public transit, parks and recreation, police, fire, etc.), while also addressing the City Council’s broad goals and citizen expectations for the community. The following are the mission and broad goals identified by Scottsdale’s Mayor and City Council: Mission - It is the mission of the City of Scottsdale to build citizen trust by fostering/ practicing open, accountable, and responsive government; to provide quality services; to provide long-term prosperity; to preserve Scottsdale’s unique southwestern character; to plan and manage growth in harmony with its desert surroundings; and to promote livability by enhancing and protecting its neighborhoods. Quality of life for residents and visitors shall be the paramount consideration. Broad Goals A. Enhance and protect a diverse, family-oriented community where neighborhoods are safe, protected from adverse impacts, and well maintained. B. Preserve the character and environment of Scottsdale. C. Provide for the safe, efficient, and affordable movement of people and goods. D. Position Scottsdale for short- and long-term economic prosperity by stabilizing, promoting, strengthening, stimulating, expanding, and diversifying our economic resources. E. Ensure Scottsdale is fiscally responsible and fair in its management of taxpayer money and city assets, and coordinates land use and infrastructure planning within the context of financial demands and available resources. City of Scottsdale, Arizona Table of Contents F. Make government accessible, responsive, and accountable so that pragmatic decisions reflect community input and expectations. Strategic Financial Plan Scottsdale’s financial plan requires many elements working in concert with one another. Some of these financial plan elements are financial resource planning, multi-year budget planning, strategic capital improvement project planning and debt management, all of which are further identified below. Currently, Scottsdale’s financial forecast includes modest revenue growth, potential for State reductions of revenue sharing due to population shifts, and continued increases in demand for City services such as police, fire, transportation and social services. Financial Services management role will be to maintain and enhance financial plan elements and ensure the continued financial stability for the City of Scottsdale. Strategic Capital Improvement Project Planning - Scottsdale Capital Improvement Projects are planned for five or more years and analyzed using City specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budget plans. Projects with significant operating impacts are carefully timed to avoid contingent liabilities, which future operating resources cannot meet. Pay-as-you-go funding sources are also conservatively estimated to avoid over-committing to capital construction using revenues that are not certain. To the extent debt financing is used and/or required capital project plans are sized to conform to existing debt management policies. The table below estimates the operating costs attributable to the Five Year Capital Improvement Plan: Estimated Operating Impacts Attributable to Capital Projects For the Five Years Ending June 30, 2009 (in thousands of dollars) Financial Resource Planning Community Facilities ............................................ $17,682.0 Strategic financial planning begins with Preservation ............................................................. 248.4 determining the City’s fiscal capacity Public Safety ............................................................ 7,696.6 based upon long-term financial Service Facilities ..................................................... 2,830.4 forecasts of recurring available Transportation Improvements ............................ 9,329.9 revenues. Financial forecasts coupled Water Resources ..................................................... 13,838.0 with financial trend analysis techniques Total Estimated Operating Impacts .................. $51,625.3 and careful reserve analysis help preserve the fiscal well being of Scottsdale. Strategic financial capacity Debt Management - Scottsdale has a financial planning is a critical element to reach long-term policy, which prohibits the issuance of debt for financial stability goals and to determine special operating expenses. With that as a governing financial needs for critical objectives of the City framework all debt issuances are for the purposes Council. of financing capital infrastructure (or long-lived costly assets). Each debt issuance is evaluated Multi-Year Budget Planning - Multi-year against multiple additional policies addressing debt budget planning encompasses long-range service as a percent of operating expenditures; tax operating expenditure plans (including the and revenue bases for the repayment of debt; the operating impacts of planned capital projects), overall debt burden on the community; statutory which are linked to community expectations and limitations and market factors affecting tax-exempt broad goals of the City Council. The multi-year interest costs. In all cases a long-term analysis is approach provides a better opportunity for staff made considering the financial (debt) capacity that to change its financial paradigm from what do fits the wherewithal (and willingness) of our we need this year to how do we accomplish our community to pay for the capital projects. The service objectives over time, given our financial annual debt service operating cost for each capacity. While the City is required to adopt an additional $1 million dollars in new debt ranges annual budget to meet State statutory from $75,000 to $80,000, based on a current requirements, Scottsdale builds a financial plan interest rate of 4.5% when amortized over 20 for the next five years to help anticipate future years. Sizing of the City’s Capital Improvement impacts and ensure achievement of City Project Plan based on debt capacity in conjunction objectives. with conservatively estimated pay-as-you-go revenues will help stabilize per capita debt and lower annual debt service costs to the City over the long-term. City of Scottsdale, Arizona 5 Table of Contents Cash Management Policies and Practices Cash temporarily idle during the year, excluding that of the Municipal Property Corporation (MPC), and the Community Facilities Districts, was invested primarily in obligations of the U.S. Treasury and its agencies. Cash needed for normal operations was also invested in the State Treasurer’s Local Government Investment Pool and mutual funds whose portfolios consist solely of U.S. Government Treasury and Agency securities. The City utilizes a pooled cash concept in order to invest greater amounts of cash at one time and; therefore, receives more favorable interest rates. The average yield on pooled investments for the FY 2003/04 was 2.46% and the average balance was $434,759,423. Scottsdale’s investment policy is to invest all of the City funds at the highest available interest rate, assuring that all monies are fully secured with emphasis on safety of principal, liquidity and financial return on principal, in that order. Risk Management The City of Scottsdale is exposed to various risks of loss related to public, property and airport operator’s liability, as well as employee workers’ compensation exposures. Public liability includes public officials’ errors and omissions, automobile, and general liability areas of coverage. The City is self-insured for the first $2,000,000 of public liability, the first $100,000 of property insurance, and the first $600,000 of workers’ compensation claims. Coverage in excess of these respective amounts is provided through the purchase of commercial insurance. For the fiscal year ending June 30, 2004, the global property-casualty insurance marketplace eased slightly from the September 11th terrorist attack downturn allowing the City to purchase an additional $10.0 million of liability insurance ($40.0 million total limits) at the same approximate cost as the previous year. As for claim expenditures, settlements for each of the past five fiscal years have not exceeded the City’s excess insurance coverage amounts for any claims. Scottsdale has an aggressive safety program that promotes on-the-job safety practices focusing on risk control techniques designed to minimize accident-related losses. In addition to 6 preventative practices geared to work unit functions, the Risk Management division reviews every claim in order to develop and implement prevention techniques that minimize the City’s exposures to similar incidents. Post-Employment Benefits The City participates in the Arizona State Retirement System, the Public Safety Personnel Retirement System, and the Elected Officials’ Retirement Plan. In addition, the City provides an option of post-retirement health care benefits, in accordance with Chapter 14 of the City Code. At retirement, employees with medical leave accumulated prior to September 6, 1976 are eligible for payment of medical leave at one hundred percent cash value at current rate of pay. Employees hired before July 1, 1982 can elect to receive cash equal to fifty percent of the first five hundred twenty hours of unused medical leave plus twenty-five percent of all hours in excess of five hundred twenty. The conversion rate is the employee’s average hourly base pay rate for the five years immediately preceding retirement. Any retiring employee with 300 or more hours of accumulated medical leave, who chooses to remain on the city medical plan, may elect to apply the value of the sick leave to the employee’s portion of the health care premiums, up until age 65. The value of the accumulated medical leave is calculated at the employee’s hourly rate of pay at the time of retirement. The number of participants at the end of fiscal year 2003/04 was 96 and is expected to grow as more employees reach retirement age. The projected liability for this benefit was actuarially determined on January 1, 2004 and was used to calculate the liability recorded in the financial statements. (See Note V of the Notes to the Financial Statements for additional information on this benefit) MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2003/04 Scottsdale continued to invest in basic government service programs and amenities that define the special character of the City. These programs and amenities will assist in maintaining Scottsdale as a “livable” community for future generations. Service efforts to shape and maintain Scottsdale as a sustainable community that were made in the past City of Scottsdale, Arizona Table of Contents year included enhancements to the quality citizen services, contributions to environmentally and fiscally-sound infrastructure and contributions toward building and maintaining a sustainable economic base. The following are some department service efforts and accomplishments for FY 2003/04. Police Developed a Police Department Strategic Plan to chart the course for the next five years. The plan addresses issues of department development and public safety response. A review mechanism has also been developed to ensure the plan components are tracked and progress is reported and communicated to the organization, City leadership, and the community. Cleared 15% of reported burglary cases in calendar year 2003 (State average was 6.9%). Arrested 80 career offenders and used the Maricopa County Attorney Repeat Offender Program for enhanced prosecution. Conducted undercover operations on activity in, and relating to, Scottsdale nightclubs. The operation targeted multiple suspects operating in an “open market” environment selling crack cocaine, cocaine, and methamphetamine. Over 32 arrests were made and $570,000 of drugs were seized. Conducted training for all first responders in weapons of mass destruction response and completed several scenario drills. Over 450 City personnel were trained in first responder guidelines. Fire Completed the construction and occupied the new permanent airport fire station at 14970 North 78th Way. Completed design and began construction of a new permanent fire station at Ranch and Pima Roads. Awarded federal funding from the fiscal year 2003 Assistance to Firefighter Grant program. Completed the process of obtaining all the large fire apparatus during fiscal year 2003/04. Financial Services Awarded ratings of “AAA”, “Aaa”, and “AAA”, from the three major credit rating agencies, Fitch Ratings, Moody’s Investors Service, and City of Scottsdale, Arizona Standard and Poor’s Ratings Services, respectively, on outstanding general obligation bonds. These are the highest possible ratings. Defeased (retired) $12.5 million of General Obligation bonds, $29.3 million of Excise Tax Refunding Bonds and $3 million of taxable Municipal Property Corporation bonds. Refunded (re-financed) $16.3 million of General Obligation, $18.89 million of Water/Sewer Excise Tax Revenue, and $22.77 million of Scottsdale Preserve Authority bonds to take advantage of low interest rates and the City’s high credit ratings, resulting in $2.7 million debt service savings. Sold $48 million of General Obligation bonds, $65.4 million of Preservation General Obligation bonds, and $75 million of Municipal Property Corporation water/sewer bonds to fund a variety of capital infrastructure projects. Implemented web-based requests for utility billing service. The E-Government platform allows customers to request their service started, stopped, or changed for Water, Sewer, and Solid Waste, removing the need to call and schedule activities related to move-in/move-outs. Upgraded sales tax and subsidiary systems to handle the new sales and use tax rates approved by Scottsdale voters May 18, 2004. Developed web-based graphics requisition system that replaces paper forms process for requesting business cards, document reproduction, and creation from the Graphics department. The system is a complete request management solution that tracks requests from inception to completion. Transportation Completed a $650,000 security improvement project at the Scottsdale Airport, including hardwiring all Airport access locations and installing 16 security cameras and a new security access control system. Reorganized the Transportation Department as the City formed a new Downtown Group partly comprised of Department staff. Completed and published a strategic plan for Scottsdale Intelligent Transportation Systems operation, the first in the region for an arterial management organization. Inaugurated the new trolleys on the Downtown Trolley routes and had the busiest season of its tenure. Trolleys were used on the Giants 7 Table of Contents Shuttle for the first time and ridership was also the highest it has ever been. Achieved adoption of a new Scottsdale Streets Master Plan by City Council in October 2003. Installed new turn lanes at the Frank Lloyd Wright/Greenway-Hayden, Chaparral/Hayden and Camelback/Hayden intersections. Completed a new bridge at the Deer Valley/ Hayden-Miller intersection. Community Services Awarded the National Gold Medal Award for Excellence in Parks and Recreation Management. This prestigious national award gives recognition to communities for excellence in management of the agency, its professional staff, its dedication to serving the needs of its citizens, creative financing, use of volunteers, serving the disabled and disadvantaged, and diversity of program/activity opportunities. Also awarded “Sports Illustrated” Magazine’s Arizona Sportstown USA for Scottsdale Parks and Recreation. The magazine and the National Recreation and Park Association featured this award as part of the magazine’s 50th anniversary. Obtained a grant for a new youth sports complex on a school/park site in central Scottsdale, through partnership with the Arizona Tourism and Sports Authority and three youth sports organizations. Completed the final phase of La Mirada Desert Park by adding a lighted basketball court, additional storage and turf area. Completed the Community Services Facilities Plan, updating the Parks Master Plan 2010. Completed a study of youth sports fields maintenance issues and made recommendations that will result in safer, better playing surfaces for the City’s youth and that will strengthen the partnership between the City, the Scottsdale Unified School District, and the community organizations providing youth sports activities. Information Systems Reached agreement with Qwest on the construction schedule for their cable TV system. The negotiations culminated with an increase in Community Contributions to the City – Qwest is providing the City with data transmission circuits for a period of ten years. The cost savings to the City is over $950,000. 8 Developed and implemented an automated Pavement Management System. This system assists with long-term pavement maintenance planning and budgeting by simplifying retrieval of historical data, calculation of quantity and cost estimates, and expediting customer service. It meets federal requirements that keep the City eligible for federal transportation funds, as well as meets GASB 34 accounting requirements. Completed the Network Upgrade Project replacing the City’s network communications infrastructure that supports most of the computers, servers and applications used in the City. The new equipment has improved overall network performance ten-fold, as well as provided increased manageability and security. Completed key infrastructure upgrades. Replaced production servers for several key systems. Replaced the primary production laser printer – doubling the print speed while adding enhancements that will reduce the need for custom forms resulting in lower costs. Upgraded the software on 2,200 desktop and laptop computers to provide increased security, a vendor supported platform, and a more intuitive user interface. Completed the mapping of natural wash corridors with a measuring flow of 50 cubic feet/second (cfs), which is a requirement for the new Environmental Sensitive Land Ordinance. This will allow City staff to review and to assure wash modifications result in an equal or enhanced quality of open space, restoration of vegetation occurs, adjacent properties are not impacted, and the integrity of upstream or downstream corridors will be reduced. Planning and Development Services Provided After-Hours Inspections and an Expedited Review process to enhance customer service. Revenues from the After-Hours Inspections totaled $19,475 and revenues from the Expedited Review process totaled $238,900. These revenues offset the Department’s entire overtime expenses for the fiscal year, with the remaining funds going directly to the City’s General Fund to support other General Fund activities. Initiated a new on-line building permit system enabling customers to enter application information from their home/office, thereby reducing processing time at the One Stop Shop. Also, opened a new customer service satellite City of Scottsdale, Arizona Table of Contents office at the City’s Corporation Yard to service customers in the northern area. Coordinated review of 405 public hearing cases and focused on character and quality to meet community expectations. Conducted 154,300 inspections, performed 900 green building inspections, and issued over 3,000 Certificates of Occupancy. Preservation Completed negotiations for acquisition of all remaining private land in the Preserve boundary. Completed plans and initiated building of first access area in the Preserve. Managed process for developing partnership between the City and the owner of the Hotel Valley Ho for revitalization of the historic hotel. Water Resources Reaffirmed the importance of water conservation as a high priority through targeted public education and community awareness programs, such as the “Water-Use It Wisely” advertising campaign. Scottsdale’s total potable water use decreased approximately 5 percent for 2003. This decrease can be partially attributed to increased customer awareness of drought conditions and the importance of water conservation in the desert. Completed a vulnerability assessment of the water system with the assistance of a Federal EPA grant and identified potential areas for improvement. The City of Scottsdale has initiated an action plan to make these improvements. Projects currently in progress include the installation of additional access controls at Water Resources office buildings and utilization of advanced detection and surveillance technology at Water Resources facilities. Began design and construction of the Chaparral Water Treatment Plant at Hayden and McDonald in 2003, with a January 2006 completion date. This plant will utilize advanced membrane technology to provide high quality drinking water to portions of Original Scottsdale. Also completed design of Phase III of the Water Campus Wastewater Treatment Plant to accommodate increased sewer flows and effluent reuse. Construction will take place during FY 2004/05. City of Scottsdale, Arizona Awarded an ‘A’ grade on the “Making the Grade: The Valley’s Environmental Report Card” from The Valley Forward Association, a unique public interest group that has influenced the quality of life and environmental decisions in the Valley since 1969. The Association stated, “Scottsdale can be used as a model for solid and comprehensive water resources planning.” The City of Scottsdale continues to reduce reliance on groundwater by using more renewable surface water (67 percent) than groundwater (33 percent). Surpassed or equaled all Federal and State drinking water standards for Scottsdale’s city water supply, as reported in the 2003 Water Quality Report sent to all customers. To ensure continued compliance with Federal Water Quality standards, design and construction of treatment facilities for arsenic removal from the water supply has been initiated and will be in place by January 2006 when the Environmental Protection Agency requires water providers to meet the new standard for arsenic. Municipal Services Purchased approximately $3.5 million in Fire department equipment to be added to the City’s Fleet inventory, in preparation for the City transitioning to a municipal Fire department in July 2005. Also supported implementation of the Transportation department’s downtown trolley route by providing a dedicated bio-diesel fuel tank at the Angus fuel site; issuing fuel cards and training Transportation employees on the proper use of the fuel system; and monitoring tank levels to ensure availability of bio-diesel fuel. The Scottsdale Trolleys are the first vehicles in the City to use this type of fuel, which is a clean-burning, environmentally friendly alternative fuel. Negotiated an extension of the intergovernmental agreement with the Salt River Pima Maricopa Indian Community through 2015 for solid waste services, including landfill, recyclables processing, green waste recovery and transfer hauling services. Also diverted 29,926 tons of recycling material from the containerized residential waste stream through curbside recycling. This represents 30 percent of the waste generated and helped avoid almost $600,000 in landfill tipping fees, while generating over $200,000 in revenue. Solid Waste completed this fourth straight year without requiring an increase to residential 9 Table of Contents collection rates. Solid Waste has aggressively supported the south Scottsdale revitalization effort – providing two roll-offs for neighborhood cleanups and spearheaded efforts to address alley issues, among others. Successfully completed the Stack 40’s drainage plan and the Stormwater Management Plan, including implementation of the Severe Weather Warning and Response plan with secure satellite and Internet communications, 24/7 availability of qualified meteorologist, automatic electronic notification system, and identification of alternative dedicated funding sources outside of the General Fund. The preparation of this report could not have been accomplished without the dedicated service of the entire staff of the Accounting and Budget divisions, the assistance of administrative personnel in the various departments, and through the competent service of our independent auditors. I also wish to express my sincere appreciation to the City Council, the City Manager, and the Assistant City Managers for their interest and support in planning and conducting the financial affairs of the City of Scottsdale in a responsible and progressive manner. Respectfully submitted, AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Scottsdale for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2003. This was the 31st consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Craig Clifford, CPA, CGFM Chief Financial Officer The City of Scottsdale received the Distinguished Budget Presentation Award for the fiscal year beginning July 1, 2003 from the GFOA for our conformity in budget presentation. We believe that our current budget continues to conform to the program requirements and expect to receive this award for the fiscal year beginning July 1, 2004. In addition, the City’s triple-A ratings from all three rating agencies on uninsured general obligation bonds as provided above were affirmed by the Rating Agencies in April 2004 in conjunction with the issuance of general obligation refunding bonds. (See the Management Discussion and Analysis for additional information on the bond ratings by bond type.) 10 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona 11 Table of Contents City of Scottsdale, Arizona List of Elected and Appointed Officials City Council Mary Manross, Mayor Robert W. Littlefield, Vice Mayor Betty Drake Wayne Ecton W.J. “Jim” Lane Ron McCullagh Kevin J. Osterman Charter Offices Comprehensive Annual Financial Report Joseph Bertoldo, City Attorney Cheryl Barcala, City Auditor Carolyn Jagger, City Clerk B. Monte Morgan, City Judge Janet M. Dolan, City Treasurer For the Fiscal Year Ended June 30, 2004 Administrative Stafff City of Scottsdale Scottsdale, Arizona 12 Janet M. Dolan, City Manager Barbara A. Burns, Assistant City Manager Ed Gawf, Deputy City Manager Roger Klingler, Assistant City Manager City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Citizens of Scottsdale Mayor and City Council TM Citizens Advisory Boards Citizen Advisory Commissions City Manager Charter Offices City Attorney - Joseph Bertoldo 480-312-2405 City Auditor - Cheryl Barcarla 480-312-7867 City Clerk - Carolyn Jagger 480-312-2411 City Judge - B. Monte Morgan 480-312-7027 City Treasurer - Janet M. Dolan 480-312-2422 Janet M. Dolan 480-312-2422 Administrative Support Communications and Public Affairs Transportation The Downtown Group Mary O'Connor John C. Little 480-312-2334 480-312-2539 Administration Aviation Transportation Planning Downtown Marketing & Promotion Deputy City Manager Assistant City Manager Assistant City Manager Ed Gawf 480-312-4510 Roger Klingler 480-312-5830 Barbara A. Burns 480-312-2599 Planning & Development Services Kroy Ekblaw 480-312-7064 Citizen & Preservation Neighborhood Resources Judy Register Bob Cafarella 480-312-2454 480-312-2577 Customer Services & Administration Administration Customer Service & Communication McDowell Sonoran Preserve Historic Downtown Planning & Preservation Project Design Services Neighborhood Planning & Services Environmental Transit Coordination Current Planning Planning Services Traffic Services Downtown Engineering Plan Review & Parking -Intelligent Permit Services/ Program Transportation One Stop Shop Systems Cultural Inspection & Council Land Survey Contract Services Administration Police Fire Human Resources Economic Vitality Alan Rodbell 480-312-5310 William L. McDonald 480-312-2492 Neal Shearer 480-312-2604 Dave Roderique 480-312-7601 Office of the Chief General Fire Protection Administration Economic Development Uniformed Services Fire Support Special Programs Fire Transition Investigative Services Administrative Services Personnel Development Emergency Services Fire Contract Human Resources Tourism Learning & Organization Development Diversity & Dialogue Revitalization Business Services IntergovernWater mental Resources Relations Steve Olson David Mansfield 480-312-2423 480-312-5681 Federal Relations State Relations Regional Relations Water Resources Administration Water Operations Municipal Services Community Services Financial Services Information Systems WestWorld Al Dreska 480-312-5555 Debra Baird 480-312-2480 Craig Clifford 480-312-2427 Brad Hartig 480-312-7615 Brad Gessner 480-312-6825 Administration Administration Administration IS Support Operations & Facilities Management Capital Project Management Water Quality Solid Waste Management Water Treatment Field Services Fleet Management Stormwater Management Parks & Recreation Accounting Budget Human Services Library Systems Parks & Ground Management Facilities Management Risk Management Application Dev. Events Integration, Mgt. & Support Management Technology Infrastructure Purchasing Implem. & Support Customer Service GIS Data Services Project Office Departmental Support July 2004 13 Table of Contents 14 City of Scottsdale, Arizona Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2004 15 City of Scottsdale, Arizona For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents 16 City of Scottsdale, Arizona Table of Contents This section of the City of Scottsdale’s (the City) Comprehensive Annual Financial Report presents a narrative overview and comparative analysis of the financial activities of the City for the fiscal years ended June 30, 2004 and 2003. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. Management’s Discussion and Analysis ANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2004 M FINANCIAL HIGHLIGHTS The assets of the City exceeded its liabilities at the close of the fiscal years 2004 and 2003 by $2.8 billion and $2.6 billion (net assets), respectively. Of these amounts, $413.2 million and $346.2 million (unrestricted net assets), respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. The City’s total net assets increased by $179.3 million and $96.0 million during fiscal years 2004 and 2003, respectively. As of June 30, 2004 and 2003, the City’s governmental funds reported combined ending fund balances of $317.5 million and $270.9 million, respectively. The increase is primarily due to new bond sales during fiscal year 2004. Approximately 96.5 percent of the fund balance at June 30, 2004, $306.3 million, is unreserved fund balance available for spending at the government’s discretion, compared to $255.2 million at June 30, 2003. However, in fiscal year 2004 management has designated $32.4 million of the unreserved fund balance for various uses and $224.4 million is for capital projects. At the close of the current fiscal year, unreserved fund balance for the General Fund was $59.7 million or 34.3 percent of total General Fund expenditures of $174.2 million. At the close of fiscal year 2003, unreserved fund balance for the General Fund was $71.2 million or 42.0 percent of total General Fund expenditures of $169.7 million. Fund balance designated at June 30, 2003 for bonds payable in the amount of $33.7 was used to defease outstanding debt during fiscal year 2004. During fiscal year 2004, the City’s total bonded debt increased by approximately $111.6 million, in contrast to the decrease of approximately $25.5 million in fiscal year 2003. Although the City reduced several bond payable balances, the key contributor to the increase was the sale of new bonds to fund capital projects in the amount of $113.4 million during fiscal year 2004. City of Scottsdale, Arizona 17 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Relationship Between Comprehensive Annual Financial Report (CAFR) and Basic Financial Statements and Required Supplementary Information (RSI) General Information on the government structure, Introductory services and environment Section + Management's Discussion and Analysis CAFR Government-wide Financial Statements Basic Financial Statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements Financial Section Notes to the Financial Statements Additional Required Supplementary Information Information on individual funds and discretely presented component units and other supplementtary information not required by GAAP + Trend data and nonfinancial data Statistical Section Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether or not the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. 18 City of Scottsdale, Arizona Table of Contents Separate financial statements of the MPC, SPA and Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, and Via Linda Road Community Facilities Districts may be obtained at the City’s Financial Services Department, Accounting Division, 7447 East Indian School Road, Suite 210, Scottsdale, Arizona 85251. The government-wide financial statements can be found on pages 34 and 35 of this report. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs. Management’s Discussion and Analysis The government-wide financial statements are for the City itself. However, included within the governmental activities of the government-wide financial statements are the operations of the City of Scottsdale Municipal Property Corporation (MPC), the Scottsdale Preserve Authority (SPA), and Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, and Via Linda Road Community Facilities Districts. Although legally separate from the City, these component units are blended with the primary government because of their governance or financial relationships to the City. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into the following three categories: Governmental Funds, Proprietary Funds, and Fiduciary Funds. For the Fiscal Year Ended June 30, 2004 Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (businesstype activities). The governmental activities of the City include general government, police, financial services, transportation, community services, information systems, planning and development, fire, municipal services, and citizen and neighborhood resources. The business-type activities of the City include water, sewer, solid waste, and airport operations. 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 government’s near-term financing decisions. 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. The City maintains several individual governmental funds organized according to their type (special revenue, debt service, and capital projects). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, General Obligation Bond Debt Service Fund, and General Capital Improvement Plan Construction Capital Projects Fund, which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. City of Scottsdale, Arizona 19 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. Proprietary Funds Proprietary Funds are generally used to account for services for which the City charges customers–either outside customers, or internal units or departments of the City. Proprietary Funds provide the same type of information as shown in the government-wide financial statements, only in more detail. The City maintains the following two types of Proprietary Funds: Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses Enterprise Funds to account for the operations of the Water, Sewer and Solid Waste operations of the City as well as the Airport. All Enterprise Funds are considered to be major funds of the City. Internal Service Funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses Internal Service Funds to account for its fleet of vehicles and self-insurance. Because these services predominantly benefit governmental rather than businesstype functions, they have been included within governmental activities in the government-wide financial statements. The Internal Service Funds are combined into a single, aggregated presentation in the propriety fund financial statements. Individual fund data for the Internal Service Funds is provided in the form of combining statements elsewhere in this report. Fiduciary Funds Fiduciary Funds are used to account for resources held for the benefit of parties outside the City. The City has two private-purpose trust funds and two agency funds, which are reported under the Fiduciary Funds. Fiduciary Funds are not reflected in the government-wide financial 20 statement because the resources of those funds are not available to support the City’s own programs. The accounting used for Fiduciary Funds is much like that used for Proprietary Funds. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension benefits to its employees. Combining Statements The combining statements referred to earlier in connection with non-major governmental funds, Internal Service Funds, and Fiduciary Funds are presented immediately following the required supplementary information on pensions. GOVERNMENT-WIDE FINANCIAL ANALYSIS Analysis of Net Assets As noted earlier, net assets may serve as a useful indicator of a government’s financial position. For the City, assets exceeded liabilities by $2.8 billion and $2.6 billion at the close of the fiscal years 2004 and 2003, respectively. The largest portion of the City’s net assets reflects its investment of $2.20 billion (78.2 percent) and $2.15 billion (81.7 percent) in capital assets (e.g. land, buildings, and equipment), less any related outstanding debt used to acquire those assets, for the fiscal years 2004 and 2003, respectively. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. City of Scottsdale, Arizona Table of Contents Governmental Business-type Activities 2004 Assets Current and Other Assets Capital Assets * Total Assets Liabilities Long-term Liabilities Outstanding * Other Liabilities Total Liabilities $ 436,905 2,090,682 2,527,587 568,936 83,381 652,317 Activities 2003 $ 384,223 1,999,825 2,384,048 528,302 75,161 603,463 2004 $ 324,954 820,530 1,145,484 168,710 30,150 198,860 Total 2003 $ 227,423 754,640 982,063 96,855 23,210 120,065 2004 $ 761,859 2,911,212 3,673,071 737,646 113,531 851,177 2003 $ 611,646 2,754,465 3,366,111 625,157 98,371 723,528 Net Assets Invested in Capital Assets, Net of Related Debt * 1,548,486 1,497,575 653,351 659,130 2,201,837 2,156,705 Restricted 199,767 117,801 20,842 16,721 220,609 134,522 Unrestricted * 127,017 165,209 272,431 186,147 399,448 351,356 Total Net Assets $ 1,875,270 $ 1,780,585 $ 946,624 $ 861,998 $ 2,821,894 $ 2,642,583 *Adjustment made to 2003 ending balance related to capital asset and debt removal, see Changes in Accounting Principle note. An additional portion of the City’s net assets, $220.6 million (7.8 percent) for fiscal year 2004 and $134.5 million (5.1 percent) for fiscal year 2003 represent resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets for fiscal years 2004 and 2003, $413.2 million (14.6 percent) and $346.3 million (13.2 percent), respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. Management’s Discussion and Analysis June 30, 2004 and 2003 (in thousands of dollars) For the Fiscal Year Ended June 30, 2004 Net Assets At the end of both the current and previous fiscal years, the City was able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for the business-type activities. City of Scottsdale, Arizona 21 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents Analysis of Changes in Net Assets The City’s total net assets increased by $179.3 million and $96.0 million during the fiscal years 2004 and 2003, respectively. These increases are explained in the government and business-type activities discussion herein, and are primarily a result of contributions from developers of infrastructure assets. Changes in Net Assets For the Years Ended June 30, 2004 and 2003 (in thousands of dollars) Governmental Activities 2004 2003 Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues: Property Taxes Business Taxes Intergovernmental Taxes Interest and Investment Income Other Total Revenues $ 41,575 $ 24,508 105,794 46,371 136,668 45,163 2,655 6,981 409,715 35,501 $ 21,219 70,369 42,218 124,935 46,971 4,108 4,718 350,039 Business-type Activities 2004 2003 Total 2004 2003 115,624 $ 71,709 110,616 $ 28,487 157,199 $ 24,508 177,503 146,117 21,219 98,856 973 699 189,005 1,493 1,672 142,268 46,371 136,668 45,163 3,628 7,680 598,720 42,218 124,935 46,971 5,601 6,390 492,307 Expenses General Government * 23,839 22,776 23,839 22,776 Police 60,027 54,469 60,027 54,469 Financial Services 7,655 7,883 7,655 7,883 Transportation 78,373 71,837 78,373 71,837 Community Services 55,087 52,222 55,087 52,222 Information Systems 11,135 11,901 11,135 11,901 Fire 19,570 18,127 19,570 18,127 Municipal Services 13,024 12,290 13,024 12,290 Citizen and Neighborhood Resources 2,812 2,433 2,812 2,433 Human Resources 3,462 3,601 3,462 3,601 Economic Vitality 6,130 6,421 6,130 6,421 Planning and Development 11,697 11,908 11,697 11,908 Streetlight and Services Districts 1,024 1,099 1,024 1,099 Interest on Long-term Debt 28,028 27,786 28,028 27,786 Water Utility 51,095 50,406 51,095 50,406 Sewer Utility 24,678 22,862 24,678 22,862 Airport 2,622 2,476 2,622 2,476 Solid Waste 15,153 13,783 15,153 13,783 Total Expenses 321,863 304,753 93,548 89,527 415,411 394,280 Increase in Net Assets Before Special Items and Transfers 87,852 45,286 95,457 52,741 183,309 98,027 Gain/(Loss) on Sale of Capital Asset (240) 42 206 (917) (34) (875) Special Item - Defeasance of Debt (3,964) (3,964) Transfers 11,037 10,955 (11,037) (10,955) Increase in Net Assets 94,685 56,283 84,626 40,869 179,311 97,152 Net Assets at Beginning of Year * 1,780,585 1,724,302 861,998 821,129 2,642,583 2,545,431 Net Assets at End of Year $ 1,875,270 $ 1,780,585 $ 946,624 $ 861,998 $ 2,821,894 $ 2,642,583 *Adjustment made to 2003 ending balance related to capital asset and debt removal, see Changes in Accounting Principle note. 22 City of Scottsdale, Arizona Table of Contents $80,000 City of Scottsdale Program Revenues and Expenses Governmental Activities Fiscal Year 2003/04 (in thousands of dollars) 70,000 60,000 50,000 40,000 30,000 20,000 Revenues Expenses Interest on long-term debt Streetlight and Services Districts Economic Vitality Citizen & Neighborhood Resources Human Resources Municipal Services Fire Planning and Development Information Systems Community Services Financial Services Transportation Police General Government 10,000 0 Management’s Discussion and Analysis For the first time in three years, City sales tax posted a year-over-year growth in the 2004 fiscal year of 9.5 percent. Although the property tax rate decreased for the fiscal year 2004 and was held constant for the fiscal year 2003, property tax revenues rose 9.8 percent and 6.9 percent, respectively, over the previous year due to increases in assessed valuation. For the Fiscal Year Ended June 30, 2004 Governmental activities. Governmental activities increased the City’s net assets by $94.7 million in fiscal year 2004 and $55.1 million in fiscal year 2003, thereby accounting for 52.8 percent and 57.4 percent, respectively, of the total growth in the net assets of the City. The key factor of this increase is as follows: Intergovernmental taxes 11.02% Interest and investment income 0.65% Other 1.70% Charges for services 10.15% Operating grants and contributions 5.98% Capital grants and contributions 25.82% Property taxes 11.32% Business taxes 33.36% City of Scottsdale Revenues by Source Government Activities Fiscal Year 2003/04 City of Scottsdale, Arizona 23 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents As shown in the “Program Revenues and Expenses for Governmental Activities” chart and the “Revenues by Source for Governmental Activities” chart, transportation is the largest function in expense (24.3 percent), followed by police (18.6 percent), and community services (17.1 percent). General revenues such as property, business, and privilege taxes are not shown by program, but are effectively used to support program activities citywide. For governmental activities overall, without regard to program, business taxes are the largest single source of funds (33.4 percent), followed by capital grants and contributions (25.8 percent), and property taxes (11.3 percent). Business-type activities. Business-type activities increased the City’s net assets in fiscal years 2004 and 2003 by $84.6 million and $40.9 million, respectively, accounting for 47.2 percent and 42.6 percent, respectively, of the total growth in the City’s net assets. The key factor of this increase is as follows: The Water and Sewer Utility Fund had capital contributions from developers and grantors resulting in $70.9 million and $26.8 million in revenue for fiscal years 2004 and 2003, respectively. The majority of this amount is from infrastructure donated from developers and development fees received as development continues throughout the City. $150,000 City of Scottsdale Program Revenues and Expenses Business Type Activities Fiscal Year 2003/04 (in thousands of dollars) 120,000 90,000 60,000 Revenues 30,000 Expenses 0 Water Utility Sewer Utility Airport Solid Waste Interest and investment income and other revenues 0.88% Capital grants and contributions 37.94% Charges for services 61.18% City of Scottsdale Revenues by Source Business Type Activities Fiscal Year 2003/04 24 City of Scottsdale, Arizona Table of Contents Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Types of Governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Project Funds. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $317.5 million, an increase of $46.6 million in comparison to the combined ending fund balances for fiscal year 2003 of $270.9 million. The increase in the current year’s fund balance is primarily due to the sale of new bonds during fiscal year 2004. Approximately $306.3 million of the total for fiscal year 2004 and $255.2 million of the total for fiscal year 2003 constitutes unreserved fund balance, which is available for spending at the City’s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed, (1) to pay City of Scottsdale, Arizona Revenues for governmental functions overall totaled approximately $307.1 million in fiscal year 2004, an increase of 7.7 percent ($22.0 million) over the previous year total of $285.1 million. In fiscal year 2004 expenditures for governmental functions, totaled $337.7 million, an increase by 3.3 percent ($10.7 million) over the fiscal year 2003 total of $327.0 million. In the fiscal years ended June 30, 2004 and 2003 expenditures for governmental functions exceeded revenues by approximately $30.6 million (10.0 percent) and $41.9 million (14.7 percent), respectively. The deficit in both years was due to the City financing some capital projects with debt proceeds. Decreases in the deficit from 2003 to 2004 were mainly due to increased revenues from taxes, fines and fees as well a decrease in expenditures for several City departments. A portion of this year’s deficit was offset by transfers in from other funds. Management’s Discussion and Analysis FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. debt service ($9.1 million and $13.7 million for fiscal years 2004 and 2003, respectively); (2) for the repayment of a long-term loan from another fund ($1.3 million and $1.2 million for fiscal years 2004 and 2003, respectively) or; (3) to pay for the ongoing cost of the streetlight and services districts ($891,000 and $801,000 for fiscal years 2004 and 2003, respectively). For the Fiscal Year Ended June 30, 2004 As shown in “Program Revenues and Expenses for Business Type Activities” and the “Revenues by Source for Business Type Activities” charts, the largest of Scottsdale’s business-type activities, Water and Sewer utilities, each had expenses of $51.1 million and $24.7 million, respectively, in fiscal year 2004, followed by Solid Waste with operating expenses of $15.2 million. For the fiscal year, revenues exceeded expenses in all four areas of business activity. Fees provided the largest share of revenues (61.2 percent) followed by capital grants and contributions (37.9 percent), which are largely developer contributions and development fees, for all of the business-type activities. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unreserved fund balance of the General Fund was $59.7 million, while total fund balance was $61.9 million. The unreserved and total balances for the General Fund at the end of fiscal year 2003 were $71.2 million and $73.2 million, respectively. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 34.3 percent of the total General Fund expenditures of $174.2 million in fiscal year 2004 and 42.0 percent of the total General Fund expenditures of $169.7 million in fiscal year 2003. The total fund balance represents 35.5 percent and 43.1 percent of those same amounts for fiscal years 2004 and 2003, respectively. In fiscal year 2004 management has designated $32.4 million of the General Fund unreserved fund balance for various uses. For the third consecutive year the fund balance in the City’s General Fund decreased. The decrease in fiscal year 2004 by $11.4 million is mainly due 25 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents to the defeasance of outstanding debt and increases in expenditures for police, fire and interest on debt service, which were partially offset by increases in property and sales tax revenues. Fund balance designated at June 30, 2003 for bonds payables in the amount of $33.7 was used to defease outstanding debt during fiscal year 2004. Overall, the General Fund’s performance resulted in revenues over expenditures in the fiscal year ended June 30, 2004, of $34.1 million, an increase of 24.9 percent over the comparable figure from the prior year of $27.3 million. The General Obligation Bond Debt Service fund is used to account for the accumulation of resources for, and the payment of, general obligation long-term debt principal, interest and related costs. At the end of the current fiscal year, the fund balance of the General Obligation Bond Debt Service Fund was $3.5 million, a decrease of $5.5 million from the $9.0 million at the end of fiscal year 2003. The City used fund balance designated for debt service to defease $5.5 million of General Obligation Bonds. The bonds were defeased to reduce the total debt service payments over the next seven years by $7.2 million. The General CIP Construction Capital Project fund accounts for the resources used to acquire, construct and improve major capital facilities, other than those financed by proprietary funds. At the end of the current fiscal year, the fund balance of the General CIP Construction Capital Project Fund was $88.9 million. The fund balance at the end of fiscal year 2003 was $81.2 million. The increase in fund balance is primarily due to amounts transferred from the General Fund to fund the pay-as-you-go Capital Improvement Plan as well as a decrease in spending for capital projects. Capital Improvement expenditures in 2004 and 2003 were $25.0 million and $32.3 million, respectively, a decrease of 22.6 percent. respectively; Scottsdale Airport were $1.2 million and $100,000, respectively; and the Solid Waste Utility Fund $5.8 million and $4.5 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities also had unrestricted net assets of $15.6 million and $16.6 million, respectively. The total growth in net assets for the Enterprise Funds was $84.6 million and $40.9 million for fiscal years 2004 and 2003, respectively. Factors concerning the finances of these funds have been addressed previously in the discussion of the City’s business-type activities. In particular, the Scottsdale Water and Sewer net assets increased by $82.0 million due to capital contributions of $70.9 million as well as increased revenues and reduced interest expense. Fiduciary Funds The City maintains Fiduciary Funds for the assets of the Family Self-Sufficiency Agency Fund, the Retainage Escrow Agency Fund, the Handicap Scholarship Private Purpose Trust Fund, and the Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund. The Hospital Trust Fund manages the investment of monies held in trust for the redevelopment of the Scottsdale Memorial Hospital. As of the end of fiscal year 2004, the net assets of the Scottsdale Memorial Hospital Trust Fund totaled $364,000, representing a decrease of $331,000 in total net assets since June 30, 2003. The change is primarily related to increased expenses directly related to the redevelopment area. Changes to the other Fiduciary Funds were immaterial for the fiscal year. Proprietary Funds The City’s Proprietary Funds provide the same type of information found in the governmentwide financial statements, but in more detail. At the end of the fiscal years 2004 and 2003, the unrestricted net assets for the Water and Sewer Utility were $265.4 million and $181.5 million, 26 City of Scottsdale, Arizona Table of Contents During the year, actual revenues and other resources exceeded budgetary estimates by $18.9 million compared to a shortage of $3.6 million in fiscal year 2003. Capital Assets and Debt Administration Capital Assets The City’s capital assets for its governmental and business-type activities as of June 30, 2004 and 2003, amount to $2.9 billion and $2.8 billion, respectively (net of accumulated depreciation). Capital assets include land, buildings and improvements, water and sewer systems, water rights vehicles, machinery and equipment, furniture and fixtures, and construction in progress. The total increase in the City’s capital assets (net of accumulated depreciation) for the fiscal years 2004 and 2003 was 5.7 percent as shown in the table below. Management’s Discussion and Analysis $279,000 ............... General Government ($31,000) ............... Financial Services $102,000 ............... Police ($17,000) ............... Community Services $11,000............... Information Systems $100,000 ............... Fire ($14,000) ............... Citizen & Neighborhood Resources $2,000 ............... Human Resources ($50,000) ............... Economic Vitality ($48,000) ............... Planning and Development $100,000 ............... Streetlight and Service District For the Fiscal Year Ended June 30, 2004 General Fund Budgetary Highlights The City’s final budget differs from the original budget due to adjustments that were made during the fiscal year. In fiscal year 2004, there was a slight increase in expenditure budgets; however, the City maintained an excess of revenues over expenditures and did not exceed the total appropriations for the year. Net budget increases for expenditures by department totaled $434,000 and $1.1 million for fiscal years 2004 and 2003, respectively. The net increase is defined as follows: Capital Assets, Net of Depreciation June 30, 2004 (in thousands of dollars) Land Buildings and Land Improvements * Streets and Storm Drains Machinery and Equipment Water Rights Water System Sewer System Motor Vehicles and Maintenance by Fleet Furniture, Fixtures and Office Equipment Construction in Progress Total Governmental Activities 2004 2003 $ 413,520 $ 349,826 Business-type Activities 2004 2003 $ 24,162 $ 13,916 Total 2004 2003 $ 437,682 $ 363,742 135,751 133,460 10,757 9,295 146,508 142,755 1,433,989 1,404,787 - - 1,433,989 1,404,787 17,807 23,450 66,165 21,280 22,956 67,516 3,388 64,688 406,412 258,737 178 52,208 3,656 64,688 343,606 250,282 234 68,963 21,195 64,688 406,412 258,737 23,450 178 118,373 24,936 64,688 343,606 250,282 22,956 234 136,479 $ 2,090,682 $ 1,999,825 754,640 $ 2,911,212 $ 2,754,465 $ 820,530 $ *Adjustment made to 2003 ending balance related to capital asset removal, see Changes in Accounting Principle note. City of Scottsdale, Arizona 27 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents Major capital asset events during the current fiscal year included the following: Construction in progress on the Chaparral Water Treatment Plant – A multiple construction contract project accounting for $13.8 million in budgeted funds. The City’s water and sewer 5year capital improvement plan includes significant cost impacts from “unfunded” federal water quality mandates for treatment of arsenic and disinfection by-product requirements, in addition to plant and infrastructure expansion to accommodate growth. The most significant CIP cash expenditures forecasted in the 5-year plan include: the Chaparral Water Treatment Plant construction ($56 million), Arsenic Mitigation Treatment ($56 million), the CAP Water Treatment Plant Expansion ($53 million), the 91st Avenue Wastewater Treatment Plant expansion and improvements ($51 million), Water Rights Acquisition ($25 million), and the Water Reclamation Plant Phase 3 Expansion ($20 million). The acquisition of an additional 251 acres, totaling $21.3 million, for inclusion in the McDowell Sonoran Preserve. Construction continued on Scottsdale Road from Indian Bend to Gold Dust Road totaling $8.7 million this year. For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. See Section IV in the Notes to the Financial Statements for further information regarding capital assets. Debt Administration At the end of the fiscal years 2004 and 2003, the City had total long-term obligations outstanding of $737.6 million and $659.0 million, respectively. Of these amounts, $400.2 million and $319.3 million, respectively, are general obligation bonds backed by the full faith and credit of the City. The remainder includes revenue bonds, certificates of participation, and other obligations of $337.4 million and $339.7 million, respectively. Outstanding Debt (in thousands of dollars) General Obligation Bonds Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Special Assessments Bonds Community Facilities Districts General Obligation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Contracts Payable * Capital Lease * Compensated Absences Total Long-term Liabilities $ $ Governmental Activities 2004 2003 389,598 $ 305,003 8,475 10,990 4,850 41,955 85,980 88,270 8,755 11,140 44,950 8,741 (9,153) 542,196 13,702 13,038 568,936 $ $ 46,355 6,864 (8,327) 502,250 14,557 11,495 528,302 $ Business-Type Activities 2004 2003 10,651 $ 14,323 $ 68,365 71,230 83,365 10,010 - Total 2004 2003 400,249 $ 319,326 76,840 82,220 88,215 51,965 85,980 88,270 8,755 11,140 6,617 (1,819) 167,179 1,531 168,710 $ 44,950 15,358 (10,972) 709,375 13,702 14,569 737,646 $ 188 (241) 95,510 1,345 96,855 $ 46,355 7,052 (8,568) 597,760 14,557 12,840 625,157 *Adjustment made to 2003 ending balance related to contract payable and capital lease removal, see Changes in Accounting Principle note. 28 City of Scottsdale, Arizona Table of Contents Type of Debt 1993 GO Bonds 1998 Excise Tax Revenue Bonds 1989 Water and Sewer Excise Tax Revenue Bonds Amount Refunded $ $ 16,260 22,770 18,885 57,915 Reduction in Total Debt Service Payments Average Interest Rate 4.77% 5.13% 4.37% $ 1,082 744 843 2,669 $ Defeased Bonds (in thousands of dollars) Type of Debt 2002 Excise Tax Revenue Delivery Refunding Bonds 2002 & 2001 GO Bonds 1995 Taxable Excise Revenue Bonds 1993 GO Bonds Amount Defeased $ $ 29,310 7,000 2,270 5,505 44,085 Reduction in Total Debt Service Payments Average Interest Rate 5.50% 5.15% 5.00% 5.20% $ $ Management’s Discussion and Analysis Refunded Bonds (in thousands of dollars) For the Fiscal Year Ended June 30, 2004 During fiscal year 2004 the City took advantage of the historic low interest rates and refunded or defeased the following: 39,277 7,616 2,551 7,169 56,613 Costs related to the defeasances were considered a special item for the governmental activities. During fiscal year 2004, the City’s total bonded debt increased by approximately $111.6 million, in contrast to the decrease of approximately $25.5 million in fiscal year 2003. Although the City reduced several bonds payable balances, the key contributor to the increase was the sale of new bonds during fiscal year 2004 in the amount of $113.4 million. The City also determined that due to unforeseen economic circumstances, an obligation formerly classified as a capital lease was more appropriately classified as a contingent operating lease for financial purposes. Because the payments under the agreement are based on the sales tax collections on a certain site and subject to accrual by the City once the sales tax collection and remittance has occurred, minimum payments cannot be determined at this time. The parking asset related to this agreement and the related debt of $28.8 million were removed from the Statement of Net Assets because title of the asset does not transfer for 150 years. The State constitution imposes certain debt limitations on the City of six percent (6%) and twenty percent (20%) of the outstanding assessed valuation of the City. The City’s available debt margin at June 30, 2004 and 2003 is $163.5 million and $139.9 million, respectively, in the 6% capacity and $475.3 million and $467.9 million, respectively, in the 20% capacity. Additional information on the debt limitations and capacities may be found in Section IV of the Notes to the financial statements and also in Table XV in the statistical section of this report. City of Scottsdale, Arizona 29 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents The City’s ratings on uninsured General Obligation Bonds as provided above were affirmed by the Rating Agencies in April 2004 in conjunction with the issuance of General Obligation Refunding Bonds. Rating Agencies also reviewed and confirmed several of the revenue based bond ratings at various times throughout the year. Subsequent to June 30, 2004 the following events related to debt occurred: On July 6, 2004, the City entered into a Development Agreement with the Arizona State University Foundation. The agreement will facilitate the development of an area of the City known as Los Arcos. Under the terms of the agreement, the City will acquire the Los Arcos property for $41.5 million, plus closing costs, for a total investment estimated at no more than $42.0 million. The City will also provide demolition, environmental remediation (if any), and grading for the property, and construction or installation of streets, landscaping, utilities, street lighting, parking, public art, plazas, and other identified improvements (collectively referred to as “Infrastructure”). The total cost of the infrastructure to be borne by the City shall not exceed $45.0 million. The City’s total expenditure for land acquisition and improvements is thus capped at approximately $87.0 million (exclusive of financing costs), of which approximately $81.4 million is allocable to the leased premises (37 acres out of the total 42 acres). The land was purchased on August 9, 2004. In order to finance the purchase of the land the City sold $40.76 Million in MPC bonds on September 15, 2004. These bonds are for a 30-year term and are interest only for the first 5 years. On July 14, 2004, the City completed a purchase of 383 acres of land for preservation purposes in the northern portion of the City. The purchase totaled $46 million. This purchase was financed with General Obligation Bonds specified for the purchase of preservation land and is supported by a separate sales tax rate. Additional information in the City’s long-term debt can be found in Section IV of the Notes to the Financial Statements. City of Scottsdale Bonded Debt Ratings As of June 30, 2004 General Obligation (GO) Municipal Property Corp (MPC) Water and Sewer Revenue (W&S) Highway User Revenue Fund (HURF) Scottsdale Preserve Authority (SPA) Moody’s Investors Service Standard and Poor’s Rating Group Fitch Investors Service, Inc. Aaa Aa1 Aa1 Aa3 Aa3 AAA AA+ AA+ AA AA- AAA AA+ AA+ Not Rated AA- Economic Factors and Next Year’s Budget and Rates The City of Scottsdale’s fiscal year 2005 budget reflects the early stages of an apparent recovery in the national, statewide and local economy after an unprecedented three years of declining revenues for the City. The fiscal year 2005 budget is based on more optimistic economic forecast than the City has seen since fiscal year 2001. However, the optimism is guarded. The magnitude and timing of the economic recovery is uncertain. The City is past a historic period of expansion. Its economy is maturing and moving to a slower – and more sustainable – level of growth. The projected modest improvements in the City’s revenues and savings carried over from the 2003/04 fiscal year will allow Scottsdale to meet its most pressing needs for the 2004/05 fiscal year. These needs include the transition to a municipal fire department, an increased focus on code enforcement and property maintenance in the mature portions of the City, and continued emphasis on economic vitality and redevelopment. 30 City of Scottsdale, Arizona Table of Contents The City continued to use a zero based, “program budget” approach, which focuses on the quality of each service citizens receive from the City, whether the service is provided by one department or several. The staff also continued to develop a more realistic and precise plan for continued investment in the City’s basic infrastructure and public facilities, combined with a more comprehensive analysis of maintenance and operating costs. Under the proposed budget, General Fund expenditures, debt payments and transfersout to other funds will increase from $194.9 million in the current fiscal year to $214.1 million. The largest single factor in the increase is the transition to a municipal fire department, including one-time capital costs for new equipment. From a historic perspective, while General Fund expenditures, debt payments and transfersout are increasing over last year, they remain below the $218.2 million budget adopted in fiscal year 2002. Because of the new public safety revenue, the adopted operating budget includes approximately $4.2 million to address high priority public safety needs such as traffic enforcement, additional police officers for the southern area encompassed by District 1, computer crimes investigations, upgrades to the police records system, enhancements to the crime laboratory, increased security at public buildings, upgrades to the photo radar program and the formation of a park and preserve police patrol unit. The proposed budget includes $5.8 million for equipment and other capital costs associated with the planned transition to a municipal fire department by July 2005. It also includes 13.5 new positions in other departments, such as Fleet Management and City of Scottsdale, Arizona The budget proposes adding the equivalent of 8.84 positions at an estimated cost of $440,000. These are the first new staff positions (unrelated to the fire transition) added to the General Fund budget since the FY 2002/03 budget. They include two code enforcement positions, two added positions in Economic Vitality focusing on job-creation, revenue enhancement and economic research, an administrative support position for the new Downtown Group, an additional technician for building maintenance needs, a position in the mailroom to help with increased security and screening, an added “K-9” police officer to enhance building security, and added part-time after-school recreation program leaders. Management’s Discussion and Analysis All of the above factors were considered in preparing the City’s budget for fiscal year 2005. For the 2004/05 budget year: Human Resources, which will be phased in throughout the year to support the transition to a new municipal department. The estimated cost of the support positions is about $520,000. The City’s ongoing costs for these positions will be partially offset next fiscal year, when the City no longer is continuing to pay for the Rural/Metro contract. The proposed budget also includes additional firefighter positions to staff a new station at Jomax and Scottsdale roads. For the Fiscal Year Ended June 30, 2004 On May 18, 2004 the citizens of Scottsdale voted to increase the transaction privilege (sales) tax rate from 1.4% to 1.65%. The additional privilege (sales) tax will be used to fund the preservation of the McDowell Mountains and for Police/Fire and Public Safety. A 2.5 percent cost-of-living pay adjustment for City personnel. Employees have not received a cost-of-living adjustment since January of 2003, and many are paying higher costs for health care and higher retirement system deductions. The total cost for the adjustment is $2.7 million. The draft budget also reflects Scottsdale’s effort to continue fostering economic vitality in the downtown area. It includes approximately $465,000 for an Enhanced Maintenance Services Pilot Program to provide a higher level of maintenance, especially litter and refuse pick-up, for the downtown area. The proposed budget continues the practice of setting aside a reserve equal to 10 percent of the General Fund and Highway User Fund program budgets to ensure the City can provide basic services in the event of major emergencies. 31 For the Fiscal Year Ended June 30, 2004 Management’s Discussion and Analysis Table of Contents 32 REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all of those with an interest in the government’s finances. If you have questions about this report or need additional financial information, contact: City of Scottsdale Financial Services Department Accounting Division 7447 E. Indian School Road, Suite 210 Scottsdale, AZ 85251 (480) 312-2437 Or visit our website at: http://www.scottsdaleaz.gov/finance/ City of Scottsdale, Arizona Table of Contents Basic Financial Statements City of Scottsdale, Arizona 33 Table of Contents Statement of Net Assets June 30, 2004 (in thousands of dollars) Governmental Activities Business-type Activities $ $ Total ASSETS Current Assets: Cash and Investments Cash with Fiscal Agent Receivable (net of uncollectible amounts of $11,495): Property Taxes and Penalties Other Local Taxes Intergovernmental Charges for Services Interest and Other Supplies Inventory Total Current Assets Restricted Assets: Restricted Cash, Cash Equivalents, and Investments: Water and Sewer System Replacement Acquisition and Construction Reserve Development Fees Customer Advances/Deposits and Deferred Revenue Total Restricted Assets 339,444 49,491 Capital Assets: Land, Water Rights, and Construction in Progress Facilities, Infrastructure, and Equipment (net of depreciation) Total Capital Assets (net of accumulated depreciation) $ 467,244 133,255 5,046 16,604 6,116 18,031 548 435,280 405 12,600 1,385 225,954 5,046 16,604 6,521 12,600 19,416 548 661,234 - 17,237 3,605 6,396 27,238 17,237 3,605 6,396 27,238 1,625 71,290 472 71,290 2,097 479,685 1,610,997 2,090,682 141,058 679,472 820,530 620,743 2,290,469 2,911,212 - Noncurrent Assets: Equity in Joint Venture Deferred Charges 127,800 83,764 Total Noncurrent Assets 2,092,307 892,292 2,984,599 Total Assets 2,527,587 1,145,484 3,673,071 13,895 7,675 2,086 14,678 28 28,665 10,625 1,778 3,745 206 83,381 11,771 859 239 9,050 1,835 23,754 25,666 8,534 2,325 14,678 28 37,715 12,460 1,778 3,745 206 107,135 - 1,319 5,077 6,396 1,319 5,077 6,396 13,038 28,402 527,496 568,936 1,531 7,128 160,051 168,710 14,569 35,530 687,547 737,646 652,317 198,860 851,177 1,548,486 653,351 2,201,837 11,745 96,420 90,315 396 891 127,017 1,875,270 17,237 3,605 272,431 946,624 11,745 96,420 90,315 396 891 17,237 3,605 399,448 $ 2,821,894 LIABILITIES Current Liabilities: Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences Claims Payable Due to Other Governments Matured Bonds, Loans, Other Payables Matured Bonds, Loans, Other Interest Payable Unearned Revenue Guaranty and Other Deposits Other Liabilities Total Current Liabilities Liabilities Payable from Restricted Assets: Customer Advances and Deposits Deferred Revenue Total Liabilities Payable from Restricted Assets Noncurrent Liabilities: Accrued Compensated Absences Bonds, Loans, and Other Payables-Due within One Year Bonds, Loans, and Other Payables-Due in More Than One Year Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted: Debt Service Transportation and Preserve Privilege Tax Activities Capital Projects Grants Streetlight and Service District Water and Sewer System Replacement Acquisition and Construction Unrestricted Total Net Assets $ $ The notes to the financial statements are an integral part of this statement. 34 City of Scottsdale, Arizona Table of Contents Statement of Activities For the Year Ended June 30, 2004 (in thousands of dollars) Function/Programs Governmental Activities: General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Interest on Long-term Debt Total Governmental Activities Business-Type Activities: Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Total Government Expenses Program Revenues Capital Operating Charges for Grants and Grants and Services Contributions Contributions Governmental Activities $ $ $ 23,839 60,027 7,655 78,373 55,087 11,135 19,570 13,024 2,812 3,462 6,130 11,697 1,024 28,028 321,863 51,095 24,678 2,622 15,153 93,548 $ 415,411 12,337 6,760 405 3,759 17,314 1,000 41,575 $ 70,613 25,587 2,936 16,488 115,624 $ 157,199 216 1,558 14,930 7,747 7 50 24,508 $ 1,162 374 105,794 $ 24,508 39,541 7 64,710 50,139 20,799 771 71,709 $ 28,255 $ (51,702) (7,655) 1,672 (43,581) (11,135) (19,570) (11,862) (2,812) (3,455) (6,080) 5,991 (24) (28,028) (149,986) - 177,503 General Revenues: Taxes: Property Taxes Sales and Use Taxes Franchise Taxes Intergovernmental: State Share Sales State Revenue Sharing Other Interest and Investment Income Other Revenue Gain (Loss) on Sale of Capital Assets Special Item - Defeasance of Debt Transfers Total General Revenues, Special Items, and Transfers Change in Net Assets Net Assets - Beginning (as restated) Net Assets - Ending Business-type Activities (149,986) 46,371 128,258 8,410 $ 17,054 18,278 9,831 2,655 6,981 (240) (3,964) 11,037 244,671 94,685 1,780,585 1,875,270 $ - Total $ 28,255 (51,702) (7,655) 1,672 (43,581) (11,135) (19,570) (11,862) (2,812) (3,455) (6,080) 5,991 (24) (28,028) (149,986) 69,657 21,708 1,085 1,335 93,785 69,657 21,708 1,085 1,335 93,785 93,785 (56,201) 973 699 206 (11,037) (9,159) 84,626 861,998 946,624 $ 46,371 128,258 8,410 17,054 18,278 9,831 3,628 7,680 (34) (3,964) 235,512 179,311 2,642,583 2,821,894 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 35 Table of Contents 36 Balance Sheet Governmental Funds June 30, 2004 (in thousands of dollars) General Fund City of Scottsdale, Arizona ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles): Interest Privilege Tax Hotel/Motel Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Special Assessments Note Miscellaneous Due from Other Funds Supplies Inventory Advances to Other Funds Total Assets (continued) $ $ General Obligation Bond Debt Service Total Nonmajor Governmental Funds General CIP Construction Capital Projects 61,619 $ - 3,227 $ 23,746 91,220 $ - 152,232 25,745 372 7,755 365 453 1,457 1,932 3,694 854 4,000 3,354 314 207 1,262 87,638 $ 681 27,654 $ 347 - 362 3,028 200 1,213 5,293 823 7,932 971 197,799 942 92,509 $ Total Governmental Funds $ $ 308,298 49,491 1,081 10,783 365 1,334 1,457 1,932 3,694 1,213 854 5,293 823 7,932 4,000 4,325 314 207 2,204 405,600 Table of Contents City of Scottsdale, Arizona Balance Sheet Governmental Funds June 30, 2004 (in thousands of dollars) General Obligation Bond Debt Service General Fund LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Court Tax Audit Intergovernmental Other Advances From Other Funds Due to Other Governments Guaranty and Other Deposits Other Total Liabilities Fund Balances: Reserved for: Advances Streetlight and Services Districts Debt Service Unreserved, reported in: General Fund - Designated General Fund - Undesignated Capital Projects Funds Special Revenue Funds Total Fund Balances Total Liabilities and Fund Balances $ $ 2,910 9,101 - $ Total Nonmajor Governmental Funds General CIP Construction Capital Projects 7,117 16,775 3,602 29 - 202 3,694 2,228 4,236 3,234 173 25,778 293 24,186 28 3,659 128 7,932 1,542 2,204 511 33 34,451 623 7,932 3,694 2,228 1,542 4,236 2,204 28 3,745 206 88,074 1,262 891 - 3,468 - 5,654 1,262 891 9,122 135,572 22,122 163,348 197,799 32,407 27,300 224,422 22,122 317,526 405,600 32,407 27,300 61,860 87,638 $ 37 The notes to the financial statements are an integral part of this statement. 1 - $ 3,468 27,654 $ $ 88,850 88,850 92,509 $ 5,956 433 314 3,508 11,890 Total Governmental Funds $ $ 12,469 9,563 314 10,625 28,665 Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2004 (in thousands of dollars) Fund Balances -Total Governmental Funds $ 317,526 Amounts reported for governmental activities in the statement of net assets are different because (see Section II A): Capital assets used in governmental activities are not financial resources and; therefore, are not reported in the funds. Bond issuance costs are not financial resources and, therefore, are not reported in the funds. 2,065,310 1,625 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. (568,614) Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets are offset by deferred revenue in the funds. 18,477 Internal Service Funds are used by management to charge the costs of certain activities, such as, insurance and vehicles to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the statement of net assets. 40,946 Net Assets of Governmental Activities $ 1,875,270 The notes to the financial statements are an integral part of this statement. 38 City of Scottsdale, Arizona Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances City of Scottsdale, Arizona Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) General Obligation Bond Debt Service General Fund REVENUES Taxes - Local: Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Fire Insurance Premium Tax Taxes - Intergovernmental: State-Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services: Building and Related Permits Recreation Fees Westworld Equestrian Facility Fees Fines, Fees and Forfeitures: Court Fines Parking Photo Radar Court Enhancement Library Special Assessments Property Rental Interest Earnings Intergovernmental: Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues 39 (continued) $ 16,415 86,547 7,227 5,488 2,740 182 481 $ Total Nonmajor Governmental Funds General CIP Construction Capital Projects 25,286 - $ - $ 4,387 33,609 - Total Governmental Funds $ 46,088 120,156 7,227 5,488 2,740 182 481 17,054 18,278 8,214 1,813 - - 14,034 1,136 - 17,054 18,278 8,214 14,034 1,136 1,813 17,291 2,440 1,795 - - 23 852 - 17,314 3,292 1,795 4,307 203 1,265 467 3,052 907 - 831 11 668 2,558 160 647 4,318 203 1,265 668 467 2,558 3,212 2,385 523 374 1,000 69 579 8,729 825 208,265 25,286 444 281 56 39 1,172 2,823 10,010 443 390 107 522 1,041 113 70,711 10,010 443 1,357 762 1,000 647 1,659 8,729 2,110 307,085 Table of Contents 40 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) General Obligation Bond Debt Service General Fund EXPENDITURES Current: General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures Total Nonmajor Governmental Funds General CIP Construction Capital Projects Total Governmental Funds City of Scottsdale, Arizona 15,522 54,807 7,222 41,583 7,328 19,249 499 2,754 3,289 6,199 11,199 1,024 - - 599 703 9,399 8,911 16 8,275 1 19 - 16,121 55,510 7,222 9,399 50,494 7,328 19,265 8,774 2,754 3,290 6,199 11,218 1,024 210 3,146 141 174,172 16,775 14,100 188 31,063 25,017 25,017 14,920 8,206 398 55,991 107,438 31,905 25,452 586 81,149 337,690 Excess (Deficiency) of Revenues Over Expenditures 34,093 (5,777) (22,194) (36,727) (30,605) OTHER FINANCING SOURCES (USES) Transfers in Transfers out Refunding Bonds Issued Long-term Capital-Related Debt Issued Premium on Bonds Issued Payment to Bond Refunding Escrow Agent Total Other Financing Sources and (Uses) 7,529 (52,990) (45,461) 12,654 16,265 1,583 (30,263) 239 31,232 (1,425) 29,807 85,628 (71,854) 22,925 113,400 2,846 (60,271) 92,674 137,043 (126,269) 39,190 113,400 4,429 (90,534) 77,259 (11,368) (5,538) 7,613 55,947 46,654 73,228 9,006 81,237 107,401 270,872 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 61,860 $ The notes to the financial statements are an integral part of this statement. 3,468 $ 88,850 $ 163,348 $ 317,526 Table of Contents Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities June 30, 2004 (in thousands of dollars) Net Change in Fund Balances - Total Governmental Funds $ 46,654 Amounts reported for governmental activities in the statement of activities are different because (see Section II B): Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period. (11,340) Donations of capital assets are not reflected on the governmental fund statements but are shown in the statement of activities. 103,049 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. (1,499) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (1,365) Bond issuance costs are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net assets. This is the amount by which current year bond issuance costs exceed amortization expense in the current period. 158 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction; however, has any effect on net assets. This is the amount by which bond proceeds exceeded principal retirement in the current period. (38,544) Additional accrued interest calculated on bonds and notes payable. (2,148) The net revenues of certain activities of internal service funds is reported with governmental activities. Changes in Net Assets of Governmental Activities (280) $ 94,685 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 41 Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local: Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Fire Insurance Premium Tax Taxes - Intergovernmental: State-Shared Sales State Revenue Sharing Auto Lieu Tax Business and Liquor Licenses Charges for Current Services: Building and Related Permits Recreation Fees Westworld Equestrian Facility Fees Fines, Fees and Forfeitures: Court Fines Parking Photo Radar Library Property Rental Interest Earnings Intergovernmental: Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues $ Actual Amounts Budgetary Basis Final 16,573 77,378 6,600 5,464 2,300 203 335 $ 16,573 77,378 6,600 5,464 2,300 203 335 $ Budget to GAAP Differences 16,415 86,547 7,227 5,488 2,740 182 481 $ Actual Amounts GAAP Basis - $ 16,415 86,547 7,227 5,488 2,740 182 481 Variance Between Final Budget and Actual Amounts Budgetary Basis $ (158) 9,169 627 24 440 (21) 146 15,415 18,017 6,941 1,756 15,415 18,017 6,941 1,756 17,054 18,278 8,214 1,813 - 17,054 18,278 8,214 1,813 1,639 261 1,273 57 13,500 2,183 1,493 13,500 2,183 1,446 17,291 2,440 1,795 - 17,291 2,440 1,795 3,791 257 349 3,714 142 1,080 454 3,280 750 3,714 142 1,080 454 3,327 750 4,307 203 1,265 467 3,052 1,743 1,163 230 8,729 1,500 189,200 1,163 230 8,729 1,500 189,200 1,000 579 8,729 825 208,135 16,134 54,468 7,488 42,816 7,536 19,469 540 2,872 3,182 6,514 12,564 1,163 16,413 54,570 7,457 42,799 7,547 19,569 540 2,858 3,184 6,464 12,516 1,263 15,395 54,536 7,072 41,324 7,234 19,247 327 2,758 3,157 6,198 11,184 1,024 1,586 2,329 178,661 500 3,415 179,095 210 3,146 172,812 Excess (Deficiency) of Revenues Over Expenditures 10,539 10,105 35,323 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) 7,869 (18,408) (10,539) 7,869 (17,974) (10,105) 7,529 (52,990) (45,461) EXPENDITURES Current: General Government Police Financial Services Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services District Debt Service Principal Interest and Fiscal Charges Capital Improvements Total Expenditures Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ - - (10,138) - - 73,228 - $ - $ 63,090 (836) 4,307 203 1,265 467 3,052 907 593 61 185 13 (275) 993 523 374 69 130 523 374 1,000 69 579 8,729 825 208,265 (163) 349 (675) 18,935 127 271 150 259 94 2 172 (4) 132 1 15 - 15,522 54,807 7,222 41,583 7,328 19,249 499 2,754 3,289 6,199 11,199 1,024 1,018 34 385 1,475 313 322 213 100 27 266 1,332 239 141 1,360 210 3,146 141 174,172 290 269 6,283 (1,230) 34,093 25,218 7,529 (52,990) (45,461) (340) (35,016) (35,356) (11,368) (10,138) 73,228 73,228 (1,230) $ (1,230) $ 61,860 $ 63,090 The notes to the financial statements are an integral part of this statement. 42 City of Scottsdale, Arizona Table of Contents General Fund Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Unrealized Loss on Investments Miscellaneous Items $ Total Revenue Reconciling Items: 130 The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Claims and Compensated Absences Bad Debt Expense Capital Improvement Total Expenditure Reconciling Items: Net Decrease in Fund Balance - Budget to GAAP (836) 966 1,168 51 141 1,360 $ (1,230) The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 43 Table of Contents Statement of Net Assets Proprietary Funds June 30, 2004 (in thousands of dollars) Water and Sewer Utility Airport Solid Waste Total Governmental Activities Internal Service Funds ASSETS Current Assets: Cash and Investments Cash with Fiscal Agent Receivable (net of allowance for uncollectibles): Property Tax Charges for Services Intergovernmental Interest Miscellaneous Supplies Inventory Total Current Assets Restricted Assets: Restricted Cash, Cash Equivalents, and Investments: Water and Sewer System Replacement Development Fees Customer Advances/Deposits and Deferred Revenue Total Restricted Assets Noncurrent Assets: Equity in Joint Venture Deferred Charges Capital Assets: Land Water Rights Water System Sewer System Buildings and Improvements Motor Vehicles Machinery and Equipment Furniture and Fixtures Construction in Progress Less Accumulated Depreciation $ 122,550 83,471 $ 852 - $ 4,398 293 $ 127,800 83,764 $ 31,146 - 10,262 6 659 489 - 399 2 170 - 2,338 20 45 - 12,600 405 681 704 - 18 117 576 341 217,437 1,423 7,094 225,954 32,198 17,237 3,605 - - 17,237 3,605 - 6,338 58 - 6,396 - 27,180 58 - 27,238 - 71,290 472 - - 71,290 472 - 13,487 64,688 541,457 320,388 3,853 666 51,040 (199,004) 9,564 13,509 73 1,168 (4,711) 1,111 2,997 2,017 (1,773) 24,162 64,688 541,457 320,388 16,506 5,943 666 52,208 (205,488) 1,846 49,892 438 22 847 (27,673) Total Capital Assets (net of accumulated depreciation) 796,575 19,603 4,352 820,530 25,372 Total Noncurrent Assets 868,337 19,603 4,352 892,292 25,372 11,446 $ 1,145,484 Total Assets $ 1,112,954 $ 21,084 $ $ 57,570 The notes to the financial statements are an integral part of this statement. (continued on next page) 44 City of Scottsdale, Arizona Table of Contents Statement of Net Assets Proprietary Funds June 30, 2004 (in thousands of dollars) Water and Sewer Utility Airport Solid Waste Total Governmental Activities Internal Service Funds LIABILITIES Current Liabilities: Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences Claims Payable Matured Bonds Payable Matured Bond Interest Payable $ Total Current Liabilities Current Liabilities Payable from Restricted Assets: Customer Advances and Deposits Deferred Revenue Total Current Liabilities Payable from Restricted Assets: Noncurrent Liabilities: Accrued Compensated Absences Bonds Payable - Due within One Year Bonds Payable - Due in More Than One Year Total Noncurrent Liabilities Total Liabilities 11,408 617 163 8,805 1,787 $ 67 38 11 - $ 296 204 65 245 48 $ 11,771 859 239 9,050 1,835 $ 1,426 146 52 14,678 - 22,780 116 858 23,754 16,302 1,261 5,077 58 - - 1,319 5,077 - 6,338 58 - 6,396 - 1,051 6,873 158,566 71 - 409 255 1,485 1,531 7,128 160,051 322 - 166,490 71 2,149 168,710 322 195,608 245 3,007 198,860 16,624 631,136 19,603 2,612 653,351 25,372 17,237 3,605 265,368 917,346 1,236 20,839 5,827 8,439 17,237 3,605 272,431 946,624 15,574 40,946 NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Water and Sewer System Replacement Restricted for Acquisition and Construction Unrestricted Total Net Assets $ $ $ $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 45 Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2004 (in thousands of dollars) Water and Sewer Utility Operating Revenues Charges for Sales and Services: Water Service Fees Sewer Service Fees Proprietary - Non-Potable Water Fees Groundwater Treatment Plant Solid Waste Fees Airport Fees Other Services Other $ 66,539 25,040 3,799 822 678 Airport $ Solid Waste 2,936 - $ 16,488 21 Total $ 66,539 25,040 3,799 822 16,488 2,936 699 Governmental Activities Internal Service Funds $ 24,586 365 Total Operating Revenues 96,878 2,936 16,509 116,323 24,951 Operating Expenses Costs for Sales and Services: Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation and Amortization 31,051 12,279 6,332 22,730 1,560 439 623 12,893 1,958 202 31,051 12,279 12,893 1,560 8,729 23,555 25,262 5,366 Total Operating Expenses 72,392 2,622 15,053 90,067 30,628 Operating Income (Loss) 24,486 314 1,456 26,256 (5,677) Non-Operating Revenues (Expenses) Property Tax Investment Income Interest Expense Gain on Sale of Capital Assets Net Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers Capital Contributions Transfers In Transfers Out Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending $ 935 (3,381) 206 - 38 (100) - 973 (3,481) 206 676 270 17 (2,240) - (62) (2,302) 963 22,246 314 70,938 (11,160) 771 230 (71) 1,394 (36) 23,954 (4,714) 71,709 230 (11,267) 4,171 796 (533) (280) 82,024 1,244 1,358 84,626 835,322 19,595 7,081 861,998 917,346 $ 20,839 $ 8,439 $ 946,624 41,226 $ 40,946 The notes to the financial statements are an integral part of this statement. 46 City of Scottsdale, Arizona Table of Contents Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2004 (in thousands of dollars) Water and Sewer Utility Cash Flows from Operating Activities: Cash Received from Customers Cash Paid to Suppliers Cash Paid to Employees Other Operating $ Net Cash Provided by Operating Activities Cash Flows from Non-Capital Financing Activities: Property Tax Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities: Bonds Proceeds Capital Contributions from Other: Government Units Water and Sewer Development Fees Capital Grants Acquisition and Construction of Property and Equipment Principal Payments on Capital Debt Interest Paid on Capital Debt Sale of Capital Assets $ Cash Flows from Investing Activities: Proceeds from the Sale of Investments Income Received on Investments Net Cash Provided by (Used for) Investing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year $ Solid Waste 2,939 (1,417) (744) (293) $ 16,470 (10,486) (4,288) 24 Total $ 1,720 117,081 (43,729) (16,100) 152 $ 485 (11,160) 230 (71) (36) 230 (11,267) 683 796 (533) (11,160) 159 (36) (11,037) 946 - 57,404 24,160 (15,575) (2,960) 365 55,199 80,064 Net Cash Provided by (Used for) Capital and Related Financing Activities Cash and Cash Equivalents at End of Year 97,672 (31,826) (11,068) 421 Airport Governmental Activities Internal Service Funds - 5,990 80,064 - 600 21,574 459 (53,192) (9,159) (3,088) 263 944 (731) - (230) (106) - 600 21,574 1,403 (53,923) (9,389) (3,194) 263 (2,034) 107 37,521 213 (336) 37,398 (1,927) 782 (2) 15 30 15 810 251 782 (2) 45 825 251 82,342 855 1,393 84,590 5,260 150,859 55 3,156 154,070 25,886 233,201 $ 910 $ 4,549 $ 238,660 $ 31,146 The notes to the financial statements are an integral part of this statement. (continued on next page) City of Scottsdale, Arizona 47 Table of Contents Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2004 (in thousands of dollars) (Continued) Water and Sewer Utility Cash and Cash Equivalents at End of Year Includes: Cash and Investments Deduction for Long-term Investments Cash with Fiscal Agent Restricted Cash and Investments Total Cash and Cash Equivalents Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities: Depreciation and Amortization Changes In Assets and Liabilities Sources (Uses) of Cash: Accounts Receivable Miscellaneous Receivables Supplies Inventory Accounts Payable Accrued Payroll and Benefits Claims Payable Deferred Revenue Due to Other Funds Advances From Other Funds Other Liabilities Supplemental Disclosure of Non-Cash Financing Activities: Additions to Property, Plant, and Equipment Contributions from Developers Contributions from Other Government Units Amortization of Deferred Charges Accretion on Capital Appreciation Bonds Loss on Sale of Capital Assets Total Non-Cash Financing Activities Solid Waste Total $ 122,550 83,471 27,180 $ 852 58 $ 4,398 (142) 293 - $ 127,800 (142) 83,764 27,238 $ 31,146 - $ 233,201 $ 910 $ 4,549 $ 238,660 $ 31,146 $ 24,486 $ 314 $ 1,456 $ 26,256 $ (5,677) 22,730 415 (257) 6,522 246 991 66 Total Adjustments Net Cash Provided by Operating Activities Airport Governmental Activities Internal Service Funds 30,713 623 202 (34) (18) 3 (179) 17 (152) (107) 3 (12) 89 - 171 264 23,555 5,366 397 (288) 6,331 352 991 (152) (107) 69 (426) 41 771 76 5,839 - 31,148 11,667 $ 55,199 $ 485 $ 1,720 $ 57,404 $ 5,990 $ 48,497 (200) 873 (57) $ - $ - $ 48,497 (200) 873 (57) $ 4,171 90 $ 49,113 $ - $ - $ 49,113 $ 4,261 The notes to the financial statements are an integral part of this statement. 48 City of Scottsdale, Arizona Table of Contents Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2004 (in thousands of dollars) Private Purpose Trust Funds ASSETS Cash and Cash Equivalents Interest Receivable Total Assets LIABILITIES Accounts Payable Designated Escrow Payable $ 374 2 $ 1,597 - $ 376 $ 1,597 $ 6 - $ 84 1,513 Total Liabilities NET ASSETS Held in Trust for Other Purposes Agency Funds 6 $ 370 1,597 $ - The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 49 Table of Contents Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended June 30, 2004 (in thousands of dollars) Private Purpose Trust Funds ADDITIONS Contributions: Private Donations Investment Earnings: Interest $ 402 10 Total Additions 412 DEDUCTIONS Scholarships Redevelopment Expenses 5 741 Total Deductions 746 Change in Net Assets Net Assets - Beginning Net Assets - Ending (334) $ 704 370 The notes to the financial statements are an integral part of this statement. 50 City of Scottsdale, Arizona Table of Contents The accounting policies of the City conform to U.S. generally accepted accounting principles (GAAP) as applicable to governmental units. The following is a summary of the more significant policies. The financial reporting entity presented in these financial statements consists of the City of Scottsdale (the primary government) and its component units. The component units discussed below are included in the City’s reporting entity because of the significance of their operational or financial relationships with the City. 1. Individual Component Units - Blended The City of Scottsdale Municipal Property Corporation (MPC), a nonprofit corporation, was created by the City in 1967 solely for the purpose of constructing, acquiring and equipping buildings, structures, or improvements on land owned by the City. The MPC is governed by a Board of Directors appointed by the City Council. For financial reporting purposes, transactions of the MPC are included as a governmental and proprietary fund type as if it were part of the City’s operations. Notes to Financial Statements A. Financial Reporting Entity The City of Scottsdale (City) was incorporated in 1951. The current City Charter was adopted in 1961, which established the Council/Manager form of government. The City provides basic government services to its citizens including roads, water, sewer, solid waste management, public transit, parks and recreation facilities, police and fire. For the Fiscal Year Ended June 30, 2004 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Scottsdale Preserve Authority (SPA), a nonprofit corporation, was created by the City in 1997 for the purpose of financing land acquisitions for the McDowell Sonoran Preserve. The City Council must approve the election of the SPA’s Board of Directors. For financial reporting purposes, transactions of the SPA are included as a governmental fund type as if it were part of the City’s operations. Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, and Via Linda Road Community Facilities Districts were formed by petition to the City Council in 1992, 1994, 1997, and 1998 respectively. The Districts’ purposes are to acquire and improve public infrastructure in specified land areas. As special purpose districts and separate political subdivisions under the Arizona Constitution, the Districts can levy taxes and issue bonds independently of the City. Property owners in the designated areas are assessed for District taxes and thus for the costs of operating the Districts. The City Council serves as the Board of Directors. The City has no liability for the Districts’ debt. For financial reporting purposes, transactions of the Districts are combined together and included as a governmental fund type as if they were part of the City’s operations. Separate financial statements of the MPC, SPA and Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, and Via Linda Road Community Facilities Districts may be obtained at the City’s Financial Services Department, Accounting and Budget Division, 7447 East Indian School Road, Suite 210, Scottsdale, Arizona 85251. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses for a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or City of Scottsdale, Arizona 51 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and trust fund financial statements. Agency funds do not have a measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers revenues to be available if they are collected within 30 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 vacation, sick leave, claims, and judgments, are recorded only when payment is due. Property taxes, other local taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when the City receives cash. 52 The government reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The General Obligation Bond Debt Service Fund is used to account for the accumulation of resources for, and the payment of, long-term obligation debt principal, interest, and related costs. The General CIP Construction Capital Projects Fund accounts for the resources used to acquire, construct and improve major capital facilities, other than those financed by proprietary funds. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements, regarding the use of the resources, are fully satisfied. The government reports the following major proprietary funds: The Water and Sewer Utility, Airport and Solid Waste Funds account for the operating revenues and expenses of the City’s water and sewer utility systems, airport and sanitation services (solid waste, brush removal, container maintenance, etc.), respectively. Additionally, the government reports the following fund types: The Internal Service Funds account for fleet management and self-insurance services provided to other departments or units of the City, on a cost-reimbursement basis. The Agency Funds are purely custodial (assets equal liabilities) and do not involve measurement of results of operations. The City’s agency funds are used to record the Family Self-Sufficiency activity and Retainage Escrow activity. The Private-Purpose Trust Funds are used to account for assets held in a trustee capacity for scholarships and other purposes as designated by the donors or by legal restrictions. Both the principal and earnings of these expendable trust funds can be expended for the trusts’ intended purposes. City of Scottsdale, Arizona Table of Contents Amounts reported as program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise and internal service funds are charges for customer services including: water, sewer, airport, and solid waste fees, vehicle purchase amounts and risk management charges. Operating expenses for enterprise funds and internal service funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. City of Scottsdale, Arizona D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments Cash equivalents for purposes of the statements of cash flows are investments (including restricted assets) in the State of Arizona Local Government Investment Pool, mutual funds, demand deposits, repurchase agreements, and U.S. Treasury bills and notes with maturities of three months or less at acquisition date. GASB Statement No. 31 provides that governmental entities may report all investments at fair value or they may elect to report certain money market investments and participating interest-earning investment contracts at amortized cost. The City has elected to report all investments at fair value. The City’s policy is to invest in certificates of deposit, repurchase agreements, direct U.S. Treasury debt, securities guaranteed by the United States Government or any of its agencies, and the State of Arizona Local Government Investment Pool (LGIP). The LGIP is overseen by the State of Arizona. The fair value of each share in the LGIP is $1. Notes to Financial Statements In general, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this rule are payments-in-lieu of taxes, indirect costs and franchise fees and other charges between the City’s Water and Sewer Utility Fund, Airport Fund, and Solid Waste Fund, because elimination of these charges would distort the direct costs and program revenues reported in the Statement of Activities. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. For the Fiscal Year Ended June 30, 2004 Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/ from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/ from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 53 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents All accounts, property tax and court receivables are shown net of an allowance for uncollectibles. All receivables in excess of one year comprise the allowance for uncollectibles at June 30, 2004. The City’s property tax is levied each year on or before the third Monday in August based on the previous January 1 full cash value as determined by the Maricopa County Assessor. Levies are due and payable in two installments, on October 1 and March 1, and become delinquent on November 1 and May 1, respectively. A lien attaches to the property on the first day of January preceding the assessment and levy of taxes. Delinquent amounts bear interest at the rate of 16 percent. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Public auctions of properties which have delinquent real estate taxes are held in February following the May 1 date upon which the second half taxes become delinquent. Property taxes levied for current operation and maintenance expenses on residential property are limited to 1.0 percent of the primary full cash value of such property. In addition, taxes levied for current operation and maintenance expenses on all types of property are limited to a maximum increase of 2.0 percent over the prior year’s levy, adjusted for new construction and annexations. Property taxes levied to pay principal and interest on bonded indebtedness are not limited. 3. Inventories Inventories of the governmental funds are recorded under the consumption method as expenditures when consumed rather than when purchased. Inventories are valued at year-end based on cost, with cost determined using an average cost method. 4. Restricted Assets Certain proceeds of the City’s enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheets because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. The revenue bond renewal and replacement account is used to report resources set aside to meet unexpected contingencies or to fund asset renewals and replacements. 54 5. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government, as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Assets contributed (donated) to those funds are recorded by reference to historical costs of the donor if recently purchased or constructed, or if such records are not available, at estimated fair market value on the date of receipt. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of businesstype activities is included as part of the capitalized value of the assets constructed. Depreciation and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: Water System ................................ 10 to 75 Years Sewer System ................................ 25 to 50 Years Buildings and Improvements ............. 25 Years Land Improvements ............................. 25 Years Machinery and Equipment ................... 20 Years Motor Vehicles ................................ 3 to 10 Years Furniture, Fixtures, and Office Equipment ........... 5 to 10 Years The excess purchase price over fair market value of assets acquired in the Water and Sewer Utility Enterprise Fund is amortized on the straight-line method over 20 to 25 years. When capital assets are disposed of, the cost and accumulated depreciation or amortization is removed from the accounts, and any resultant gain or loss is recognized in the government-wide and proprietary fund financial statements. The City early implemented the provisions of GASB Statement No. 42, Impairment of Capital Assets and for Insurance Recoveries for the year ended June 30, 2004. This statement establishes accounting and financial reporting requirements related to impairment of capital assets. City of Scottsdale, Arizona Table of Contents 7. Long-term Obligations In the government-wide financial statements and the Proprietary Fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable Governmental Activities, Business-Type Activities, or Proprietary Fund statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount and deferred amounts on refundings. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. City of Scottsdale, Arizona 8. Fund Equity In the fund financial statements, Governmental Funds report reservation of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Notes to Financial Statements All vacation pay is accrued when incurred in the government-wide, proprietary and fiduciary fund financial statements. A liability for the current amount of compensated absences is recorded as a current liability at June 30 in the Governmental and Proprietary funds. The current compensated absences amount in the governmental funds is combined with accrued payroll and other payroll related amounts in the accrued payroll and benefits line item. The City calculates this current amount based on vacation taken and an actuarial valuation dated January 1, 2003, for medical leave conversion. There is no long-term liability for compensated absences in the governmental funds. 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. For the Fiscal Year Ended June 30, 2004 6. Compensated Absences Compensated absences consist of vacation leave and a calculated amount of sick leave earned by employees based on services already rendered. Employees may accumulate up to a maximum number of hours of vacation depending on years of service, but any vacation hours in excess of the maximum amount unused at year end are forfeited. The City’s policy is to pay employees for unused accumulated vacation hours at termination or retirement. Sick leave time can be accumulated without limit. The City’s policy, however, is that only those employees hired fulltime before July 1, 1982 are paid for unused sick leave at death or retirement. Employees who retire on or after July 1, 1996, and who have accumulated 300 or more hours of sick leave, may elect to apply the value of the sick leave toward their City medical plan premiums. II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain difference between the governmental fund balance sheet and the government-wide statement of nets assets. The fund balances of the City’s governmental funds, $317,526, differs from net assets of governmental activities, $1,875,270, reported in the statement of net assets. The difference primarily results from the long-term economic focus in the statement of net assets versus the current financial resources focus in the governmental fund balance sheets. 55 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Reconciliation of Governmental Funds Balance Sheet and the Government-wide Statement of Net Assets (in thousands of dollars) Total Governmental Funds ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Hotel/Motel Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Special Assessments Note Miscellaneous Due from Other Funds/Internal Balances Supplies Inventory Advances to Other Funds/Internal Balances Capital Assets (net of accumulated depreciation) Deferred charges and other assets Total Assets LIABILITIES Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Due Within One Year Accrued Compensated Absences - Due in More Than One Year Claims Payable Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Court Tax Audit Intergovernmental Other Advances From Other Funds Due to Other Governments Guaranty and Other Deposits Other Bonds, Loans, Capital Leases, and Other Payables Total Liabilities Fund Balances/Net Assets Total Fund Balances/Net Assets Total Liabilities and Fund Balances/Net Assets 56 $ $ $ Internal Service Funds (2) Reclassifications and Eliminations Statement of Net Assets Totals 308,298 $ 49,491 - $ - 31,146 $ - - $ - 339,444 49,491 1,081 10,783 365 1,334 1,457 1,932 3,694 1,213 854 5,293 823 7,932 4,000 4,325 314 207 2,204 405,600 $ 2,065,310 1,625 2,066,935 $ 117 18 576 341 25,372 57,570 $ (314) (2,204) (2,518) $ 1,198 10,783 365 1,352 1,457 1,932 3,694 1,213 854 5,293 823 7,932 4,000 4,901 548 2,090,682 1,625 2,527,587 12,469 $ 9,563 314 10,625 28,665 - $ 12,716 - 1,426 $ 146 52 322 14,678 - - $ (2,034) 2,034 (314) - 13,895 7,675 2,086 13,038 14,678 10,625 28,665 16,624 (2,204) (2,518) 40,946 57,570 $ (2,518) $ 623 7,932 3,694 2,228 1,542 4,236 2,204 28 3,745 206 88,074 $ Long-Term Assets/ Liabilities (1) 317,526 405,600 $ (623) (7,932) (3,694) (2,228) (4,000) 555,898 550,137 1,516,798 2,066,935 $ 1,542 236 28 3,745 206 555,898 652,317 1,875,270 2,527,587 City of Scottsdale, Arizona Table of Contents Cost of capital assets Accumulated depreciation $ $ 2,939,178 (873,868) 2,065,310 Bond issuance costs are expended in governmental funds when paid, and are capitalized and amortized over the life of the corresponding bonds for purpose of the statement of net assets. Bond issuance costs @ 7/1/03 Bond issuance cost for FY 2004 Amortization of bond issuance costs $ $ 1,467 586 (428) 1,625 Long-term liablilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities in the governmental funds. All liabilities, both current and long-term, are reported in the statement of net assets. Also, during the year the City refunded some of its exitsting debt. The amount borrowed is received in the governmental funds and increases fund balance. The amount that was sent to the paying agent ($42,084) to be placed in escrow for payment of the old debt ($39,030) as it comes due is paid out of governmental funds and reduces fund balance. The difference between those amounts was $3,054 and will be amortized as an adjustment of interest expense in the statement of activities over the remaining life of the refunded debt. Balances at June 30, 2004 were: Contract payables Bonds payable Deferred charge on refunding Deferred issuance premium Accrued vacation and sick leave pay $ $ Notes to Financial Statements assets are reported as expenditures in governmental funds. However, the statement of net assets includes those capital assets among the assets of the City as a whole. For the Fiscal Year Ended June 30, 2004 (1) When capital assets (land, buildings, equipment, etc) that are to be used in governmental activities are purchased or constructed, the costs of those (13,702) (542,608) 9,153 (8,741) (12,716) (568,614) Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets (for example, receivables) are offset by deferred revenues in the governmental funds and thus are not included in fund balance. Deferred revenue for the long-term special assessment receivables shown on the governmental fund statements is not deferred on the statement of net assets. Certain tax and other revenues deferred under modified accrual for governmental fund statements, is recognized as revenue under accrual accounting for the government-wide statements. Deferred special assessment revenue Deferred court revenue Deferred other Deferred tax revenue $ $ 7,932 3,694 4,000 2,851 18,477 $ 40,946 (2) Internal Service Funds are used by management to charge the costs of certain activities, such as fleet management and self insurance, to individual funds. The assets and liabilities of certain Internal Service Funds are included in governmental activities in the statement of net assets. City of Scottsdale, Arizona 57 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities. The net change in fund balances for governmental funds, $46,654, differs from the change in net assets for the governmental activities, $94,685, reported in the statement of activities. The differences arise primarily from the long-term economic focus in the statement of activities versus the current financial resources focus in the governmental funds. The effect of the differences is illustrated below. Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) Total Governmental Funds REVENUES: Taxes - Local: Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Fire Insurance Premium Taxes - Intergovernmental: State-Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services: Building and Related Permits Recreation Fees Westworld Equestrian Facility Fees Fines and Forfeitures: Court Fines Parking Photo Radar Court Enhancement Library Special Assessments Property Rental Interest Earnings Intergovernmental: Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total $ 46,088 $ 120,156 7,227 5,488 2,740 182 481 Long-Term Revenue/ Expenses (3) Capital Related Items (4) (393) $ 875 - Internal Service Funds (5) - $ - Long-Term Debt Transactions (6) 676 $ - Statement of of Activities - $ - 46,371 121,031 7,227 5,488 2,740 182 481 17,054 18,278 8,214 14,034 1,136 1,813 - - - - 17,054 18,278 8,214 14,034 1,136 1,813 17,314 3,292 1,795 - - - - 17,314 3,292 1,795 4,318 203 1,265 668 467 2,558 3,212 2,385 306 (2,153) - - 270 - 4,624 203 1,265 668 467 405 3,212 2,655 10,010 443 1,357 762 1,000 647 1,659 8,729 2,110 307,085 (1,365) - - - 10,010 443 1,357 762 1,000 647 1,659 8,729 2,110 306,666 - 946 (continued) 58 City of Scottsdale, Arizona Table of Contents EXPENDITURES/EXPENSES Current: General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures/Expenses OTHER FINANCING USES/CHANGES IN NET ASSETS Net Transfers (to) From Other Funds Capital Contibutions Sales of Capital Assets Refunding Bonds Issued Long-term Capital-Related Debt Issued Premium on Bonds Issued Payment to Bond Refunding Escrow Agent Total $ 31,905 25,452 586 81,149 337,690 10,774 39,190 113,400 4,429 (90,534) 77,259 Special Item - Defeasance of Debt Net Change for the Year City of Scottsdale, Arizona 16,121 $ 55,510 7,222 9,399 50,494 7,328 19,265 8,774 2,754 3,290 6,199 11,218 1,024 $ 46,654 $ Long-Term Revenue/ Expenses (3) Capital Related Items (4) 215 $ 630 70 (31) 301 54 7 72 6 107 (76) 144 - Internal Service Funds (5) Long-Term Debt Transactions (6) Statement of of Activities 6,703 $ 1,628 219 68,656 3,679 3,685 213 3,104 19 34 3 118 - 800 $ 2,259 144 349 613 68 85 1,074 33 31 4 217 - 1,499 (81,149) 6,912 5,677 (31,905) 2,576 (586) (29,915) 28,028 321,863 - (4,171) 103,049 (257) 98,621 4,434 17 4,451 (39,190) (113,400) (4,429) 90,534 (66,485) 11,037 103,049 (240) 113,846 - (3,964) (3,964) (280) $ (40,534) $ 94,685 (2,864) $ 91,709 $ - $ - 23,839 60,027 7,655 78,373 55,087 11,135 19,570 13,024 2,812 3,462 6,130 11,697 1,024 Notes to Financial Statements Total Governmental Funds For the Fiscal Year Ended June 30, 2004 Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) 59 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) (3) Reconciling Items Description: Because some property taxes will not be collected for several months after the city's fiscal year ends, they are not considered as "available" revenues in the governmental funds. Similarly, other revenues are not currently available at year-end and are not reported as revenue in the governmental funds. Property taxes Court revenue Tax audit revenue Special Assessment revenue $ $ (393) 306 875 (2,153) (1,365) $ (1,499) $ $ 69,412 (80,495) (257) (11,340) $ 103,049 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. Accrual for long-term compensated absences (4) When capital assets that are to used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net assets decrease by the amount of depreciation expense charged for the year, and the loss on disposal of capital assets. Capital expenditures Depreciation Expenses Loss on disposal of capital assets Difference Donations of capital assets are not shown on the governmental fund statements, but are included in the assets of the City. On the statement of activities, these donations are shown as capital contributions. Capital Contributions (5) Internal Service funds are used by management to charge the costs of certain activities, such as insurance and motor pool, to the individual funds. The adjustments for internal service funds close those funds by charging additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. Capital assets contributed by the governmental funds ($4,171) are treated as capital contribution revenue in the Internal Service fund statements and capital outlay expenditures in the governmental funds statements. For government-wide purposes, the capital contribution is reclassified as a transfer in in the Internal Service Fund column and a transfer out in the Capital Related Items column. Change in Net Assets 60 $ (280) City of Scottsdale, Arizona Table of Contents Bond issuance costs are reported as an expenditure in governmental funds in the year of bond issuance and thus, have the effect of reducing fund balance because current financial resources have been used. For the government-wide statements; however, the bond issuance costs are deferred and amortized (expensed) over the life of the bonds. Bond issuance costs for FY 2004 Amortization of bond issuance costs Difference $ 586 (428) 158 $ Repayment of bond principal is reported as an expenditure in governmental funds and, thus, has the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, the principal payments reduce the liabilities in the statement of net assets and do not result in an expense in the statement of activities. The City's bonded debt was reduced in two ways; principal payments were made to bond holders and resources were sent to the bond paying agent for the advance refunding of outstanding bonds. Transferred to the paying agent: For bond principal Principal payments made $ $ 90,534 31,905 122,439 Notes to Financial Statements (6) For the Fiscal Year Ended June 30, 2004 Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) Interest expense in the statement of activities differs from the amount reported in governmental funds because additional accrued and accreted interest was calculated for bonds and notes payable, and additional interest expense was recognized on the amortization of bond discount and premiums which are expended within the fund statements. Amortization of deferred charges on refundings Interest accretion and amortization Amortization of bond premium and discounts $ (3,051) (2,872) 3,775 (2,148) $ Bond proceeds are reported as financing sources in governmental funds and thus contribute to the change in fund balance. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net assets and does not affect the statement of activities. Proceeds were received from: General Obligation Bonds Refunding General Obligation Bonds Refunding Revenue Bonds Premium on Bonds $ $ (113,400) (16,265) (22,925) (4,429) (157,019) III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budget And Budgetary Accounting The City prepared an annual budget that covered fiscal year 2003/04 on a cash basis and the appropriation for this is established and reflected in the financial statements as follows: The City Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds (Highway User Fuel Tax, Preserve Privilege Tax, and Transportation Privilege Tax), Debt Service Funds (except for the Community Facilities Districts Debt Service Funds), and Enterprise Funds. Therefore, these funds have appropriated budgets, and budget to actual information is presented. The Community Development Block Grant, Home, Grants, Section 8, and Special Programs Special Revenue Funds, Community Facilities Districts Funds, Capital Projects Funds, Internal Service Funds, and Trust and Agency Funds have non-appropriated budgets. Accordingly, no comparison of budget to actual is presented in the financial statements for these funds. Budgets for the Community Development Block Grant, Grants, and Section 8 Funds are established pursuant to the terms of the related grant awards. Budgets for the Community Facilities Districts are established in accordance with Arizona Revised Statutes, which do not require their inclusion in the City budget or adoption by the City Council. Budgets for Capital Projects Funds are established for individual projects and unexpended funds are re-appropriated each year until the project is completed and capitalized. Budgets for Internal Service Funds are established in order to help departments control operational costs. Budgets for Trust and Agency Funds are established in accordance with the trust/agency agreements. City of Scottsdale, Arizona 61 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents On or before the second regular Council meeting in May, the City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Two public hearings are held prior to the budget’s final adoption in order to obtain taxpayer comments. At the first regular Council meeting in June, the budget is legally enacted through passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. During 2003/04, there were no supplemental budgetary appropriations to the original budget. The expenditure appropriations in the adopted budget are by department. The maximum legal expenditure permitted for the fiscal year is the total budget as adopted. Departmental appropriations may be amended during the year. Upon the recommendation of the City Manager, and with the approval of the City Council: (1) transfers may be made from the appropriations for contingencies to departments; and (2) unexpended appropriations may be transferred from one department to another. Management control of budgets is further maintained at a line item level within the department. All expenditure appropriations that have not been expended lapse at year end. Beginning July 1, 1998, the City discontinued the use of encumbrance accounting. As such, fund balance amounts are not reserved for purchase orders, contract or other commitments. B. Excess of Expenditures over Appropriations The Special Assessments Debt Service Fund exceeded its Debt Service Expenditures appropriation by $15,000. This over expenditure was funded by available fund balance. The Water and Sewer Utility Enterprise Fund exceeded its expense appropriation for Sewer operations by $3,199,000. This over expenditure was funded by available fund balance. The Airport Enterprise Fund exceeded its expense appropriation by $206,000. This over expenditure was funded by available fund balance. The Solid Waste Enterprise Fund exceeded its expense appropriation by $108,000. This over expenditure was funded by available fund balance. C. Deficit Fund Equity The Section 8 Housing Fund had a deficit fund balance of $6,000 caused by certain grant reimbursements due which may not be available in the upcoming period. Since these reimbursements are not assured, no revenue was accrued in the current fiscal year. These reimbursements due will be recognized as revenue when actually received. Since January 1998, the fund has generated a surplus. Program administrators expect this trend to continue and anticipate eliminating the fund deficit within one year. D. Fund Balance/Net Assets Reservations and Designations Only restrictions imposed by external sources are shown as Restricted Net Assets on the government-wide financial statements. Reservations or designations of fund balances are shown in aggregate on the governmental fund financial statements, but not on the proprietary fund financial statements. The City does, however, reserve or designate portions of net assets in other funds to demonstrate the government’s intended use of those net assets. Designations are created by administrative policy. The following are the reservations and designations of fund balance/net assets included in the unreserved fund balance/net assets at June 30, 2004: 62 City of Scottsdale, Arizona Table of Contents $ 3,468 Restricted Net Asset and Unrestricted Net Asset Designations Water and Sewer Restricted for Repair and Replacement $ Restricted for Acquisition and Construction Total Restricted $ 17,237 3,605 20,842 $ 5,654 Notes to Financial Statements Debt Service Reserved for Debt Service Nonmajor For the Fiscal Year Ended June 30, 2004 Fund Balance Reservations and Designations (in thousands of dollars) General Fund Major Designated for Economic Stabilization Reserve $ 22,588 Designated for Economic Investment 9,819 Total Designated $ 32,407 The amounts presented below detail the City's planned use of the following Unrestricted Net Asset amounts: Water and Sewer Designated for Operating Reserve $ 17,601 Solid Waste Designated for Operating Reserve $ 3,267 Airport Designated for Operating Reserve $ 458 $ $ 3,516 1,893 5,409 $ 9,329 Self-Insurance Designated for General Liability Claims Designated for Benefits Fleet Management Designated for Capital Equipment Replacement IV. DETAILED NOTES ON ALL FUNDS A. Change in Accounting Principle The City entered into a sales tax repayment agreement with a local developer in 1998. Under the term of the contract the City is required to pay back in 30 annual installments the cost of a garage built for a local shopping center including 9.14% interest compounded annually. The agreement was recorded as a capital lease. Although there is a stated principal amount in the contract, the sales tax generated has never been sufficient to pay any principal amounts and based on our current projections, the City estimates that we will never pay any principal amounts. After the 30th payment, the City is free and clear of any obligations including accrued interest. The City does not acquire title to the garage until the 150th year. City of Scottsdale, Arizona 63 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Therefore, we are changing our accounting treatment during the fiscal year 2003-2004 for the Nordstrom Agreement from a capital lease to a contingent-operating lease and will review and record current and future agreements with the parameters listed above. Beginning Net Assets was restated to eliminate the capital asset amount (since we do not hold title to the Nordstrom garage until the 150th year), accumulated depreciation and the related debt (capital lease). Additionally, beginning Net Assets was restated for two sales tax repayment contracts (Anchor National and Promenade) that fell within the above parameters. Although this change is not material to the Ctiy’s financial statements taken as a whole, we believe that changing the accounting treatment for sales tax repayment agreements from a capital lease payable and contract payables to contingent operating leases is a preferable reporting method for the users of our financial statements based on our current knowledge. We believe that disclosure of this change was necessary to demonstrate the spirit of full disclosure and to clearly communicate to the users of our financial statements. Restatement of beginning net assets for governmental funds (in thousands of dollars) Governmental Activities Net Assets: Beginning Net Assets at June 30, 2003, as previously reported $ Change in Accounting Principle Beginning Net Assets at July 1, 2003, as adjusted 1,770,819 9,766 $ 1,780,585 B. Cash and Investments The City maintains a cash and investment pool for use by all funds except the Municipal Property Corporation and Community Facilities Districts Funds, which have investments held separately by a trustee. The City adopted the provisions of GASB Statement No.40, Deposit and Investment Risk Disclosures for the year ended June 30, 2003. This statement establishes and modifies disclosure requirements related to investment and deposit risks; accordingly, the note disclosures on cash and investments are in conformity with the provisions of GASB Statement No. 40. Deposits At June 30, 2004, the carrying amount of the City’s deposits was $43,112,854, and the bank balance was $41,610,707. The $1,502,147 difference represents outstanding checks and other reconciling items. Custodial Credit Risk – Deposits Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. As of June 30, 2004, the City’s deposits were covered by federal depository insurance or by collateral held by the City’s agent or pledging financial institution’s trust department or agent in the name of the City, and thus had no deposits that were exposed to custodial credit risk. Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits the City’s investment portfolio to maturities of less than three years. Credit Risk City Charter, Ordinance, and Trust Agreements authorize the City to invest in obligations of the U.S. Treasury, U.S. Government agencies, Certificates of Deposit, bankers’ acceptances, commercial paper (A-1, P-1), repurchase agreements, mutual funds consisting of the foregoing, and the State of Arizona Local Government Investment Pool (LGIP). The City’s investment in the bonds of U.S. agencies was rated AAA by Standard & Poor’s and Fitch Ratings, and Aaa by Moody’s Investors Service. 64 City of Scottsdale, Arizona Table of Contents Investment Maturities (in Years) Investment Type U.S. Treasuries U.S. Agencies Local Government Investment Pool Guaranteed Investment Contracts Money Market Funds Total Investments Less Fair Value Than 1 1-2 $ 142 $ 16 $ 126 $ 407,312 105,642 138,028 * 2,596 2,596 475 176,070 $ 475 176,070 2-3 163,642 ** - - 586,595 $ 284,799 $138,154 $ 163,642 *$113,459 of these bonds are callable July 1, 2004 to November 27, 2004 **$163,623 of these bonds are callable July 1, 2004 to May 18, 2005 Notes to Financial Statements (in thousands of dollars) For the Fiscal Year Ended June 30, 2004 Investments The City’s investments at June 30,2004, are summarized below. Total City cash and investments at fair value are as follows (in thousands of dollars): Carrying Amount of City Deposits Investments $ 43,113 586,595 Total Cash and Investments $ 629,708 $ 467,244 133,255 27,238 6 Total City cash and investments are reported as follows (in thousands of dollars): Primary Government Cash and Investments Cash Held with Fiscal Agent Restricted Cash Handicap Scholarship Private Purpose Trust Fund Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund Family Self-Sufficiency Agency Fund Retainage Escrow Agency Fund Total Cash and Investments $ 368 84 1,513 629,708 Investment income comprises the following for the year ended June 30, 2004 (in thousands of dollars): Net Interest and Dividends Net Decrease in the Fair Value of Investments Total Net Investment Income $ $ 11,030 (7,392) 3,638 The net decrease in the fair value of investments during fiscal year 2003/04 was $7,391,699. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. The unrealized gain on investments held at June 30, 2004, was $3,883,385. In the previous year, the City reported a decrease in fair value of $7,864,309 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool. The State and numerous other bondholders filed suit against the principals, underwriters, trustees, accountants and other in May 2003. The case is presently pending in federal court in Ohio. Formal discovery in the case has yet to begin, so no reliable assessment of the litigation outcome is available. City of Scottsdale, Arizona 65 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents C. Receivables Receivables as of year end for the government’s individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts are as follows: (in thousands of dollars) Governmental Funds: General Obligation Bond Debt Service General Fund Receivables Property Taxes and Penalties: Property Court Subtotal Property Taxes and Penalties $ Other local taxes: Privilege Hotel/Motel State Shared Sales Tax Franchise Fee Auto Lieu Highway User Subtotal Other Local Taxes 453 $ 12,671 13,124 General CIP Construction Capital Projects 681 $ 681 Nonmajor and Other Funds - $ - 200 $ 200 Total Governmental Funds 1,334 12,671 14,005 7,755 365 1,457 1,932 854 12,363 - - 3,028 1,213 4,241 10,783 365 1,457 1,932 854 1,213 16,604 - - - 6,116 6,116 Interest and Other: Interest Special Assessments Note (Sinclair Oil) Miscellaneous Subtotal Interest and Other 372 4,000 5,872 10,244 - 347 347 362 7,932 971 9,265 1,081 7,932 4,000 6,843 19,856 Gross Receivable Less: Allowance for Uncollectibles Net Total Receivables 35,731 (11,495) 24,236 $ Intergovernmental $ 681 681 $ 347 347 $ 19,822 19,822 $ 56,581 (11,495) 45,086 Enterprise Funds: Water and Sewer Utility Receivables Charges for services Intergovernmental Interest Miscellaneous Gross Receivable Net Total Receivables 66 Airport Solid Waste Total $ 10,262 $ 6 659 489 11,416 - $ 399 2 170 571 2,338 $ 20 45 2,403 12,600 405 681 704 14,390 $ 11,416 $ 571 $ 2,403 $ 14,390 City of Scottsdale, Arizona Table of Contents Property Tax Special Assessments Court Tax Audit Intergovernmental Other Note Receivable Community Services Unavailable $ 623 7,932 3,694 2,228 - Unearned $ 1,542 4,000 18,477 236 1,778 $ $ Notes to Financial Statements (in thousands of dollars) For the Fiscal Year Ended June 30, 2004 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the fiscal year, the various components of deferred revenue and unearned revenue reported in the Governmental funds were as follows: D. Capital Assets Capital asset activity for the year ended June 30, 2004, was as follows (in thousands of dollars): Beginning Governmental Activities Balance Ending Increases Decreases Balance Capital Assets, Not Being Depreciated: Land $ Construction In Process Total Capital Assets, Not Being Depreciated: 349,826 $ 63,694 $ - $ 413,520 67,516 69,688 (71,039) 66,165 417,342 133,382 (71,039) 479,685 Capital Assets, Being Depreciated: Buildings and Land Improvements Streets and Storm Drains Vehicles Maintenance by Fleet Machinery and Equipment Total Capital Assets, Being Depreciated: 249,091 11,618 - 260,709 2,055,270 95,161 - 2,150,431 41,581 5,825 (1,173) 46,233 3,652 32 (24) 3,660 52,749 2,086 (3,329) 51,506 2,402,343 114,722 (4,526) 2,512,539 Less Accumulated Depreciation for: Buildings and Land Improvements 115,631 9,327 - 124,958 Streets and Storm Drains 650,483 65,959 - 716,442 20,506 4,900 (1,084) 24,322 1,771 380 (30) 2,121 31,469 5,295 (3,065) 33,699 819,860 85,861 (4,179) 901,542 1,582,483 28,861 (347) 1,610,997 (71,386) $ 2,090,682 Vehicles Maintenance by Fleet Machinery and Equipment Total Accumulated Depreciation: Total Capital Assets, Being Depreciated, Net: Governmental Activities Capital Assets, Net: $ 1,999,825 $ 162,243 $ The City adjusted the beginning balance of Governmental Capital Assets, Buildings and Land Improvements to reflect a change in Accounting Principle, $28,750,000, less accumulated depreciation of $4,695,833. City of Scottsdale, Arizona 67 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Beginning Balance Business-Type Activities Increases Ending Balance Decreases Capital Assets, Not Being Depreciated: Land - $ 24,162 Water Rights $ 64,688 - - 64,688 Construction In Process 68,963 37,208 (53,963) 52,208 147,567 47,454 (53,963) 141,058 Water System 464,513 77,227 (283) 541,457 Sewer System 303,614 16,774 - 320,388 14,306 2,200 - 16,506 5,963 11 (31) 5,943 698 - (32) 666 789,094 96,212 (346) 884,960 Water System 120,907 14,369 (231) 135,045 Sewer System 53,332 8,319 - 61,651 Buildings and Land Improvements 5,011 738 - 5,749 Machinery and Equipment 2,307 279 (31) 2,555 Total Capital Assets, Not Being Depreciated: 13,916 $ 10,246 $ Capital Assets, Being Depreciated: Buildings and Land Improvements Machinery and Equipment Furniture, Fixtures and Office Equipment Total Capital Assets, Being Depreciated: Less Accumulated Depreciation for: Furniture, Fixtures and Office Equipment 464 51 (27) 488 Total Accumulated Depreciation: 182,021 23,756 (289) 205,488 Total Capital Assets, Being Depreciated, Net 607,073 72,456 (57) 679,472 (54,020) $ 820,530 Business-Type Activities Capital Assets, Net $ 754,640 $ 119,910 $ During fiscal year 2003/04, the Water and Sewer Utility Enterprise Fund capitalized net interest costs of $1,316,703. Total interest expense in this fund before capitalization was $8,650,757. Depreciation expense was charged to functions/programs of the primary government as follows (in thousands of dollars): Governmental Activities 68 General Government Police Financial Services Transportation Community Services Information Services Fire Municipal Services Citizen and Neighborhoods Resources Human Resources Economic Vitality Planning and Development Capital Assets Held by the Government's Internal Service Funds are Charged to the Various Functions Based on their Usage of the Assets $ Total Depreciation Expense - Government Activities $ 5,226 2,699 325 64,257 3,947 3,450 665 4,797 57 34 3 166 235 85,861 City of Scottsdale, Arizona Table of Contents $ 22,926 623 202 Total Depreciation Expense - Business-Type Activities $ 23,751 Construction Commitments The City has active construction projects as of June 30, 2004. At year-end the government’s commitments with contractors for specific projects are as follows (in thousands of dollars): Construction Commitments Remaining Commitment Spent to Date Streets Traffic Improvement District Fire Police Drain/Flood Control Community Parks/Recreation Municipal Facilities Technology Libraries Airport Transit Water System Sewer System $ 54,825 $ 18,807 1,121 27,677 - 5,962 460 10,659 315 9,292 942 316,164 12,233 14,426 1,915 5,744 1,390 10,630 778 658 447 2,932 238 5,951 1,372 165,311 62,739 75,299 $ 12,361 Notes to Financial Statements Water and Sewer System Airport Solid Waste For the Fiscal Year Ended June 30, 2004 Business-Type Activities 1,687 724,337 $ 97,998 The improvement district portion of the commitment is financed by improvement district bonds. The traffic commitments are being financed by the .2% Transportation Privilege (sales) Tax, which is reported in the Special Revenue fund financial statements. All water and sewer system improvement projects are being financed through the use of water or sewer development fees and water or sewer rates. E. Interfund Balances and Interfund Transfers “Due to” and “due from” balances have primarily been recorded when funds overdraw their share of pooled cash. The composition of interfund balances as of June 30, 2004, is as follows: Receivable Fund (in thousands of dollars) General Amount $ 314 Payable Fund (in thousands of dollars) Nonmajor Governmental Funds Amount $ 314 Total $ Total $ City of Scottsdale, Arizona 314 314 69 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Individual funds having advances to and from other funds at June 30, 2004. The advance to the Preserve Privilege Capital Projects fund from the General Fund is a result of a loan that was made in order to purchase a parcel of land outside of the area authorized for preservation sales tax funding in fiscal year 1999/00. The loan is required to be repaid in June 2005. The advance accrues interest at a rate of 6% compounded annually. The advance from the General CIP Capital Project Fund to the Preserve Privilege Tax Capital Project Fund was to provide cash in order to complete a purchase of a parcel of land outside of the area authorized for preservation sales tax funding in fiscal year 1999/00. The amounts will be repaid from the Preserve Privilege Tax Fund when it has sufficient cash to cover operations. Advances To Other Funds: (in thousands of dollars) General Amount $ 1,262 Major Governmental Funds General CIP Construction Total $ 942 2,204 Advances From Other Funds: (in thousands of dollars) Nonmajor Governmental Funds Amount $ 1,262 Nonmajor Govermental Funds Total $ 942 2,204 Interfund Transfers Transfers are used to fund capital projects and debt service, reallocate special revenue funds to operating centers or other operations and for indirect administrative cost allocations (including in-lieu property tax and franchise fees) charges to Enterprise Funds. During the year $32.3 million was transferred from the General Fund to the Municipal Property Corporation Non-major Debt Service Fund to defease outstanding debt. The amount had been previously set aside by management and reported as designated fund balance in the General Fund for bonds payable. The balance of this designation reported at June 30, 2004, was $33.7 million. Net transfers (in thousands of dollar): Transfers Out From: Major Governmental Funds General Transfers In To: $ 52,990 Major Governmental Funds Capital Projects General CIP Construction Major Enterprise Funds Airport Nonmajor Governmental funds 54,415 1,325 100 General Fund Total Major Governmental Funds 40,945 796 Internal Service Funds 1,425 11,019 230 Nonmajor Governmental Funds Capital Projects General CIP Construction $ Total Major Governmental Funds 54,415 (continued) 70 City of Scottsdale, Arizona Table of Contents $ Airport 11,160 71 Solid Waste 36 Total Major Enterprise Funds 11,267 Nonmajor Governmental Funds 71,854 Total Nonmajor Governmental Funds 71,854 533 Internal Service Total Internal Service Funds Total 533 $ 138,069 Major Governmental Funds General Fund $ 7,302 Capital Projects General CIP Construction 1,339 Nonmajor Governmental funds 2,519 Major Governmental Funds General Fund 60 Capital Projects General CIP Construction 11 Major Governmental Funds General Fund 17 Capital Projects General CIP Construction 19 Internal Service Total Major Enterprise Funds 11,267 Major Governmental Funds General Fund 50 Debt Service General Obligation Bond 12,654 Capital Projects General CIP Construction 18,311 Nonmajor Governmental funds 40,839 Total Nonmajor Governmental Funds 71,854 Major Governmental Funds Capital Projects General CIP Construction 533 Total Internal Service Funds 533 Total $ Notes to Financial Statements Major Enterprise Funds Water and Sewer Transfers In To: For the Fiscal Year Ended June 30, 2004 Transfers Out From: 138,069 F. Operating Leases The City has entered into rental agreements of retail and parking facilities. Rental payments on these facilities during the 2003/04 fiscal year were $2,976,916. Payments are contingent upon sales tax revenues received on the properties; thus, future payments cannot be determined. City of Scottsdale, Arizona 71 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents G. Bonds, Loans, and Other Payables The following are brief descriptions of bonds outstanding at June 30, 2004. The totals shown are the principal amount outstanding, net of the current portion due July 1, 2004. There are a number of limitations and restrictions contained in the various bond indentures. The City is in compliance with all significant limitations and restrictions. General Obligation Bonds General obligation (GO) bonds are issued, after approval by City of Scottsdale voters at an authorized bond election, to finance the construction of water and sewer systems, artificial lighting, parks and open spaces, recreational facilities, and general purpose improvements. At June 30, 2004, the City had $282,200,000 of unissued various purpose GO bonds, which were authorized in September 2000. The City had no unissued Preservation GO bonds from the September 1999 authorization. In May 2004 voters authorized $500,000,000 of additional Preservation GO bonds, as well as an additional .15% sales tax increase to be used to finance Preserve land acquisitions. GO bonds are backed by the full faith and credit of the City, and are repaid through the City’s levying of property (ad valorem) taxes. However, the Preservation GO bonds are repaid through the two-tenths of one percent City sales tax approved by voters in September 1996 to be used specifically to finance land acquisitions for the McDowell Sonoran Preserve. Additionally, a portion of the City’s GO bonds are recorded in the Water Enterprise Fund as described below, and are repaid through revenues of that fund unless such revenues are insufficient. HURF Revenue Bonds Highway User Revenue Fee (HURF) bonds are issued specifically for the purpose of constructing street and highway projects. These bonds are repaid out of the Special Revenue Fund by gas tax revenues collected by the State of Arizona and distributed to cities and towns based on a formula of population and gas sales within each county. Municipal Property Corporation Bonds The Municipal Property Corporation (MPC) is a nonprofit corporation created by the City in 1967 to finance the construction or acquisition of certain capital improvement projects. The MPC issues its own bonds, which are repaid through the City’s excise tax collections and other unrestricted revenues. The use of property taxes to repay these bonds is 72 specifically prohibited by law. Most of these bonds are recorded as governmental long-term debt. The 1995 MPC Transfer Station bonds, however, are recorded in and paid out of revenues of the Solid Waste Enterprise Fund. The 2001 MPC Scottswater bonds are recorded in and paid out of the revenues of the Water Enterprise Fund. The 2004 MPC bonds are recorded in and paid out of the revenues of the Water and Sewer Enterprise Funds. Scottsdale Preserve Authority Bonds The Scottsdale Preserve Authority (SPA) is a nonprofit corporation created by the City in 1997 to finance land acquisitions for the McDowell Sonoran Preserve. The SPA issues its own bonds which are repaid through the two tenths of one percent City sales tax approved by voters in September 1996 to be used specifically for this purpose. In May 2004 voters approved an additional .15% sales tax increase SPA bonds are recorded as governmental long-term debt and are paid out of the SPA Debt Service Fund. Water and Sewer Revenue Bonds Water and sewer revenue bonds are issued as authorized by the voters for the construction, acquisition, furnishing and equipping of water and sewer facilities and related systems. At June 30, 2004, the City had $3,340,000 authorized but unissued water and sewer revenue bonds. The City has no plans to issue the remaining portion of the unissued water and sewer revenue bonds authorized as all projects related to the authorization have been completed. The water and sewer revenue bonds are collateralized by revenue in excess of operating and maintenance expenses of the City’s water and sewer utility system, and are repaid via user charges or fees for service. Property taxes cannot be used to pay the debt service on these bonds. Water and sewer revenue bond covenants require that the City accumulate sufficient reserves to cover the eventual replacement of the water and sewer system. The City has continued to meet this reserve requirement. At June 30, 2004, the funds reserved for this purpose were $17,236,893. Special Assessment Bonds Special assessment bonds are issued by the City on behalf of improvement districts created by property owners for a specific purpose, such as to finance local street, water or sewer improvements, or to acquire an existing water or sewer operation. Property owners in the designated districts agree to be assessed for the principal and interest costs of repaying the bonds. As trustee for improvement districts, the City is responsible for collecting the assessments levied City of Scottsdale, Arizona Table of Contents The City Council’s adopted policy is that special assessment improvement debt is permitted only when the ratio of the full cash value of the property (prior to improvements being installed) when compared to debt is a minimum of 3 to 1 prior to issuance of debt, and 5 to 1 or higher after construction of improvements. In addition, cumulative improvement district debt is not permitted to exceed 5 percent of the City’s secondary assessed valuation. At June 30, 2004, there were 4 separate series of special assessment improvement bonds outstanding, each series issued as serial bonds to be repaid over 10 years. Notes to Financial Statements These bonds are secured by a lien on the property and improvements of all parcels within each district. In the event of default by the property owner, the City may enforce auction sale to satisfy the debt service requirements of the improvement bonds. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. For the Fiscal Year Ended June 30, 2004 against the owners of property within the improvement districts and for disbursing these amounts to retire the bonds issued to finance the improvements. The receivables, revenues, and debt service expenses related to these bonds are recorded in the Special Assessments Debt Service Fund. At June 30, 2004, special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, were adequate for the scheduled maturities of the bonds payable and the related interest. Community Facilities Districts General Obligation Bonds Community Facilities District General Obligation Bonds are issued by community facilities districts (CFDs), which are special purpose districts created specifically to acquire and improve public infrastructure in specified land areas. CFD bonds are repaid by ad valorem taxes levied directly by the districts and collected by the county. Property owners in the districts are assessed for district taxes and thus for all costs associated with the districts. The City has no liability for community facilities district bonds. CFDs are created only by petition to the City Council by property owners within the district areas. As board of directors for the CFDs, the City Council has adopted a formal policy that CFD debt will be permitted only when the ratio of the full cash value of the unimproved district property to the proposed district debt, is a minimum of 3 to 1, and 5 to 1 or higher after construction of improvements. These ratios are verified by an appraisal paid for by the CFD and administered by the City. In addition, cumulative debt of all CFDs cannot exceed 5 percent of the City’s secondary assessed valuation. CFD Advance Refundings There were no refundings during fiscal year 2003/04. In prior years, the McDowell Mountain Ranch CFD and the Scottsdale Mountain CFD refinanced other bond issues through the issuance of refunding bonds. The proceeds from the refunding bonds have been deposited in irrevocable trusts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future redemption or payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of all of these trust accounts and the liability for refunded (defeased) bonds are not reflected in the financial statements of the City. The table reflects refunded debt outstanding at June 30, 2004, and net of any amounts to be paid or retired by the trustee on July 1, 2004 (in thousands of dollars). Refunded in Prior Year (in thousands of dollars) McDowell Mountain Ranch CFD: General Obligation Series 1997 Scottsdale Mountain CFD: General Obligation Series Series 1993B General Obligation Series 1995 Total CFD Bonds Refunded in Prior Years City of Scottsdale, Arizona $ 6,910 $ 65 1,665 $ 6,910 1,730 8,640 73 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents 74 Bonds payable at June 30, 2004, are comprised of the following: Classified in Governmental activities on the government-wide financial statements: General Obligation Bonds Bonds Outstanding (in thousands of dollars) 1993 Refunding Bonds due in annual installments of $1,010,000 to $8,150,000 through July 1, 2009; interest at 4.0 percent to 5.5 percent. $28,399,993 of these bonds are recorded in and paid out of the Water Fund. On June 15, 2004, $2,505,000 due 2007 through 2009 were defeased. Of the total outstanding at June 30, 2004, $5,499,577 bonds are capital appreciation bonds maturing in 2004 and 2005, of which $3,572,813 are included in the amount paid out of the Water Fund. The original issue amount for the 1993 Refunding Bonds was $45,015,000. $ 12,768 1989 Capital Improvement Project Serial Bonds (Series D issued 1993) due in annual installments of $500,000 to $1,475,000 through July 1, 2013; interest at 4.0 percent to 6.5 percent. On September 26, 2002, $9,940,000 due 2002 through 2011 were refunded, and on September 24, 2003, an additional $2,905,000 due 2012 through 2013 were refunded. Original issue amount, $21,000,000. - 1993A Refunding Bonds due in annual installments of $475,000 to $5,560,000 through July 1, 2011; interest at 3.65 percent to 5.1 percent. $1,315,000 of these bonds are recorded in and paid out of the Water Fund. On September 26, 2003, $13,355,000 due 2004 and 2007 through 2011 were refunded. The original issue amount for the 1993A Refunding Bonds was $24,265,000. 2,510 1989 Capital Improvement Project Serial Bonds (Series H issued January 1, 1997) due in annual installments of $870,000 to $2,115,000 through July 1, 2016; interest at 5.0 percent to 7.5 percent. On September 26, 2002, $18,305,000 due 2006 throuth 2016 were refunded. Original issue amount, $27,500,000. 1,235 1997 Refunding Bonds (issued September 3, 1997) due in annual installments of $50,000 to $3,510,000 through July 1, 2014, interest at 4.45 percent to 5.5 percent. Original issue amount $19,900,000. 19,770 1989 Capital Improvement Project Serial Bonds (issued April 6, 1998) due in annual installments of $445,000 to $1,340,000 through July 1, 2018, interest at 4.3 percent to 6.5 percent. On September 26, 2002, $8,180,000 due 2009 through 2015 were refunded. Original issue amount $20,500,000. 8,090 1999A Transportation, Storm Sewer, Flood Protection and Pima Road Improvements Serial Bonds (issued June 29, 1999) due in annual installments of $675,000 to $1,900,000 through July 1, 2019; interest at 4.6 percent to 6.5 percent. On September 26, 2002, $15,525,000 due 2010 through 2019 were refunded. Original issue amount $25,200,000. 5,500 1999 Preservation Bonds (issued November 16, 1999) due in annual installments of $800,000 to $4,225,000 through July 1, 2024; interest at 7.5 percent to 5.0 percent. On July 18, 2001, $32,375,000 due 2012 through 2022 were refunded, and on September 26, 2002, an additional $4,125,000 due 2010 and 2011 were refunded. Original issue amount $59,600,000. 16,925 2001 Preservation Bonds (issued March 29, 2001) due in annual installments of $920,000 to $2,455,000 through July 1, 2024; interest at 4.0 percent to 6.0 percent. On September 26, 2002, $3,920,000 due 2010 through 2012 were refunded. Original issue amount $35,000,000. 28,225 City of Scottsdale, Arizona Table of Contents 2002 Various Purpose Bonds (issued May 16, 2002) due in annual installments of $1,740,000 to $5,000,000 through July 1, 2024; interest at 4 percent to 5 percent. On June 15, 2004 due 2010 through 2011 were defeased. Original issue amount $68,000,000. 61,295 2002 Refunding Bonds (issued September 26, 2002) due in annual installments of $1,625,000 to $8,795,000 through July 1, 2019; interest at 2 percent to 5 percent. On April 15, 2004, $1,510,000 due 2010 were defeased. Original issue amount $72,000,000. 63,505 2003 Refunding Bonds (issued September 24, 2003) due in annual installments of $45,000 to $5,515,000 through July 1, 2013; interest at 2 percent to 4.5 percent. Original issue amount $16,265,000. 15,020 2004 Various Purpose Bonds (issued May 13, 2004) due in annual installments of $1,600,000 to $30,300,000 through July 1, 2025; interest at 3 percent to 5 percent. Original issue amount $113,400,000. 113,400 Total General Obligation Bonds Outstanding $ Notes to Financial Statements 41,355 For the Fiscal Year Ended June 30, 2004 2001 Refunding Bonds (issued July 18, 2001) due in annual installments of $70,000 to $5,030,000 through July 1, 2022; interest at 3.875 percent to 5.375 percent. On April 15, 2004, $5,490,000 due 2010 and 2014 through 2018 were defeased. Original issue amount $51,155,000. 389,598 The 1999 and 2001 Preservation Bonds of $18,400,000 and $29,210,000, respectively, and portions of the 2001 Refunding Bonds, 2002 Various Purpose Bonds, 2002 Refunding Bonds, and 2004 Various Purpose Bonds of $33,235,000, $40,000,000, $8,100,000 and $65,400,000, respectively, are paid from the .2% Preservation Sales Tax. HURF Revenue Bonds 1993 Highway User Revenue Refunding Serial Bonds due in annual installments of $405,000 to $2,990,000 through July 1, 2007; interest at 4.25 percent to 5.5 percent. Original issue amount, $26,690,000. City of Scottsdale, Arizona $ 8,475 75 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Municipal Property Corporation Bonds 1993 Municipal Property Corporation Refunding Bonds due in annual installments of $515,000 to $4,170,000 through July 1, 2005; interest at 4.25 percent to 5.375 percent. Original issue amount, $29,475,000. $ 4,170 1994 Municipal Property Corporation Refunding Bonds due in annual installments of $775,000 to $1,080,000 through July 1, 2004; interest at 4.3 percent to 5.15 percent. Original issue amount, $9,295,000. - 1995 Municipal Property Corporation TPC Land Taxable Excise Tax Revenue Bonds due in annual installments of $70,000 to $285,000 through July 1, 2015; interest at 7.7 percent to 9.0 percent. On May 25, 2004, $2,270,000 due 2004 thrrough 2015 were defeased. Original issue amount, $2,950,000. - 1996 Municipal Property Corporation Excise Tax Revenue Bonds for McCormick/Stillman Park, computers, and curbside recycling (issued July 1, 1996) due in annual installments of $310,000 to $1,570,000 through July 1, 2004; interest at 4.4 percent to 5.4 percent. The curbside recycling portion (2,800,000 issued, $0 outstanding) of bonds are recorded in and paid out of the Solid Waste Enterprise Fund. Original issue amount, $7,550,000. - 1998 Municipal Property Corporation Excise Tax Revenue Bonds (issued December 2, 1998) due in annual installments of $3,500,000 to $180,000 through July 1, 2008; interest at 4.0 percent. Original issue amount, $9,150,000. 680 2002 Municipal Property Corporation Refunding Bonds (issued August 7, 2002) due in annual installments of $1,260,000 to $3,505,000 through July 1, 2014; interest at 5.5 percent. On October 24, 2003, $29,310,000 due 2004 through 2014 were defeased. Original issue amount, $30,570,000. - Total MPC Bonds Outstanding $ 4,850 $ 595 Scottsdale Preserve Authority Bonds 1997 Scottsdale Preserve Authority Excise Tax Revenue Bonds due in annual installments of $170,000 to $1,475,000 beginning July 1, 1998, through July 1, 2022; interest at 7.75 percent to 5.625 percent. On July 18, 2001, $16,690,000 due 2006 through 2022 were refunded. Original issue amount $20,500,000. 1998 Scottsdale Preserve Authority Excise Tax Revenue Bonds due in annual installments of $1,015,000 to $6,585,000 beginning July 1, 1999, through July 1, 2024; interest at 6.0 percent to 4.75 percent. On March 30, 2004, $22,770,000 due 2009 through 2016 were refunded. Original issue amount $77,000,000. 45,155 2001 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued July 18, 2001, due in annual installments of $60,000 to $1,465,000 beginning July 1, 2002, through July 1, 2022; interest at 4.375 percent to 5.25 percent. Original issue amount $17,495,000. 17,305 2004 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued March 30, 2004, due in annual installments of $75,000 to $3,315,000 through July 1, 2016; interest at 2 percent to 5 percent. Original issue amount $22,925,000. 22,925 Total Scottsdale Preserve Authority Bonds 76 $ 85,980 City of Scottsdale, Arizona Table of Contents $ 8,755 $ 4,750 Community Facilities Districts General Obligation Bonds 1998 DC Ranch Community Facilities District General Obligation Bonds due in annual installments of $155,000 to $385,000 beginning July 15, 2005 through July 15, 2023; interest at 4.75% to 5.5%. Original issue amount $4,750,000. 1999 Via Linda Road Community Facilities District General Obligation Bonds due in annual installments of $95,000 to $255,000 beginning July 15, 2004 through July 15, 2023; interest at 5.0% to 5.75%. Original issue amount $3,225,000. 3,130 1999 McDowell Mountain Ranch Community Facilities District General Obligation Refunding Bonds due in annual installments of $320,000 to $1,455,000 beginning July 15, 1999 through July 15, 2022; interest at 4.0% to 6.0%. Original issue amount $20,245,000. 17,405 1999 DC Ranch Community Facilities District General Obligation Bonds (issued November 1, 1999) due in annual installments of $85,000 to $260,000 beginning July 15, 2005 through July 15, 2011. Interest at 5.45% to 6.50%. Original issue amount $3,085,000. 3,085 2002 Scottsdale Mountain Community Facilities District General Obligation Refunding Bonds (issued May 15, 2002) due in annual installments of $160,000 to $455,000 beginning July 15, 2003 through July 15, 2018; interest at 3.0 percent to 4.7 percent. Original issue amount $5,375,000. 4,885 2002 DC Ranch Community Facilities District General Obligation Bonds (issued December 17, 2002) due in annual installments of $245,000 to $1,395,000 beginning July 15, 2004 through July 15, 2027. Interest at 3% to 5%. Original issue amount $12,165,000. 11,695 Total Community Facilities Districts General Obligation Bonds Outstanding Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona $ 44,950 $ 542,608 Notes to Financial Statements Special Assessment Bonds issued September 1, 1993, through December 20, 2001, maturing January 1, 2004, through January 1, 2013; due in annual installments of $15,000 to $1,575,000; interest at 4.5 percent to 5.7 percent. Total original issue amount, $31,770,000. For the Fiscal Year Ended June 30, 2004 Special Assessment Bonds 77 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Classified in Business-type Activities on the Government-wide Financial Statements: General Obligation Bonds Bonds Outstanding (in thousands of dollars) 1993 Refunding Bonds due in annual installments of $1,010,000 to $8,150,000 through July 1, 2009; interest at 4.0 percent to 5.5 percent. $28,399,993 of these bonds are recorded in and paid out of the Water Fund. Of the total outstanding at June 30, 2004, $5,499,577 bonds are capital appreciation bonds maturing in 2004 and 2005, of which $3,572,813 are included in the amount paid out of the Water Fund. The original issue amount for the 1993 Refunding Bonds was $45,015,000. $ 1993A Refunding Bonds due in annual installments of $475,000 to $5,560,000 through July 1, 2011; interest at 3.65 percent to 5.1 percent. $1,315,000 of these bonds are recorded in and paid out of the Water Fund. The original issue amount for the 1993A Refunding Bonds was $24,265,000. Total General Obligation Bonds Outstanding 9,336 1,315 $ 10,651 $ - Water and Sewer Revenue Bonds 1989 Water and Sewer Revenue Serial Bonds (Series B issued 1992) due in annual installments of $165,000 to $410,000 through July 1, 2012; interest at 5.0 percent to 7.5 percent. On March 30, 2004, $2,660,000 due 2005 through 2012 were refunded. Original issue amount, $5,000,000. 1989 Water and Sewer Revenue Bonds (Series C issued 1994) due in annual installments of $125,000 to $240,000 through July 1, 2014; interest at 5.75 percent to 8.25 percent. $3,005,000 of these bonds due 2006 through 2014 were refunded on March 1, 1996. On March 30, 2004, $240,000 due 2005 were refunded. Original issue amount, $5,000,000. - 1996 Water and Sewer Revenue Refunding Serial Bonds (issued March 1, 1996) due in annual installments of $325,000 to $1,000,000 beginning July 1, 1997 through July 1, 2014; interest at 3.5 percent to 5.625 percent. Original issue amount, $9,815,000. 6,175 1989 Water and Sewer Revenue Bonds (Series D issued November 1, 1997) due in annual installments of $425,000 to $1,375,000 through July 1, 2022; interest at 4.75 percent to 7.25 percent. On March 30, 2004, $6,775,000 due 2009 through 2016 were refunded. Original issue amount $20,000,000. 9,775 1989 Water and Sewer Revenue Bonds (Series E issued December 2, 1998) due in annual installments of $1,015,000 to $4,615,000 through July 1, 2023; interest at 4.5 percent to 7.0 percent. On March 30, 2004, $9,210,000 due 2009 through 2013 were refunded. Original issue amount $50,000,000. 33,535 2004 Water and Sewer Revenue Refunding Bonds (Series 2004 issued March 30, 2004) due in annual installments of $80,000 to $3,175,000 through July 1, 2016 ; interest at 2 percent to 5 percent. $2,907,520 of these bonds are recorded in and paid out of the Water Enterprise Fund, and $15,972,480 are recorded in and paid out of the Sewer Enterprise Fund. Original issue amount $18,880,000. 18,880 Total Water and Sewer Revenue Bonds Outstanding 78 $ 68,365 City of Scottsdale, Arizona Table of Contents $ 1,740 2001 Municipal Property Corporation Scottswater Excise Tax Revenue Serial Bonds (issued October 10, 2001) due in annual installments of $1,160,000 to $1,835,000 through July 1, 2008; interest at 3.5 percent to 5 percent. These bonds are recorded in and paid out of the Water Enterprise Fund. Original issue amount, $10,500,000. 6,625 2004 Municipal Property Corporation Excise Tax Revenue Bonds (Series 2004 issued May 13, 2004) due in annual installments of $2,190,000 to $5,435,000 through July 1, 2024; interest at 3.25 percent to 5.25 percent. $55,000,000 of these bonds are recorded in and paid out of the Water Enterprise Fund, and $20,000,000 are recorded in and paid out of the Sewer Enterprise Fund. Original issue amount $75,000,000. 75,000 Total Municipal Property Corporation Bonds Outstanding $ 83,365 Total Bonds Payable Recorded in Business-type Activities $ 162,381 Total Long-term Portion of Bonds Payable $ 704,989 Notes to Financial Statements 1995 Municipal Property Corporation Transfer Station Excise Tax Revenue Serial Bonds (issued November 1, 1995) due in annual installments of $160,000 to $330,000 through July 1, 2010; interest at 4.75 percent to 7.25 percent. These bonds are recorded in and paid out of the Solid Waste Enterprise Fund. Original issue amount, $3,500,000. For the Fiscal Year Ended June 30, 2004 Municipal Property Corporation Bonds Statutory Debt Limitation Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt issued for water, sewer, light, parks, and open space purposes may not exceed 20 percent of a city’s net secondary assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of a city’s net secondary assessed valuation. Accretion on capital appreciation bonds, which is included for GAAP purposes as outstanding debt, is excluded for this calculation. General obligation bonds of community facilities districts also are not subject to or included in this calculation. The following summarizes the City of Scottsdale’s legal general obligation bonded debt borrowing capacity at June 30, 2004 (in thousands of dollars): General Obligation Bonds Issued to Provide Water, Sewer, Light, $ 795,104 20% Constitutional Limit General Obligation Bonds Issued for All Other Purposes 6% Constitutional Limit $ 238,531 Less General Obligation 20% Bonds Outstanding (319,765) Less General Obligation 6% Bonds Outstanding 475,339 Available 6% Limitation Borrowing Capacity Available 20% Limitation Borrowing Capacity City of Scottsdale, Arizona $ (74,984) $ 163,547 79 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Arbitrage Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after August 31, 1986, is subject to arbitrage rebate requirements. The requirements stipulate, in general, that the earnings from the investment of tax-exempt bond proceeds, which exceed related interest expenditures on the bonds, must be remitted to the Federal government on every fifth anniversary of each bond issue. The City used an independent consultant to evaluate the City’s outstanding tax-exempt debt for arbitrage liability and determined that there is no arbitrage liability due as of June 30, 2004. Advance Refundings and Defeasances During the year ended June 20, 2004, the City issued three series of refunding bonds. The City issued $16,265,000 of General Obligation Refunding Bonds, Series 2003, (advance refunding) dated September 24, 2003, with an average interest rate of 3.8%, to refund $16,260,000 of Series 1993 Series D and 1993A General Obligation Bonds with an average interest rate of 4.77%. The City will reduce its total debt service payments over the next 10 years by approximately $1,082,145, and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $920,151. The City issued $22,925,000 of Scottsdale Preserve Authority Refunding Bonds, Series 2004, (advance refunding) dated March 30, 2004, with an average interest rate of 4.85%, to refund $22,770,000 of Series 1998 Excise Tax Revenue Bonds with an average interest rate of 5.13%. The City refunded the bonds to reduce its total debt service payments over the next 12 years by approximately $744,293 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $683,174. The City issued $18,880,000 of Water and Sewer Revenue Refunding Bonds, Series 2004, (advance refunding) dated March 30, 2004, with an average interest rate of 4.69%, to refund $18,885,000 of 1989 Series B, C, D, and E Water and Sewer Excise Tax Revenue Bonds with an average interest rate of 4.37%. The City refunded the bonds to reduce its total debt service payments over the next 12 years by approximately $843,029 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $821,398. The proceeds from the issuance of the bonds were used to purchase U.S. government securities that were placed in an irrevocable trust with an escrow agent to provide debt service payments on the bonds being refunded. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the governmental activities column of the City’s financial statements. During the year ended June 20, 2004, the City defeased the following debt: On October 23, 2003, the City placed $32,310,969 with an escrow agent to defease the entire outstanding amount of $29,310,000 of the MPC Excise Tax Revenue Forward Delivery Refunding Bonds, Series 2002 having an average interest rate of 5.5%. The City defeased the bonds to reduce its total debt service payments over the next 10 years by $39,276,825. On April 15, 2004, the City placed $7,694,036 with an escrow agent to defease $7,000,000 of General Obligation Bonds, Series 2001 and 2002 having an average interest rate of 5.15%. The City defeased the bonds to reduce its total debt service payments over the next 14 years by $7,615,913. On May 26, 2004, the City placed $2,506,780 with an escrow agent to defease the entire outstanding amount of $2,270,000 of the MPC Taxable Excise Tax Revenue Bonds, Series 1995 having an average interest rate of 8%. The City defeased the bonds to reduce its total debt service payments over the next 11 years by $2,551,220. On June 15, 2004, the City placed $5,937,862 with an escrow agent to defease $5,505,000 of General Obligation Bonds, Series 1993 Refunding and 2002 having an average interest rate of 5.2%. The City defeased the bonds to reduce its total debt service payments over the next 7 years by $7,169,178. Costs in the amount of $3,964,000 related to the defeasances were considered a special item for the governmental activities. In prior years, the City refinanced other bond issues through the issuance of refunding bonds. The proceeds from the refunding bonds have been deposited in irrevocable trusts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future redemption or payment of principal and interest of the issues refunded. 80 City of Scottsdale, Arizona Table of Contents Refunded in Year Ended June 30, 2004 (in thousands of dollars) 1993 GO Refunding Bonds 2001 GO Refunding Bonds 2002 GO Bonds 2002 GO Refunding Bonds 1998 Scottsdale Preserve Authority Excise Tax Revenue Bonds 1995 MPC Taxable Excise Tax Bonds 2002 MPC Refund Excise Tax Bonds 1997 Water and Sewer Revenue Bonds, Series D 1998 Water and Sewer Revenue Bonds, Series E $ 2,505 5,490 3,000 1,510 22,770 2,150 27,140 6,775 9,210 $ 80,550 $ 18,305 8,180 15,525 32,375 4,125 3,920 16,690 99,120 Notes to Financial Statements The tables below reflect refunded debt outstanding at June 30, 2004, and net of any amounts to be paid or retired by the trustee on July 1, 2004 (in thousands of dollars). For the Fiscal Year Ended June 30, 2004 The assets, liabilities, and financial transactions of all of these trust accounts and the liability for refunded (defeased) bonds are not reflected in the financial statements of the City. Refunded in Prior Years (in thousands of dollars) 1997 General Obligation Bonds 1998 General Obligation Bonds 1999A General Obligation Bonds 1999 General Obligation Bonds 1999 Preservation General Obligation Bonds 2001 Preservation General Obligation Bonds 1997 Scottsdale Preserve Authority Excise Tax Revenue Bonds $ City of Scottsdale, Arizona 81 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Contracts Payable The City of Scottsdale has entered into various purchase contracts related to economic development, acquisition of water system facilities, acquisition of recreational facilities and patents. The contract for the acquisition of water system facilities is payable only from the operating revenue of the water and sewer utility system. The following is a summary of debt service to maturity for all long-term contracts payable at June 30, 2004. Classified in Governmental activities on the government-wide financial statements: Contracts Payable (in thousands of dollars) Contract payable to the U.S. Army Corps of Engineers for the construction of flood control and recreation facilities; due in annual installments through 2032; interest at 5.1 percent. 3,241 Contract payable for the construction of public infrastructure relating to completion of The Dial Corporation new corporate headquarters; due in annual installments beginning September 1998 through September 2007; non-interest bearing. 230 Contract payable for the maintenance of a federal patent; due in three year installments beginning January 1, 2001 through January 1, 2009; non-interest bearing. 5 Contract payable for the oversight and management of the Tournament Players Club Recreational Land Use Agreement; due in annual installments beginning March 1999 through June 2035; non-interest bearing. 1,705 Contract payable for the oversight and management of the Westworld Cost-share and Land Use Agreement; due in annual installments beginning December 2000 through December 2032; non-interest bearing. 1,595 Contract payables for the undergrounding of 69kv power lines; due in annual installments beginning January 1999 through; interest at 10.0 percent. 101 Contract payable for the purchase of a portion of 2,685 acres of land for the McDowell Sonoran Preserve; due in fifteen annual installments beginning July 1, 1999 through July 1, 2013; interest from 3.75 percent to 6.0 percent. 6,825 Total Contracts Payable Recorded in Governmental Activities 82 $ $ 13,702 City of Scottsdale, Arizona Table of Contents $ $ $ 305,003 10,990 41,955 88,270 11,140 46,355 6,864 (8,327) 502,250 14,557 11,495 528,302 $ Current Maturities, Retirements, and Net Decreases 130,135 22,925 - $ (45,540) (2,515) (37,105) (25,215) (2,385) 4,429 (3,054) 154,435 8,536 162,971 (1,405) (2,552) 2,228 (114,489) (855) (6,993) $ (122,337) Amounts Due Within One Year Ending Balance $ $ 389,598 8,475 4,850 85,980 8,755 44,950 8,741 (9,153) 542,196 13,702 13,038 568,936 $ $ 16,662 2,660 4,330 2,415 Notes to Financial Statements Governmental Activities: Bonds payable: General Obligation Bonds HURF Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Special Assessments Bonds Community Facilities Districts General Obligation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Contracts Payable (as restated) Capital Lease (as restated) Compensated Absences Governmental Activity Long-term Liabilities Beginning Balance Additional Obligations, Interest Accretion and Net Increases For the Fiscal Year Ended June 30, 2004 Changes in Long-Term Liabilities The following is a summary of changes in long-term liabilities reported in the government-wide financial statements for the year ended June 30, 2004 (in thousands of dollars). 1,470 27,537 865 2,086 30,488 Internal Service Funds serve primarily the governmental funds, the long-term liabilities of which are included as part of the governmental activities. For the year ended June 30, 2004, $374,000 of accrued compensated absences is included in the above amount. For the governmental activities, the General Fund, Special Revenue Funds and Capital Projects Funds generally liquidate accrued compensated absences. Business-type Activities: Bonds Payable General Obligation Bonds Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Compensated Absences Business-type Activity Long-term Liabilities City of Scottsdale, Arizona $ $ 14,323 71,230 10,010 188 (241) 95,510 1,345 96,855 $ $ 873 18,880 75,000 6,986 (1,870) 99,869 1,006 100,875 $ $ (4,545) (21,745) (1,645) (557) 292 (28,200) (820) (29,020) $ $ 10,651 68,365 83,365 6,617 (1,819) 167,179 1,531 168,710 $ $ 563 2,630 3,935 7,128 239 7,367 83 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2004. Deferred issuance costs and deferred amounts on refunding are not included. Governmental Activities (in thousands of dollars) General Obligation Bonds Issued To Provide Water, Sewer, Light Parks, and Open Spaces 20% Limitation Fiscal Year Principal 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 2025-2029 Capital Appreciation ** $ Total $ 6,476 $ 7,226 8,315 7,790 10,595 88,465 76,555 76,965 30,300 1,927 Interest General Obligation Bonds Issued For All Other Purposes 6% Limitation Total Principal 17,907 $ 24,383 14,689 21,915 14,315 22,630 13,884 21,674 13,487 24,082 56,756 145,221 37,218 113,773 18,642 95,607 1,439 31,739 (1,927) $ 10,185 10,479 11,575 10,165 8,220 11,360 13,000 - $ 74,984 $ - 314,614 $ 186,410 $ 501,024 Interest $ Total General Obligation Bonds Total 3,556 2,951 2,444 1,931 1,492 4,038 881 - Principal $ 13,741 13,430 14,019 12,096 9,712 15,398 13,881 - 17,293 $ 92,277 - - $ - 16,661 17,705 19,890 17,955 18,815 99,825 89,555 76,965 30,300 Interest $ 1,927 21,463 $ 17,640 16,759 15,815 14,979 60,794 38,099 18,642 1,439 Total 38,124 35,345 36,649 33,770 33,794 160,619 127,654 95,607 31,739 (1,927) $ 389,598 $ 203,703 $ 593,301 ** For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. Highway User Revenue Bonds Fiscal Year Principal Interest Municipal Property Corporation Bonds Total Principal Interest Scottsdale Preserve Authority Excise Tax Revenue Bonds Total Principal Interest Total 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 2025-2029 $ 2,660 $ 2,825 2,990 - 459 $ 316 165 - 3,119 3,141 3,155 - $ 4,330 $ 170 170 180 - 251 $ 21 14 7 - 4,581 191 184 187 - $ 2,595 $ 2,815 2,965 3,110 3,260 18,215 23,180 29,840 - 4,430 $ 3,990 3,836 3,672 3,500 15,238 10,311 4,185 - 7,025 6,805 6,801 6,782 6,760 33,453 33,491 34,025 - Total $ 8,475 $ 940 $ 9,415 $ 4,850 $ 293 $ 5,143 $ 85,980 $ 49,162 $ 135,142 Community Facilities Districts General Obligation Bonds Special Assessment Bonds Fiscal Year Principal Interest Total Principal Interest Total 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 2025-2029 $ 2,415 $ 835 835 835 835 3,000 - 349 $ 267 229 191 154 270 - 2,764 1,102 1,064 1,026 989 3,270 - $ 1,470 $ 1,535 1,615 1,685 1,760 10,255 12,160 10,480 3,990 2,193 $ 2,121 2,045 1,978 1,907 8,261 5,579 2,455 406 3,663 3,656 3,660 3,663 3,667 18,516 17,739 12,935 4,396 Total $ 8,755 $ 1,460 $ 10,215 $ 44,950 $ 26,945 $ 71,895 (continued) 84 City of Scottsdale, Arizona Table of Contents 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 2025-2029 2029-2033 2034-2035 Capital Appreciation Total Principal $ Interest 853 $ 879 912 951 1,063 4,430 1,146 1,315 1,476 622 55 13,702 $ Total Total Principal 500 $ 466 432 395 357 1,123 560 391 174 9 - 1,353 1,345 1,344 1,346 1,420 5,553 1,706 1,706 1,650 631 55 $4,407 $ 18,109 $ Interest 30,984 $ 26,764 29,377 24,716 25,733 135,725 126,041 118,600 35,766 622 55 $ Total 29,645 $ 24,821 23,480 22,058 20,897 85,686 54,549 25,673 2,019 9 - 60,629 51,585 52,857 46,774 46,630 221,411 180,590 144,273 37,785 631 55 1,927 (1,927) 556,310 $ 286,910 $ 843,220 Notes to Financial Statements Fiscal Year For the Fiscal Year Ended June 30, 2004 Governmental Activities (concluded) Contracts Payable Business-type Activities (in thousands of dollars) General Obligation Bonds Issued To Provide Water, Sewer, Light Parks, and Open Spaces 20% Limitation Fiscal Year Principal Interest 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 2025-2029 Capital Appreciation ** $ 563 $ 6,515 - Total $ 10,651 $ 3,573 4,352 $ 340 (828) 3,864 $ Total 4,915 6,855 - Total General Obligation Bonds Principal $ 2,745 14,515 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 2025-2029 Capital Appreciation ** Total Principal $ $ Interest $ 4,352 $ 340 - 10,651 $ 3,864 $ 3,573 $ Water and Sewer Revenue Bonds Fiscal Year 563 6,515 - Interest (828) Total 4,915 6,855 2,745 14,515 Municipal Property Corporation Bonds Total 2,630 $ 3,330 3,475 3,635 3,785 16,930 17,385 17,195 - 3,570 $ 3,182 2,997 2,801 2,598 10,445 6,454 2,021 - 6,200 6,512 6,472 6,436 6,383 27,375 23,839 19,216 - 68,365 $ 34,068 $ 102,433 Principal $ $ Interest Total Total 3,935 $ 4,610 4,815 5,030 3,290 16,850 19,990 24,845 - 4,725 $ 3,964 3,757 3,516 3,284 13,947 9,478 3,953 - 8,660 8,574 8,572 8,546 6,574 30,797 29,468 28,798 - 83,365 $ 46,624 $ 129,989 Principal $ $ Interest Total 7,128 $ 14,455 8,290 8,665 7,075 33,780 37,375 42,040 - 12,647 $ 7,486 6,754 6,317 5,882 24,392 15,932 5,974 - 19,775 21,941 15,044 14,982 12,957 58,172 53,307 48,014 - 3,573 162,381 $ (828) 84,556 $ 2,745 246,937 ** For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. City of Scottsdale, Arizona 85 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents V. OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to public, property, and aviation premises liability, selfinsured benefits and workers compensation. Public liability includes public officials’ errors and omissions, automobile and general liability. The City is self-insured for the first $2,000,000 of public liability, the first $100,000 of property coverage, the first $150,000 of health benefits claims and the first $600,000 of workers compensation. Coverage in excess of these respective amounts is provided through the purchase of commercial insurance. During the fiscal year ending June 30, 2004, the previous years’ very severe global insurance market eased allowing the City to purchase an additional $10 million of liability insurance raising the total to $40 million. As for claim expenditures, settlements for each of the past three fiscal years have not exceeded the City’s excess insurance coverage amounts for any claims. The City reports its self-insurance activity in its Self-Insurance Internal Service Fund. Claims liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. The claims liabilities amount recorded in the accompanying financial statements is based on reported pending claims; and an actuarial analysis and projection of the accrued liability amounts necessary to fund the claims. At June 30, 2004, the general liability claims payable totaled $9,204,464 and the self-insured benefits claims payable totaled $5,474,000. The City began to administer all self-insured health and dental plans in January of 2004. Years Ended June 30 (in thousands of dollars) 2004 2003 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 8,839 $ 14,980 (9,141) 8,420 6,065 (5,646) Claims Payable, June 30 $ 14,678 8,839 $ In addition, management has established a policy to retain a cash balance at the 90% confidence level for general risk claims and a corridor and premium stabilization reserve for the self-insured health benefits. At June 30, 2004, the 90% confidence level recommendation is $13,346,473 for all lines of pending claims and the claims incurred, corridor reserve and premium stabilization reserve total $8,473,000 for self-insured benefits. B. Contingent Liabilities The City is a party to several lawsuits incidental to its normal operations. Management, with concurrence of the City Attorney, and outside legal counsel, is of the opinion that settlement of these lawsuits will not have a material effect on the financial position of the City. Therefore, no specific provision has been reflected in the accompanying basic financial statements for these matters. C. Commitments and Subsequent Events On November 19, 2002, the City Council approved a development agreement with John Lund relating to a new automotive complex at the southeast corner of Scottsdale Rd. and Loop 101 Freeway. The terms of this agreement require the City to reimburse Lund for up to $5.5 million in public benefits relating to the project including the acquisition of public lands, reimbursement of the City’s water and sewer development fees, and reimbursement of the City’s stormwater retention payment in lieu. The actual amount will be dependent upon actual costs. However, the reimbursement amount may not exceed $5.5M even if actual costs are higher. The City has also agreed to pay interest costs on Lund’s cost of borrowing on the unpaid balance beginning at 8.5% in the first year and dropping by .5% per year. The reimbursement of the costs listed above, will be 86 City of Scottsdale, Arizona Table of Contents The City has a Service Agreement with the Scottsdale Cultural Council (Council) that provides that the Council will manage the arts and cultural affairs within the Scottsdale community for a ten-year period, automatically renewable for two five-year periods. In return, the City will pay service fees to the Council based on the Service Agreement between the City and the Council. Payments to Scottsdale Cultural Council amounted to $2,780,596 for the year ended June 30, 2004. Annual amounts due in fiscal year 2004/05 will approximate $2,864,014. The City has a Service Agreement with the Scottsdale Convention and Visitors’ Bureau (SCVB) that provides that SCVB will manage the tourism promotion within the Scottsdale community for a ten-year period. In return, the City will pay service fees to SCVB based on the Service Agreement with the City. Payments to SCVB amounted to $5,025,358 for the year ended June 30, 2004. The annual amount due in fiscal year 2004/05 will be $5,276,000. The City has entered into several agreements whereby it will reimburse developers for construction costs of certain public infrastructure improvements. The funding source for the reimbursements will come from Water and Sewer development fees paid over the life of the development. Only amounts paid subsequent to January 13, 1997 are eligible for reimbursement. The City does not become liable under the agreements until the City has accepted the cost, a development fee has been paid and a water meter has been set. The City has limited its liability City of Scottsdale, Arizona The City has entered into several agreements whereby it will reimburse developers a portion of the sales tax collected on their site for a time period up to a maximum dollar amount. The funding source for the reimbursements will come from sales tax collected on the site over the life of the agreement. The City does not become liable under the agreements until the developer has collected and remitted the tax to the City. The City’s maximum contingent liability at June 30, 2004, is $19,467,914. On May 26, 2004, the City Council authorized an Amended and Restated Development Agreement with the Center for Translational Drug Development (TD2). TD2 is a subsidiary company of the Translational Genomics Research Institute (Tgen). The purpose of the new company is to create a new biomedical research facility on the Mayo Clinic Scottsdale Campus. The City’s intent is to help to develop a biomedical research campus in order to provide for the future long-term economic sustainability of the community by attracting a highly desirable industry with high value jobs. Under the terms of the agreement the City will provide $3 million to TD2. The payments are scheduled to be dispersed in two payments, the first at $500,000 and the second for $2.5 million based on space lease and ground lease requirements for the land being developed. Repayment of the amounts from TD2 to the City will begin the 25th month after the date the City pays the first installment of funds to TD2. TD2 is obligated to pay equal monthly installments prior to the end of the term of 84 months. All payments will include interest compounded at 2.5% per year. On July 2, 2004, the City made the first payment of $500,000. Notes to Financial Statements In June 2002, the City Council approved a three-year agreement with Rural/Metro Corporation (Rural/ Metro) whereby Rural/Metro will provide fire protection and related services to the City to June 30, 2005 with the option of two one-year extensions. Payments to Rural/Metro amounted to $17,942,979 for the year ended June 30, 2004. The new contract requires 26 payments during the fiscal year 2004/05 for a total amount of $19,203,955. In November 2003, Rural/Metro informed the City that it would not be extending the contractual relationship further than June 2005. The City plans to form a municipal fire department that will begin operations on July 1, 2005. to the lesser of the cost accepted by the City or the development fees paid. The City’s maximum contingent liability at June 30, 2004, is $6,150,385. For the Fiscal Year Ended June 30, 2004 accomplished by paying Lund quarterly payments equal to 67% of the City’s General Fund sales tax receipts received from the new dealership in that quarter, for a maximum of 10 years. The first payment is not due until the calendar quarter after the calendar quarter in which the first certificate of occupancy is issued. On July 6, 2004, the City entered into a Development Agreement with the Arizona State University Foundation. The agreement will facilitate the development of an area of the City known as Los Arcos. Under the terms of the agreement, the City will acquire the Los Arcos property for $41.5 million, plus closing costs, for a total investment estimated at no more than $42.0 million. The City will also provide demolition, environmental remediation (if any), and grading for the property, and construction or installation of streets, landscaping, utilities, street lighting, parking, public art, plazas, and other identified improvements (collectively referred to as “Infrastructure”). The 87 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents total cost of the infrastructure to be borne by the City shall not exceed $45.0 million. The City’s total expenditure for land acquisition and improvements is thus capped at approximately $87.0 million (exclusive of financing costs), of which approximately $81.4 million is allocable to the leased premises (37 acres out of the total 42 acres). The land was purchased on August 9, 2004. In order to finance the purchase of the land the City sold $40.76 Million in MPC bonds on September 15, 2004. These bonds are for a 30-year term and are interest only for the first 5 years. On July 14, 2004, the City completed a purchase of 383 acres of land for preservation purposes in the northern portion of the City. The purchase totaled $46 million. D. Joint Venture The City participates with the cities of Phoenix, Glendale, Mesa, and Tempe in the multi-city SubRegional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation, and maintenance of jointly used sewage treatment and transportation facilities. The facilities include the 91st Avenue Wastewater Treatment Plant, the Salt River Outfall Sewer, the Southern Avenue Interceptor, and related transportation facilities. The City of Phoenix acts as lead agency and is responsible for the planning, budgeting, construction, operation, and maintenance of the facilities. In addition, the City of Phoenix provides all management, personnel, and financing arrangements and accepts federal grants on behalf of the participants. The JEPA requires each city to pay for its share of the actual cash costs of operating and maintaining the facilities based on relative sewage flows and strengths. The City records its share of SROG’s cash operating expenses, and its equity in the joint venture in the City’s Water and Sewer Utility Fund. For the year ended June 30, 2003, (the latest audited information available from SROG), the City’s net investment in SROG was $48,651,000. SROG’s net cash operating expenses for the year ended June 30, 2003, were $24,443,022, of which the City’s share was $3,601,934, or 14.7 percent. For the year ended June 30, 2004, the City paid $13,949,466 for SROG capital contributions, and $4,688,459 for SROG operating expenses, including adjustments to the operating and replacement reserves. 88 The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2003 for the multi-city Sub-Regional Operating Group (the latest SROG CAFR available) may be obtained from the Arizona Municipal Water Users Association, 4041 N. Central Avenue, Suite 900, Phoenix, AZ 85012. E. Related Organization The Industrial Development Authority (Authority) is a nonprofit corporation established by the City in 1984 to promote industry and develop trade by inducing manufacturing, industrial and commercial enterprises to locate and remain in Scottsdale. The Board of Directors of the Authority is appointed by the City Council; however, the City’s accountability for the authority does not extend beyond making the appointments. F. Retirement and Pension Plans All full-time employees of the City, the Mayor, and City Council are covered by one of three pension plans. All full-time City employees, except public safety personnel, participate in the Arizona State Retirement System, a multiple-employer cost sharing pension plan. All public safety personnel participate in the Public Safety Personnel Retirement System, which is an agent multiple-employer pension plan. The Mayor and Council participate in the Elected Officials’ Retirement Plan, a multiple-employer cost sharing pension plan. All three pension plans are administered by the State of Arizona. Arizona State Retirement System Plan Description All full-time City employees (except public safety personnel) participate in the Arizona State Retirement System (System), a multiple-employer cost sharing defined benefit pension plan. The System was established by the State of Arizona to provide pension benefits for employees of the state and employees of participating political subdivisions and school districts. The System is administered in accordance with Title 38, Chapter 5, of the Arizona Revised Statutes. The System provides for retirement, disability, health insurance premium benefits, and death and survivor benefits. The Arizona State Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to Arizona State Retirement System, P. O. Box 33910, Phoenix, AZ 85067-3910, or by calling 1800-621-3778. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Annual Pension Cost For 2004, the City’s annual pension cost of $1,793,540 for PSPRS was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2003 actuarial valuation using the individual entry-age actuarial cost method. Notes to Financial Statements Public Safety Personnel Retirement System Plan Description All of the City’s public safety personnel (police officers) participate in the Public Safety Personnel Retirement System (PSPRS), an agent multipleemployer defined benefit pension plan. PSPRS was established by Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes to provide pension benefits for public safety employees of certain state and local governments. The PSPRS is jointly administered by the fund manager and 171 local boards. PSPRS provides retirement benefits, as well as death and disability benefits. The Public Safety Personnel Retirement System of the State of Arizona issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Public Safety Personnel Retirement System, 1020 East Missouri Avenue, Phoenix, AZ 85014 or by calling (602) 255-5575. Funding Policy The System is funded through a member contribution of 7.65% of gross payroll, an employer contribution set by an actuarial valuation expressed as a percent of gross payroll, and a distribution of the net earnings of the Fund. The City’s current contribution rate is 7.77% of annual covered payroll, consisting of 11.89% for normal cost and (4.12%) for amortization of unfunded actuarial accrued liability. Contribution rates for both 2003 and 2002 were 5.37%. For the Fiscal Year Ended June 30, 2004 Funding Policy The Arizona Revised Statutes (ARS) provide statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of covered payroll. Employers are required to contribute at the same rate as employees. Although the statutes prescribe the basis of making the actuarial calculation, the Arizona legislature is able to legislate a contribution rate other than the actuarially determined rate. The actuarially determined contribution rate for the years ended June 30, 2004, 2003, and 2002 were 5.70% (5.20% retirement and .50% long-term disability) 2.49% and 2.49%, respectively, for both employers and employees. The City’s contributions to the System for the years ending June 30, 2004, 2003, and 2002 were $4,680,164, $2,034,363, and $2,057,262, respectively, equal to the required contributions for each year. The actuarial assumptions include (a) a rate of return on the investment of present and future assets of 9.0% per year compounded annually, (b) projected salary increases of 6.5% per year compounded annually, attributable to inflation and other acrossthe-board factors, and (c) additional projected salary increases ranging from 6.5% to 9.5% per year, attributable to seniority/merit. Included in (b) is an inflation component of 5.5%. The actuarial value of PSPRS assets was determined using techniques that smooth the market value of assets over a 4-year period. PSPRS’s unfunded accrued liability is being amortized as a level percent of projected payroll on an open basis. The remaining amortization period at July 1, 2004 was 20 years. 89 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents Elected Officials’ Retirement Plan Three-Year Trend Information for PSPRS (in thousands of dollars) Fiscal Year Ending 2002 2003 2004 Annual Pension Cost (APC) $ 1,133 1,159 1,794 Percentage of APC Contributed 100% 100% 100% Net Pension Obligation - Plan Description The City’s Mayor and Council participate in the Elected Officials’ Retirement Plan (EORP), a multiple-employer cost sharing defined benefit pension plan. The EORP was established and is administered by the State of Arizona to provide pension benefits for state and county elected officials, judges, and certain City-elected officials. The fund manager of the PSPRS is also the administrator for the EORP. EORP provides retirement benefits, as well as death and disability benefits. The Elected Officials’ Retirement Plan issues a publicly available financial report that includes financial statements and required supplementary information for EORP. That report may be obtained by writing to Elected Officials’ Retirement Plan, 1020 East Missouri Avenue, Phoenix, Arizona 85014 or by calling (602) 255-5575. Funding Policy Covered employees are required by state statute to contribute an amount equal to 7.00% of gross salary. Incorporated city or town employers are required to contribute an amount sufficient to meet both the normal cost of a level-cost method attributable to the EORP, plus the amount required to amortize the unfunded accrued liability for the employer. Such amount is to be determined each year by actuarial valuation and paid as a level percent of compensation. The contribution requirements for plan members are established and may be amended by the Fund Manager, a five-member board. The City’s rates for fiscal years ended June 30, 2004, 2003, and 2002 were 13.49%, 6.97%, and 6.97%, respectively. The City’s contributions to EORP for the years ending June 30, 2004, 2003, and 2002 were $19,658, $10,036, and $9,749, respectively, equal to the required contributions for each year. G. Other Post-Employment Benefits In addition to the pension benefits described in H (above) the City provides an option of post-retirement health care benefits, in accordance with Chapter 14 of the City Code. At retirement, employees with medical leave accumulated prior to September 6, 1976 are eligible for payment of medical leave at one hundred percent cash value at current rate of pay. Employees hired before July 1, 1982 can elect to receive cash equal to fifty percent of the first five hundred twenty hours of unused medical leave plus twenty-five percent of all hours in excess of five hundred twenty. The conversion rate is the employee’s average hourly base pay rate for the five years immediately preceding retirement. Any retiring employee with 300 or more hours of accumulated medical leave, who chooses to remain on the city medical plan, may elect to apply the value of the sick leave to the employee’s portion of the health care premiums, up until age 65. The value of the accumulated medical leave is calculated at the employee’s hourly rate of pay at the time of retirement. The number of participants during fiscal year 2003/04 was 25. The projected liability, as of June 30, 2004, for medical conversion was $7,079,000. Of this liability, $6,491,000 is considered payable in greater than one year and is not reflected as a current expenditure in the governmental fund statements. The projected liability is based on a January 1, 2004, ‘roll-forward’ actuarial valuation, as adjusted, based on the actuarial projection that for every additional 100 participants, future normal costs increase by an additional 3% per annum. Significant actuarial assumptions of the January 1, 2004 actuarial valuation include a) mortality rates based on the 1983 Group Annuity Mortality Table set back 1 year for males and no set back for females, b) interest compounded 5.0 percent annually, c) salaries increase at a rate of 4.5% to 9.5% based on years of service per annum, d) projected unit credit cost method based on participant data as of January 1, 2004. 90 City of Scottsdale, Arizona Table of Contents (in thousands of dollars) Actuarial Valuation June 30 1998 1999 2000 2001 2002 2003 (1) Actuarial Value of Assets $ 61,095 72,177 84,435 93,684 94,784 98,287 City of Scottsdale, Arizona (2) Entry Age Actuarial Accrued Liability (AAL) $ 51,615 57,828 65,021 73,216 80,997 91,841 (3) Percent Funded (1)/(2) 118.4% 124.8% 129.9% 128.0% 117.0% 107.0% (4) (5) Unfunded Annual AAL Covered (2) - (1) Payroll $ (9,480) $ 15,284 (14,349) 16,187 (19,414) 18,547 (20,468) 20,406 (13,787) 20,930 (6,446) 21,996 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) - Notes to Financial Statements Public Safety Personnel Retirement System Schedule of Funding Progress For the Fiscal Year Ended June 30, 2004 Required Supplementary Information 91 For the Fiscal Year Ended June 30, 2004 Notes to Financial Statements Table of Contents 92 City of Scottsdale, Arizona Table of Contents Nonmajor Governmental Funds SPECIAL REVENUE FUNDS Special Revenue Funds are established to finance particular activities and are created out of receipts of specific taxes or other earmarked revenue. Such funds are authorized by statutory or charter provisions to pay for certain activities with some form of continuing revenue. Highway User Fuel Tax Fund This fund receives and expends the City’s allocation of the Arizona Highway User Revenue tax and other transportation related revenue. The amount available to each city is allocated on a population basis, which is determined by the latest federal census. These monies must be used for street construction, reconstruction, maintenance or transit. Community Development Block Grant Fund This fund receives and expends the City’s Community Development Block Grant revenues. The amount of the grant is awarded annually by the U.S. Department of Housing and Urban Development (HUD) upon application for funding by the City. Community Development Block Grant revenues may be used only for those projects approved in the grant budget and are subject to agency expenditure guidelines. Home Fund This fund receives and expends monies from the Maricopa County Home Consortium. Expenditures are made to provide affordable housing, expand the capacity of nonprofit housing providers, strengthen the ability of local governments to provide housing and leverage private-sector participation in housing. Grants Fund This fund receives and expends the City’s grant revenues. The amount of grants received is generally based upon application to granting agencies by the City and upon availability of funding by the grantors. Grant revenues may be used only for the stated purpose in the approved grant agreement and are subject to grantor expenditure guidelines. City of Scottsdale, Arizona Section 8 Fund This fund receives and expends the City’s Section 8 Housing revenues. Assistance contracts are awarded by the U.S. Department of Housing and Urban Development (HUD) upon application by the City, and covers a five year period. Budgets are approved annually by HUD. Section 8 revenues may be used only for assistance approved by HUD and are subject to agency expenditure guidelines. Preserve Privilege Tax Fund This fund receives a 0.2 percent Preservation Privilege (Sales) Tax revenue approved by the voters to purchase property in the McDowell Sonoran Preserve. Revenues are transferred to Capital Projects Funds for land purchase or are used for debt service payments for land contracts. Transportation Privilege Tax Fund This fund receives a 0.2 percent Transportation Privilege (Sales) Tax approved by the voters for transportation purposes. Revenues are transferred to Capital Projects to fund transportation related improvements. Special Programs Fund This fund receives monies from a variety of sources. The monies are required to be expended for specific purposes related to the source of the revenue. DEBT SERVICE FUNDS These funds record the accumulation of resources for, and the payment of, long-term debt principal and interest not serviced by the proprietary funds. Municipal Property Corporation Fund This fund accounts for the principal and interest requirements of the City’s Municipal Property Corporation (MPC) bonds. Financing is provided primarily by transaction privilege tax. Special Assessments Fund This fund accounts for the principal and interest requirements of special assessment bonds. Financing is provided by special assessment levies against the benefited property holders. 93 Table of Contents Community Facilities Districts Funds: Scottsdale Mountain Community Facilities District Fund McDowell Mountain Community Facilities District Fund DC Ranch Community Facilities District Fund Preserve Privilege Tax Fund Accounts for the May 23, 1995, voter-approved 0.2 percent Preserve Privilege (Sales) Tax and the expenditure of proceeds from the sale of 1999 voter-approved general obligation bonds dedicated to acquisition of land within the McDowell Sonoran Preserve. Via Linda Road Community Facilities District Fund These funds account for the principal and interest of general obligation bonds issued by community facilities districts. Although these bonds are not obligations of the City, generally accepted accounting principles indicate that the bonds should be disclosed herein. Scottsdale Preserve Authority Fund This fund accounts for the principal and interest requirements of excise tax revenue bonds issued by the Scottsdale Preserve Authority. Financing is provided by a 0.2 percent Preservation Privilege (Sales) Tax. Transportation Privilege Tax Fund Accounts for the authorized 0.2 percent Transportation Privilege (Sales) Tax dedicated to transportation capital improvements. Voters approved the tax on November 7, 1989. Community Facilities Districts Funds: McDowell Mountain Community Facilities District Fund DC Ranch Community Facilities District Fund Accounts for the proceeds issued by community facilities districts to acquire and improve public infrastructure in specified areas. CAPITAL PROJECTS FUNDS Capital Projects Funds account for the resources used to acquire, construct and improve major capital assets, other than those financed by proprietary funds. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements regarding the use of the resources are fully satisfied. General Obligation Bond Fund Accounts for the proceeds of the sale of 1989, 1992 and 2000 voter-approved general obligation bonds that are used for authorized capital improvements. Municipal Property Corporation Bond Fund Accounts for the proceeds of Municipal Property Corporation bonds issued for acquisition or construction of capital improvements. 94 City of Scottsdale, Arizona Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2004 (in thousands of dollars) Special Revenue Funds ASSETS Cash and Investments Cash with Fiscal Agent Receivables Interest Privilege Tax Property Tax Highway User Tax Intergovernmental Grants Special Assessments Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue: Property Tax Special Assessments Intergovernmental Advances From Other Funds Guaranty and Other Deposits Other Total Liabilities $ $ $ 18,782 2,810 62 3,028 1,213 1,393 648 34 27,970 840 401 298 296 2,515 Debt Service Funds $ $ $ 1,276 16,066 200 7,932 937 26,411 11 3,212 9,375 Total Nonmajor Governmental Funds Capital Projects Funds $ $ $ 132,174 6,869 300 3,900 175 143,418 5,105 32 16 - $ $ $ 152,232 25,745 362 3,028 200 1,213 5,293 823 7,932 971 197,799 5,956 433 314 3,508 11,890 1,462 22 14 5,848 128 7,932 80 19 20,757 2,204 489 7,846 128 7,932 1,542 2,204 511 33 34,451 Fund Balances Reserved for: Debt Service Unreserved, undesignated 22,122 5,654 - 135,572 5,654 157,694 Total Fund Balances 22,122 5,654 135,572 163,348 Total Liabilities and Fund Balances City of Scottsdale, Arizona $ 27,970 $ 26,411 $ 143,418 $ 197,799 95 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) Special Revenue Funds REVENUES Taxes - Local: Property Transaction Privilege Taxes - Intergovernmental: Highway User Tax Local Transportation Assistance Fund Charges for Current Services: Building and Related Permits Recreation Fees Fines, Fees and Forfeitures: Court Fines Court Enhancement Special Assessments Property Rental Interest Earnings (Loss) Intergovernmental: Federal Grants State Grants Miscellaneous Developer Contributions Contributions and Donations Reimbursements From Outside Sources Other Total Revenues $ Debt Service Funds 33,609 $ Total Nonmajor Governmental Funds Capital Projects Funds 4,387 - $ - $ 4,387 33,609 14,034 1,136 - - 14,034 1,136 23 852 - - 23 852 11 668 72 738 2,558 88 46 8,474 443 387 466 107 37 61,057 3 7,082 (137) 1,536 107 56 934 76 2,572 11 668 2,558 160 647 10,010 443 390 107 522 1,041 113 70,711 (continued) 96 City of Scottsdale, Arizona Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) Special Revenue Funds EXPENDITURES Current: General Government Police Transportation Community Services Fire Municipal Services Human Resources Planning and Development Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures Debt Service Funds Total Nonmajor Governmental Funds Capital Projects Funds 278 703 9,399 8,911 16 8,275 1 19 321 - - 599 703 9,399 8,911 16 8,275 1 19 3,120 944 2,797 34,463 11,800 7,262 297 19,680 101 53,194 53,295 14,920 8,206 398 55,991 107,438 Excess (Deficiency) of Revenues Over Expenditures 26,594 (12,598) (50,723) (36,727) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Refunding Bonds Issued Long-term Capital-related Debt Issued Premium on Bonds Issued Premium on refunding debt Payment to Bond Refunding Escrow Agent Proceeds from Capital Lease Sale of Capital Assets Total Other Financing Sources and (Uses) 8,274 (37,299) (29,025) 48,088 22,925 2,846 (60,271) 29,266 (34,555) 113,400 108,111 85,628 (71,854) 22,925 113,400 2,846 (60,271) 92,674 990 57,388 55,947 4,664 78,184 107,401 Net Change in Fund Balances (2,431) Fund Balances - Beginning Fund Balances - Ending City of Scottsdale, Arizona 13,588 24,553 $ 22,122 $ 5,654 $ 135,572 $ 163,348 97 Table of Contents 98 Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2004 (in thousands of dollars) Highway User Fuel Tax ASSETS Cash and Investments Cash with Fiscal Agent Receivables: Interest Privilege Tax Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue: Intergovernmental Guaranty and Other Deposits Other Total Liabilities $ $ $ City of Scottsdale, Arizona Fund Balances Unreserved, Undesignated Total Fund Balances (Deficit) Total Liabilities and Fund Balances $ 2 2,810 1,213 4,025 524 333 296 2,515 Community Development Block Grant $ $ $ HOME 281 281 150 15 116 - $ Grants - $ 2 $ 2 $ $ 2 - $ Section 8 347 170 7 524 37 9 - 22 3,690 281 2 76 122 335 335 - - 402 402 4,025 $ 281 $ 2 $ Preserve Privilege Tax 524 $ $ $ 195 1 196 20 182 - $ $ $ 202 (6) (6) $ 196 $ Transportation Privilege Tax 14,622 44 1,532 16,198 - $ $ $ Special Programs 7 1,496 1,503 - $ $ $ Total 3,811 11 1,393 26 5,241 129 22 - $ $ $ 18,782 2,810 62 3,028 1,213 1,393 648 34 27,970 840 401 298 296 2,515 - - 1,386 14 1,551 1,462 22 14 5,848 16,198 16,198 1,503 1,503 3,690 3,690 22,122 22,122 16,198 $ 1,503 $ 5,241 $ 27,970 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances City of Scottsdale, Arizona Nonmajor Special Revenue Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) Highway User Fuel Tax REVENUES Taxes - Local: Transaction Privilege Taxes - Intergovernmental: Highway User Tax Local Transportation Assistance Fund Charges for Current Services: Building and Related Permits Recreation Fees Fines, Fees and Forfeitures: Court Fines Court Enhancement Fee Property Rental Interest Earnings (Loss) Intergovernmental: Federal Grants State Grants Miscellaneous Contributions and Donations Reimbursements From Outside Sources Other Total Revenues $ EXPENDITURES Current: General Government Police Transportation Community Services Fire Municipal Services Human Resources Planning and Development Debt Service: Principal Interest and Fiscal Charges Capital Improvements Total Expenditures Community Development Block Grant - $ HOME - $ Grants - $ Preserve Privilege Tax Section 8 - $ - $ Transportation Privilege Tax 16,981 $ 33,609 - - - - - 14,034 1,136 - - - - - - - 23 852 23 852 - - - 1 4 321 (4) 11 668 72 416 11 668 72 738 173 282 107 9 15,741 1,342 1,342 607 607 1,025 123 8 32 1,189 5,327 3 5,334 17,302 16,624 38 379 434 25 2,918 8,474 443 387 466 107 37 61,057 9,399 8,275 - 1,344 - 607 - 36 500 65 16 - 5,298 - 1 - - 241 203 1,597 1 19 278 703 9,399 8,911 16 8,275 1 19 2,515 592 2,559 23,340 1,344 607 130 747 5,298 605 352 958 - 108 2,169 3,120 944 2,797 34,463 36 16,344 16,624 749 26,594 (16,376) (16,376) 192 (957) (765) 8,274 (37,299) (29,025) (16) (2,431) - 442 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) 8,007 (73) 7,934 - - 75 (629) (554) - (19,264) (19,264) 335 (2) - (112) 36 (2,920) 2 - 514 (42) 19,118 - 99 $ - - (2) Fund Balances - Ending $ - (7,599) Fund Balances - Beginning 16,628 Total 14,034 1,136 Excess (Deficiency) of Revenues Over Expenditures Net Change in Fund Balances $ Special Programs 335 $ - $ - $ 402 $ (6) $ 16,198 248 1,255 $ 1,503 3,706 $ 3,690 24,553 $ 22,122 Table of Contents Highway User Fuel Tax - Special Revenue Fund 100 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Variance Between Final Budget and Actual Amounts Budgetary Basis Budgeted Amounts Original REVENUES Taxes - Intergovernmental: Highway User Tax Local Transportation Assistance Fund Intergovernmental: Federal Grants State Grants Reimbursement From Outside Sources Other Total Revenues $ EXPENDITURES Current: Transportation Municipal Services Debt Service: Principal Interest and Fiscal Charges Capital Improvements Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning City of Scottsdale, Arizona Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 13,512 1,146 $ 13,512 1,146 $ Budget to GAAP Differences 14,034 1,136 $ - $ 14,034 1,136 $ 522 (10) 14,658 14,658 15,170 173 282 107 9 571 173 282 107 9 15,741 512 10,143 8,159 10,239 8,199 9,396 8,275 3 - 9,399 8,275 843 (76) 2,515 592 2,559 23,968 2,515 592 2,559 24,104 2,515 592 2,559 23,337 3 2,515 592 2,559 23,340 (9,310) (9,446) (8,167) 568 (7,599) 1,279 9,384 (74) 9,310 9,520 (74) 9,446 8,007 (73) 7,934 - 8,007 (73) 7,934 (1,513) 1 (1,512) (233) 568 335 - - - - - - - $ - $ (233) $ 568 $ 455 107 9 571 Explanation of Differences: The City does not budget for certain revenues: Grants Reimbursement From Outside Sources Other The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Compensated Absences Net Increase in Fund Balance - Budget to GAAP Actual Amounts GAAP Basis 3 $ 568 $ 335 767 (233) $ (233) Table of Contents City of Scottsdale, Arizona Preserve Privilege Tax - Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local: Transaction Privilege Interest Earnings Total Revenues $ EXPENDITURES Current: General Government Debt Service: Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 16,118 510 16,628 $ 16,118 510 16,628 $ 16,981 321 17,302 - $ 16,981 321 17,302 $ 863 (189) 674 - - 1 1 - 605 352 957 605 352 957 605 352 957 1 605 352 958 - 15,671 15,671 16,345 (1) 16,344 674 (15,671) (15,671) (15,671) (15,671) (19,264) (19,264) - (19,264) (19,264) (3,593) (3,593) - - (2,919) (1) (2,920) (2,919) - - 19,118 - 19,118 19,118 - $ - $ 16,199 $ 1 $ (1) The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Net (Decrease) in Fund Balance - Budget to GAAP $ Actual Amounts GAAP Basis - Explanation of Differences: Audit Expense Budget to GAAP Differences Variance Between Final Budget and Actual Amounts Budgetary Basis $ (1) $ 16,198 $ 16,199 101 Table of Contents 102 Transportation Privilege Tax - Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local: Transaction Privilege Interest Earnings (Loss) Total Revenues $ EXPENDITURES Current: Transportation Total Expenditures Actual Amounts Budgetary Basis Final 15,522 510 16,032 $ 15,522 510 16,032 $ 16,628 13 16,641 - - - Excess (deficiency) of revenues over expenditures 16,032 16,032 16,641 OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and Uses (16,032) (16,032) (16,032) (16,032) (16,376) (16,376) Net Change in Fund Balance Fund Balance - Beginning City of Scottsdale, Arizona Fund Balance - Ending $ - - 265 - - 1,255 - $ - $ 1,520 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ (17) (17) - (17) (17) $ (17) Items recorded as revenues for GAAP purposes: Unrealized Loss on Investments $ (17) Net (Decrease) in Fund Balance - Budget to GAAP $ (17) Explanation of Differences: $ 16,628 (4) 16,624 Variance Between Final Budget and Actual Amounts Budgetary Basis $ 1,106 (497) 609 - - 16,624 609 (16,376) (16,376) (344) (344) 248 265 1,255 1,255 1,503 $ 1,520 Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2004 (in thousands of dollars) Municipal Property Corporation ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles): Property Tax Special Assessments Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue: Property Tax Special Assessments Intergovernmental Other Total Liabilities $ $ $ Fund Balances Reserved for: Debt Service Total Fund Balances Total Liabilities and Fund Balances $ Special Assessments Scottsdale Mountain CFD McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD Scottsdale Preserve Authority Total 100 $ 5,794 1,176 $ 206 - $ 857 - $ 1,987 - $ 2,377 - $ 771 4,074 937 6,831 $ 7,932 9,314 $ 28 885 $ 52 2,039 $ 106 2,483 $ 14 785 $ 4,074 5 $ 269 5,525 6 $ 206 - - $ 108 275 - $ 433 565 - $ 496 470 - $ 89 95 1,611 2,445 $ $ $ 1,276 16,066 200 7,932 937 26,411 11 3,212 9,375 80 5,879 7,932 19 8,163 16 399 31 1,029 74 1,040 7 191 4,056 128 7,932 80 19 20,757 952 952 1,151 1,151 486 486 1,010 1,010 1,443 1,443 594 594 18 18 5,654 5,654 9,314 $ 885 $ 2,039 $ 2,483 $ 785 $ 6,831 $ 4,074 $ 26,411 103 Table of Contents 104 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) Municipal Property Corporation REVENUES Taxes - Local: Property Special Assessments Property Rental Interest Earnings Intergovernmental: Miscellaneous Total Revenues $ EXPENDITURES Current: General Government Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Scottsdale Mountain CFD Special Assessments 88 1 $ 2,558 - $ 1,911 8 $ 184 27 $ - $ 4,387 2,558 88 46 City of Scottsdale, Arizona 3 1,683 1,919 211 - 3 7,082 - 1 16 63 241 - - 321 5,525 687 6,212 2,425 492 2,918 275 219 510 565 867 1,495 470 993 1,704 95 179 274 2,445 3,825 297 6,567 11,800 7,262 297 19,680 112 188 215 (63) (6,567) (12,598) - - - 6,267 2,846 22,925 (25,453) 6,585 48,088 2,846 22,925 (60,271) 13,588 112 188 215 374 822 1,228 OTHER FINANCING SOURCES (USES) Transfers In Premium on Bonds Issued Refunding Bonds Issued Payment to Bond Refunding Escrow Agent Total Other Financing Sources and (Uses) 41,774 (34,818) 6,956 47 47 833 (313) 119 $ 1,674 6 Total 622 (360) Fund Balances - Ending $ Scottsdale Preserve Authority 2,558 (6,123) Fund Balances - Beginning 618 4 Via Linda Road CFD DC Ranch CFD 89 Excess (Deficiency) of Revenues Over Expenditures Net change in Fund Balances $ McDowell Mountain CFD 952 1,464 $ 1,151 $ 486 $ 1,010 $ 1,443 (63) 657 $ 594 $ 18 990 - 4,664 18 $ 5,654 Table of Contents City of Scottsdale, Arizona General Obligation Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ Budgeted Amounts Original REVENUES Taxes - Local: Property Total Revenues $ EXPENDITURES Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Refunding Bonds Issued Premium on Refunding Debt Payment to Bond Refunding Escrow Agent Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Final 25,539 25,539 $ 25,539 25,539 25,286 25,286 - 25,286 25,286 (253) (253) 14,483 20,593 35,076 14,483 20,593 35,076 16,775 14,100 188 31,063 - 16,775 14,100 188 31,063 (2,292) 6,493 (188) 4,013 (9,537) (9,537) (5,777) - (5,777) 3,760 9,537 9,537 9,537 9,537 12,654 16,265 1,583 (30,263) 239 - 12,654 16,265 1,583 (30,263) 239 3,117 16,265 1,583 (30,263) (9,298) - - (5,538) - (5,538) (5,538) - - 9,006 - 9,006 9,006 - $ - $ 3,468 $ - $ 3,468 $ 3,468 105 Table of Contents 106 Municipal Property Corporation Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ Budgeted Amounts Original REVENUES Property Rental Interest Earnings Total Revenues $ EXPENDITURES Debt Service: Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Payment to Bond Refunding Escrow Agent Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final - $ - $ Budget to GAAP Differences 88 1 89 $ - 88 1 89 88 1 89 5,525 2,041 7,566 5,525 2,041 7,566 5,525 687 6,212 - 5,525 687 6,212 1,354 1,354 (7,566) (7,566) (6,123) - (6,123) 1,443 7,566 7,566 7,566 7,566 41,774 (34,818) 6,956 - 41,774 (34,818) 6,956 34,208 (34,818) (610) - - 833 - 833 833 - - 119 - 119 119 - $ - $ 952 $ - $ 952 $ 952 Table of Contents City of Scottsdale, Arizona Special Assessments Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ Budgeted Amounts Original REVENUES Special Assessments Total Revenues $ EXPENDITURES Current: General Government Debt Service: Principal Interest and Fiscal Charges Total Expenditures Actual Amounts Budgetary Basis Final 2,903 2,903 $ 2,903 2,903 $ Budget to GAAP Differences 2,558 2,558 $ - 2,558 2,558 (345) (345) - - 1 - 1 (1) 2,404 499 2,903 2,404 499 2,903 2,425 492 2,918 - 2,425 492 2,918 (21) 7 (15) Excess (Deficiency) of Revenues Over Expenditures - - (360) - (360) (360) OTHER FINANCING SOURCES (USES) Transfers In Total other financing sources and uses - - 47 47 - 47 47 47 47 - - (313) - (313) (313) - - Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ - $ - 1,464 $ 1,151 $ - 1,464 $ 1,151 1,464 $ 1,151 107 Table of Contents 108 Scottsdale Preserve Authority Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ Budgeted Amounts Original REVENUES Total Revenues $ EXPENDITURES Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Proceeds of refunding bonds Premium on refunding debt Payment to bond refunding escrow agent Total other financing sources and uses Net Change in Fund Balance City of Scottsdale, Arizona Fund Balance - Beginning Fund Balance - Ending $ Final - $ - - - - - 2,445 4,419 6,864 2,445 4,419 6,864 2,445 3,825 297 6,567 - 2,445 3,825 297 6,567 594 (297) 297 (6,864) (6,864) (6,567) - (6,567) 297 6,864 6,864 6,864 6,864 6,267 22,925 2,846 (25,453) 6,585 - 6,267 22,925 2,846 (25,453) 6,585 - - 18 - 18 18 - - - - - - - $ - $ 18 $ - $ 18 (597) 22,925 2,846 (25,453) (279) $ 18 Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2004 (in thousands of dollars) General Obilgation Bond ASSETS Cash and Investments Cash with Fiscal Agent Receivables: Interest Intergovernmental Grants Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Advances From Other Funds Guaranty and Other Deposits Total Liabilities $ $ $ Fund Balances Unreserved, Undesignated Total Fund Balances Total Liabilities and Fund Balances Municipal Property Corporation 49,228 111 49,339 - $ $ $ 49,339 49,339 $ 49,339 Preserve Privilege Tax 661 3 664 - $ $ $ 664 664 $ 664 40,366 40,366 213 2,204 2,417 $ $ $ 37,949 37,949 $ 40,366 McDowell Mountain CFD Transportation Privilege Tax Total 41,919 - 95 6,774 186 3,900 175 46,180 - - 4,889 32 489 5,410 46,180 $ 300 3,900 175 143,418 95 $ 6,774 $ - $ 3 16 19 5,105 32 16 2,204 489 7,846 6,755 6,755 135,572 135,572 95 95 $ 95 $ 6,774 $ 132,174 6,869 $ 40,770 40,770 $ DC Ranch CFD $ 143,418 109 Table of Contents 110 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Year Ended June 30, 2004 (in thousands of dollars) General Obilgation Bond REVENUES Interest Earnings (Loss) Intergovernmental Federal Grants Developer Contributions Contributions and Donations Reimbursements from Outside Sources Other Total Revenues $ EXPENDITURES Debt Service Bond Issuance Costs Capital Improvements Total Expenditures 8 (17) 8 (17) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Long-term Capital-related Debt Issued Total Other Financing Sources and (Uses) City of Scottsdale, Arizona Net Change in Fund Balances Fund Balances - Beginning $ Preserve Privilege Tax (17) $ - Excess (Deficiency) of Revenues Over Expenditures Fund Balances - Ending Municipal Property Corporation $ (723) $ 56 (667) 542 - $ Total 53 $ (137) - 53 1,536 107 56 934 76 2,572 - 101 21,194 21,295 26,963 26,963 3 3 5,034 5,034 101 53,194 53,295 8 (21,962) (23,768) (3) (4,981) (50,723) - (100) (100) 1,621 65,400 67,021 27,599 (4,545) 23,054 18,119 (92) 45,059 (714) 31,220 756 (7,110) $ $ DC Ranch CFD 1,536 107 934 76 3,195 46 (29,910) 48,000 18,136 49,339 McDowell Mountain CFD Transportation Privilege Tax 664 $ 37,949 41,484 $ 40,770 $ - 29,266 (34,555) 113,400 108,111 (3) (4,981) 57,388 98 11,736 78,184 95 $ 6,755 $ 135,572 Table of Contents City of Scottsdale, Arizona Water and Sewer Utility Enterprise Fund Schedule of Revenues and Expenses - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Budgeted Amounts Original Revenues Charges for Sales and Services: Water Service Fees Sewer Service Fees Proprietary - Non-Potable Water Fees Groundwater Treatment Plant Investment Income Capital Contributions Gain on Sale of Capital Assets Other $ Total Revenues Expenses Cost of Sales and Services: Water Operations Sewer Operations Debt Service and Reserves Depreciation and Amortization Indirect Costs Transfers Out Total Expenses Change in Net Assets (continued on next page) $ 68,084 25,853 3,897 1,040 2,064 - Final Budget to GAAP Differences 66,539 25,040 3,799 822 3,901 678 100,938 100,938 100,779 67,766 168,957 (159) 31,319 10,920 13,997 6,332 7,434 31,327 10,933 13,997 6,332 7,434 30,855 12,277 12,186 6,332 11,160 196 2 (8,805) 22,730 - 31,051 12,279 3,381 22,730 6,332 11,160 472 (1,344) 1,811 (3,726) 70,002 70,023 73,222 14,123 86,933 (3,199) $ 30,915 $ 27,557 $ $ (2,966) 70,938 (206) - Actual Amounts GAAP Basis 68,084 25,853 3,897 1,040 2,064 - 30,936 $ Actual Amounts Budgetary Basis 53,643 $ $ 66,539 25,040 3,799 822 935 70,938 206 678 Variance Between Final Budget and Actual Amounts Budgetary Basis 82,024 $ $ (1,545) (813) (98) (218) 1,837 678 (3,358) 111 Table of Contents 112 Water and Sewer Utility Enterprise Fund Schedule of Revenues and Expenses - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded as revenues for budget purposes: Loss on Investments Capital Contributions Gain on Sale of Capital Assets Total Revenue Reconciling Items: $ (2,966) 70,938 (206) 67,766 The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis. 198 (8,805) 22,730 14,123 Compensated Absences Debt Service Principal Payments Depreciation and Amortization Expense Total Expenditure Reconciling Items: Net Increase in Net Assets - Budget to GAAP $ 53,643 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Airport Enterprise Fund Schedule of Revenues and Expenses - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ Budgeted Amounts Original Revenues Charges for Sales and Services: Airport Fees Investment Income Capital Contributions Transfers In $ Total Revenues Expenses Cost of Sales and Services: Airport Operations Depreciation Indirect Costs Transfers Out Total Expenses Change in Net Assets $ 2,853 - Final $ 2,853 - 2,936 13 230 (13) 771 - 83 13 230 2,853 2,853 3,179 758 3,937 326 1,335 439 82 1,335 439 82 1,552 439 71 8 623 - 1,560 623 439 71 (217) 11 1,856 1,856 2,062 631 2,693 (206) 997 $ 997 $ 1,117 $ 127 Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded as revenues for budget purposes: Loss on Investments Capital Contributions Total Revenue Reconciling Items: $ (13) 771 758 The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis. 8 623 631 Compensated Absences Depreciation Expense Total Expenditure Reconciling Items: 113 Net increase in Net Assets - Budget to GAAP 2,936 771 230 $ 127 $ 1,244 $ 120 Table of Contents 114 Solid Waste Enterprise Fund Schedule of Revenues and Expenses - Budget and Actual For the Year Ended June 30, 2004 (in thousands of dollars) Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ Budgeted Amounts Original Revenues Charges for Sales and Services: Solid Waste Fees Investment Income Other $ Total Revenues Expenses Cost of Sales and Services: Solid Waste Operations Debt Service and Reserves Depreciation Indirect Costs Transfers Out Total Expenses Change in Net Assets $ 16,178 49 - Final $ 16,178 49 - 16,488 102 21 (64) - 310 53 21 16,227 16,227 16,611 (64) 16,547 384 12,724 345 1,958 36 12,724 345 1,958 36 12,832 345 1,958 36 61 (245) 202 - 12,893 100 202 1,958 36 (108) - 15,063 15,063 15,171 18 15,189 (108) 1,164 $ 1,164 $ 1,440 $ (82) $ (64) (64) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded as revenues for budget purposes: City of Scottsdale, Arizona Loss on Investments Total Revenue Reconciling Items: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis. 61 (245) 202 18 Compensated Absences Debt Service Principal Payments Depreciation Expense Total Expenditure Reconciling Items: Net (Decrease) in Net Assets - Budget to GAAP 16,488 38 21 $ (82) $ 1,358 $ 276 Table of Contents INTERNAL SERVICE FUNDS Internal Services Funds are established to finance and account for services and/or commodities furnished by one department or unit to other departments or units within the City. Fleet Management Fund The Fleet Management Fund is responsible for the maintenance and operations of various automobiles and other equipment of the City. Revenue to this fund is derived from charges to user programs. Self-Insurance Fund The Self-Insurance Fund is responsible for the administration of the City’s self-insurance program. Revenue to this fund is derived from charges to user programs and employee contributions for health and dental coverage. This fund provides coverage of unemployment, self-insured benefits, workmen’s compensation, property, and liability claims. City of Scottsdale, Arizona 115 Table of Contents Combining Statement of Net Assets Internal Service Funds June 30, 2004 (in thousands of dollars) Fleet Management SelfInsurance Total ASSETS Current Assets: Cash and Investments Receivables (net of allowance for uncollectibles) Property tax Interest Miscellaneous Supplies Inventory $ Total Current Assets Noncurrent Assets: Capital Assets: Buildings and Improvements Motor Vehicles Machinery and Equipment Furniture and Fixtures Construction in Progress Less Accumulated Depreciation 11,417 $ 19,729 $ 31,146 42 8 341 18 75 568 - 18 117 576 341 11,808 20,390 32,198 1,846 49,892 438 847 (27,651) 22 (22) 1,846 49,892 438 22 847 (27,673) Total Capital Assets (net of accumulated depreciation) 25,372 - 25,372 Total Noncurrent Assets 25,372 - 25,372 37,180 20,390 57,570 1,234 122 39 - 192 24 13 14,678 1,426 146 52 14,678 1,395 14,907 16,302 248 248 74 74 322 322 1,643 14,981 16,624 25,372 10,165 5,409 25,372 15,574 Total Assets LIABILITIES Current Liabilities: Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences Claims Payable Total Current Liabilities Noncurrent Liabilities: Accrued Compensated Absences Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets 116 $ 35,537 $ 5,409 $ 40,946 City of Scottsdale, Arizona Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Funds For the Year Ended June 30, 2004 (in thousands of dollars) Fleet Management Operating Revenues Charges for Sales and Services: Billings To User Programs Self Insurance Contributions-Employee Other $ Total Operating Revenues Operating Expenses Costs of Sales and Services: Fleet Management Operations Self-Insurance Administration Self-Insurance Claims Self-Insurance Benefits Insurance and Bond Premiums Depreciation Total Operating Expenses Operating Income (Loss) 11,180 152 SelfInsurance $ Total Non-Operating Revenues Income (Loss) Before Contributions and Transfers Capital Contributions Transfers In Transfers Out 24,951 6,920 5,366 1,837 4,342 10,638 1,525 - 6,920 1,837 4,342 10,638 1,525 5,366 12,286 18,342 30,628 (4,723) (5,677) 93 17 676 177 - 676 270 17 110 853 963 (844) (3,870) (4,714) 4,171 46 (522) 750 (11) 4,171 796 (533) (280) 2,851 (3,131) Total Net Assets - Beginning 32,686 8,540 City of Scottsdale, Arizona $ 23,068 1,518 365 13,619 Change in Net Assets Total Net Assets - Ending $ 11,332 (954) Non-Operating Revenues Property Tax Investment Income Gain on Sale of Capital Assets 11,888 1,518 213 Total 35,537 $ 5,409 41,226 $ 40,946 117 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2004 (in thousands of dollars) Cash Flows from Operating Activities: Cash Received from Customers Cash Paid to Suppliers Cash Paid to Employees Other Operating Fleet Management SelfInsurance $ $ Net Cash Provided by Operating Activities 46 (522) Net Cash Provided by (Used) for Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Property and Equipment Sale of Capital Assets Net Cash (Used) for Capital and Related Financing Activities Cash Flows from Investing Activities: Income Received on Investments 12,980 (11,905) (521) 213 $ 767 5,223 Cash Flows from Non-Capital Financing Activities: Property Tax Transfers In Transfers Out 24,160 (15,575) (2,960) 365 5,990 683 750 (11) 683 796 (533) (476) 1,422 (2,034) 107 - (2,034) 107 (1,927) - (1,927) 946 92 159 251 Net Increase (Decrease) in Cash and Cash Equivalents 2,912 2,348 5,260 Cash and Cash Equivalents at Beginning of Year 8,505 17,381 25,886 Cash and Cash Equivalents at End of Year Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided by (Used for) Operating Activities: Depreciation Changes in Assets and Liabilities Sources (Uses) of Cash: Accounts Receivable Supplies Inventory Accounts Payable Accrued Payroll and Benefits Claims Payable $ $ Net Cash Provided by Operating Activities Supplemental Disclosure of Noncash Financing Activities: Additions to Property, Plant, and Equipment Contributions from Other Government Units Loss on Sale of Capital Assets Total Non-Cash Financing Activities 11,417 (954) $ 19,729 $ 31,146 $ (4,723) $ (5,677) - 5,366 5,366 (426) 63 14 5,839 41 708 62 - Total Adjustments 118 11,180 (3,670) (2,439) 152 Total (426) 41 771 76 5,839 5,490 6,177 11,667 $ 5,223 $ 767 $ 5,990 $ 4,171 90 4,261 $ - $ 4,171 90 4,261 $ $ $ City of Scottsdale, Arizona Table of Contents FIDUCIARY FUNDS Private Purpose Trust Funds and Agency Funds administer resources received and held by the City as the trustee or as the agent for others. Use of these funds facilitates the discharge responsibilities placed upon the governmental unit by virtue of law or other similar authority. Handicap Scholarship Private Purpose Trust Fund This fund accounts for monies received and expended for college scholarships for individual with handicaps. Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund This fund accounts for monies received and expended for the redevelopment of Scottsdale Memorial Hospital. Family Self-Sufficiency Agency Fund This fund accounts for monies in escrow for Section 8 Housing Program participants. Retainage Escrow Agency Fund This fund accounts for monies held in escrow for construction contract retainage payable. City of Scottsdale, Arizona 119 Table of Contents 120 Combining Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2004 (in thousands of dollars) Private Purpose Trust Funds Scottsdale Memorial Handicap Scholarship Hospital Redevelopment Private Purpose Private Purpose Trust Fund Trust Fund ASSETS Cash and Cash Equivalents Interest Receivable $ Total Assets LIABILITIES Accounts Payable Designated Escrow Payable Total Liabilities NET ASSETS Held in Trust for Other Purposes $ 6 - $ 368 2 Agency Funds Family Self-Sufficiency Agency Fund Total $ 374 2 $ Retainage Escrow Agency Fund 84 - $ Total 1,513 - $ 1,597 - 6 370 376 84 1,513 1,597 - 6 - 6 - 84 - 1,513 84 1,513 - 6 6 84 1,513 1,597 6 $ 364 $ 370 $ - $ - $ - City of Scottsdale, Arizona Table of Contents Combining Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended June 30, 2004 (in thousands of dollars) Handicap Scholarship Private Purpose Trust Fund ADDITIONS Contributions: Private Donations Investment Earnings: Interest $ Total Additions DEDUCTIONS Scholarships Redevelopment Expenses Total Deductions Change in Net Assets Net Assets - Beginning Net Assets - Ending City of Scottsdale, Arizona $ Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund 2 $ 400 $ Total 402 - 10 10 2 410 412 5 - 741 5 741 5 741 746 (3) (331) (334) 9 6 $ 695 364 $ 704 370 121 Table of Contents 122 Combining Statement of Changes in Assets and Liabilities Fiduciary Funds For the Year Ended June 30, 2004 (in thousands of dollars) Family Self-Sufficiency Balance July 1, 2003 Additions Retainage Escrow Deductions Balance June 30, 2004 Balance July 1, 2003 Additions Deductions Balance June 30, 2004 ASSETS Cash and Investments Total Assets $ 70 $ 57 $ 43 $ 84 $ 464 $ 1,513 $ 464 $ 1,513 $ 70 $ 57 $ 43 $ 84 $ 464 $ 1,513 $ 464 $ 1,513 $ 70 - $ 57 - $ 43 - $ 84 - $ 464 $ 1,513 $ 464 $ 1,513 $ 70 $ 57 $ 43 $ 84 $ 464 $ 1,513 $ 464 $ 1,513 LIABILITIES Accounts Payable Designated Escrow Payable Total Liabilities City of Scottsdale, Arizona Table of Contents OTHER SUPPLEMENTARY INFORMATION Debt Requirements The supplemental debt service schedule provides a comprehensive overview of the City’s total debt. The Schedule of Changes in Long-Term Debt for the current fiscal year presents the City’s debt by debt type without regard to fund classification. Debt issued by community facilities districts is included for full disclosure although such debt is not legally an obligation of the City. City of Scottsdale, Arizona 123 Table of Contents 124 Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2004 (in thousands of dollars) July 1, 2003 GENERAL OBLIGATION BONDS Governmental Fund Type: 1993 Refunding 1989 Series D (1993) 1993A GO Refunding 1997 Series H - Roads/ Strm Sew/ Pima 1997 GO Refunding 1989 Series I (1998) 1999A GO / Pima Road 1999 GO Preservation 2001 GO Preservation 2001 GO Refunding Various Purpose 2001 GO Refunding Preservation 2002 GO Various Purpose 2002 GO Preservation 2002 GO Refunding Various Purpose 2002 GO Refunding Preservation 2003 GO Refunding Various Purpose 2004 GO Various Purpose 2004 GO Preservation 2001 GO Refunding Series Deferred Issuance Premium 2001 GO Series Deferred Amount on Refunding 2002 GO Refunding Series Deferred Issuance Premium 2002 GO Series Deferred Amount on Refunding 2003 GO Series Deferred Amount on Refunding 2003 GO Refunding Series Deferred Issuance Premium 2004 GO Refunding Series Deferred Issuance Premium Subtotal $ Business Type - General Obligation Bonds 1993 Refunding 1993 A GO Refunding Subtotal Total General Obligation Bonds REVENUE BONDS Governmental Fund Type Highway User Revenue Fund Bonds 1993 HURF Refunding Subtotal 17,248 $ 2,905 15,865 2,415 19,850 8,910 6,450 18,400 29,210 21,277 28,293 26,260 40,000 59,820 8,100 1,295 (2,112) 4,128 (4,200) 304,114 13,008 1,315 14,323 Retired 48,000 65,400 1,077 114,477 $ - 2,445 1,180 80 820 950 1,475 985 2,725 1,965 2,905 1,245 16,775 $ Bonds Defeased - $ 16,265 (371) 506 16,400 4,545 4,545 Accretions, Amortizations & Contract Adjustments - 2,505 2,905 13,355 1,490 4,000 3,000 1,510 28,765 $ - June 30, 2004 470 $ (115) 187 (754) 767 59 (80) (51) 483 873 873 Governmental Activities 12,768 $ 2,510 1,235 19,770 8,090 5,500 16,925 28,225 17,062 24,293 21,295 40,000 55,405 8,100 15,020 48,000 65,400 1,180 (1,925) 3,374 (3,433) (312) 426 1,026 389,934 9,336 1,315 10,651 Business Type-Activities 12,768 $ 2,510 1,235 19,770 8,090 5,500 16,925 28,225 17,062 24,293 21,295 40,000 55,405 8,100 15,020 48,000 65,400 1,180 (1,925) 3,374 (3,433) (312) 426 1,026 389,934 - 07/01/09 07/01/13 07/01/11 07/01/16 07/01/14 07/01/18 07/01/19 07/01/24 07/01/24 07/01/24 07/01/24 07/01/24 07/01/24 07/01/19 07/01/19 07/01/13 07/01/25 07/01/25 9,336 1,315 10,651 07/01/06 07/01/06 318,437 $ 114,477 $ 21,320 $ 16,400 $ 28,765 $ 1,356 $ 400,585 $ 389,934 $ 10,651 $ 10,990 10,990 $ - $ 2,515 2,515 $ - $ - $ - $ 8,475 8,475 $ 8,475 8,475 $ - City of Scottsdale, Arizona 2,910 465 6,700 17,100 44,055 (241) 70,989 $ 81,979 $ - 250 225 525 550 1,310 2,860 $ 5,375 18,880 (1,870) 2,061 19,071 $ 19,071 *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). 2,660 240 6,775 9,210 18,885 $ 18,885 44 248 (273) 19 $ 19 6,175 9,775 33,535 18,880 (197) (1,622) 1,788 68,334 $ 76,809 $ 8,475 6,175 9,775 33,535 18,880 (197) (1,622) 1,788 68,334 $ Final Payment Date - $ Business Type - Revenue Bonds 1989 Utility Series B (1992) 1989 Utility Series C (1994) 1996 Utility Revenue Series Refunding 1989 Utility Series D (1998) 1989 Utility Series E (1998) 2004 Utility Revenue Series Refunding 1996 Revenue Series Deferred Amount on Refunding 2004 Revenue Series Deferred Amount on Refunding 2004 Refunding Series Deferred Issuance Premium Subtotal Total Revenue Bonds Issued Refunding Bonds Issued 68,334 07/01/07 07/01/12 07/01/05 07/01/14 07/01/22 07/01/23 07/01/16 Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* (continued here and on following page) For the Year Ended June 30, 2004 (in thousands of dollars) July 1, 2003 MUNICIPAL PROPERTY CORPORATION BONDS Governmental Fund Type: 1993 Refunding 1994 Refunding 1995 MPC Taxable Excise - TPC Land 1996 McCormick/Stillman Park 1998 Telephone, HR\Tech Bldg, Westworld 2002 Refunding 2002 Refunding Series Deferred Issuance Premium 2002 Series Deferred Amount on Refunding Subtotal $ Business Type - Municipal Property Corporation Bonds 1995 Transfer Station 2001 Scottswater 2004 Water/Sewer 2001 Scottswater Deferred Issuance Premium 2004 Water/Sewer Deferred Issuance Premium Subtotal Total Municipal Property Corporation Bonds SCOTTSDALE PRESERVE AUTHORITY BONDS Governmental Fund Type: 1997 Excise Tax Revenue 1998 Excise Tax Revenue 2001 Excise Tax Revenue 2004 Excise Tax Refunding 2001 Excise Tax Revenue Deferred Issuance Premium 2001 Excise Tax Revenue Deferred Amount on Refunding 2004 Excise Tax Revenue Deferred Issuance Premium 2004 Excise Tax Revenue Deferred Amount on Refunding Total Scottsdale Preserve Authority Bonds SPECIAL ASSESSMENT BONDS Governmental Fund Type: Craftsman Court Series 100 Bell Road Series 101 Desert Ranch Water Series 102 Desert Ranch Infrastructure Series 103 Pima Acres Paving & Drainage Series 105 Bell Road II Series 106 Total Special Assessment Bonds Issued 8,120 $ 1,080 2,270 340 835 29,310 1,223 (823) 42,355 1,985 8,025 188 10,198 - $ 75,000 4,925 79,925 $ 52,553 $ 1,160 $ 69,740 17,370 116 (703) 87,683 $ $ Retired $ 79,925 3,950 1,080 340 155 5,525 Refunding Bonds Issued $ Bonds Defeased - 245 1,400 1,645 $ - $ 7,170 $ - $ - $ 565 1,815 65 2,445 $ $ Accretions, Amortizations & Contract Adjustments - 2,270 29,310 31,580 $ - $ 22,925 2,846 (2,683) 23,088 $ Governmental Activities - $ (1,223) 823 (400) 4,170 680 4,850 (37) (247) (284) 1,740 6,625 75,000 151 4,678 88,194 $ (684) $ 93,044 - $ 22,770 22,770 $ - $ (6) 37 (316) 298 13 $ 595 $ 45,155 17,305 22,925 110 (666) 2,530 (2,385) 85,569 $ $ June 30, 2004 31,580 $ Business Type-Activities 4,170 680 4,850 $ $ 4,850 - 07/01/05 07/01/04 07/01/15 07/01/04 07/01/08 07/01/14 1,740 6,625 75,000 151 4,678 88,194 07/01/10 07/01/08 07/01/24 $ 88,194 595 $ 45,155 17,305 22,925 110 (666) 2,530 (2,385) 85,569 $ - 07/01/05 07/01/24 07/01/22 07/01/16 01/01/04 01/01/05 01/01/04 01/01/05 01/01/09 01/01/13 $ 15 7 38 3,070 510 7,500 $ - $ 15 2 38 1,495 85 750 $ - $ - $ - $ 5 1,575 425 6,750 $ 5 1,575 425 6,750 $ - $ 11,140 $ - $ 2,385 $ - $ - $ - $ 8,755 $ 8,755 $ - *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). Final Payment Date 125 Table of Contents 126 Schedule of Changes in Long-Term Debt* (continued) For the Year Ended June 30, 2004 (in thousands of dollars) July 1, 2003 COMMUNITY FACILITIES DISTRICT BONDS Governmental Fund Type: McDowell Mtn Ranch Refunding Series 1999 DC Ranch Series 1998 Via Linda Road Series 1999 DC Ranch Series 1999 Scottsdale Mountain Refunding Series 2002 DC Ranch Series 2002 Scottsdale Mountain 2002 Deferred Issuance Premium Scottsdale Mountain 2002 Deferred Amount on Refunding DC Ranch 2002 Deferred Issuance Premium Total Community Facilities District Bonds Total Bonds CONTRACTS PAYABLE Governmental Fund Type: US Corps of Engineers Dial Corporation US Patent Office McDowell Sonoran Preserve Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Underground Improvement District Series 104 Anchor National Life/Portales (as restated) Promenade (as restated) Total Contracts $ Issued 17,970 $ 4,750 3,225 3,085 5,160 12,165 36 (489) 66 45,968 Refunding Bonds Issued Retired Bonds Defeased - $ 565 95 275 470 1,405 $ - $ 597,760 $ 194,402 $ 40,100 $ 58,559 $ 3,304 268 5 7,430 1,650 1,760 140 14,557 $ $ $ 62 38 605 55 55 40 855 $ $ - $ - $ Accretions, Amortizations & Contract Adjustments CAPITAL LEASES Governmental Fund Type: Nordstrom Garage Lease (as restated) $ - $ - $ - $ - TOTAL BONDS AND CONTRACTS $ 612,317 $ 194,402 $ 40,955 $ 58,559 $ June 30, 2004 $ $ 102,000 $ 754 $ 709,375 $ 542,196 $ 167,179 $ $ - $ $ - $ 3,242 230 5 6,825 1,595 1,705 100 13,702 $ $ 3,242 230 5 6,825 1,595 1,705 100 13,702 - $ - $ - $ - $ 754 $ 723,077 $ 555,898 $ 167,179 $ $ - $ 102,000 17,405 $ 4,750 3,130 3,085 4,885 11,695 32 (432) 63 44,613 $ Compensated Absences City of Scottsdale, Arizona Total Long-Term Debt *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). Business Type-Activities - - - $ (4) 57 (3) 50 Governmental Activities 17,405 $ 4,750 3,130 3,085 4,885 11,695 32 (432) 63 44,613 $ 13,038 $ 568,936 - 1,531 $ 168,710 Final Payment Date 07/15/22 07/15/23 07/15/23 07/15/24 07/15/18 07/15/27 2032 2008 2009 2013 2032 2035 01/01/13 Table of Contents City of Scottsdale, Arizona Government-wide Expenses by Function Table I Last Three Fiscal Years (in thousands of dollars) Fiscal Year 2002 2003 2004 Fiscal Year 2002 2003 2004 General Financial Community Information Government Police Services Transportation Services Systems $ 26,982 $ 52,719 $ 7,464 $ 72,159 $ 53,325 $ 10,821 $ 23,926 54,469 7,883 71,837 52,222 11,901 23,839 60,027 7,655 78,373 55,087 11,135 Citizen & Municipal Neighborhood Fire Services Resources 16,494 $ 11,482 $ 2,484 18,127 12,290 2,433 19,570 13,024 2,812 Planning and Interest on Economic Community Streetlight Long-Term Solid Waste Vitality Development Districts Debt Water Utility Sewer Utility Airport Utility - $ - $ 18,269 $ 1,044 $ 28,063 $ 51,125 $ 24,007 $ 2,648 $ 14,071 $ 3,601 6,421 11,908 1,099 27,786 50,406 22,862 2,476 13,783 3,462 6,130 11,697 1,024 28,028 51,095 24,678 2,622 15,153 Human Resources $ Source: City of Scottsdale Financial Services Department Note: The City implemented GASB 34 for the fiscal year ended June 30, 2002. Prior statements have not been restated to comply with the new requirements. Amounts represent the results of operations for the primary government only. These amounts are presented on the accrual basis of accounting and include depreciation expense. Total 393,157 395,430 415,411 127 Table of Contents 128 Government-wide Revenues Table II Last Three Fiscal Years (in thousands of dollars) Fiscal Year 2002 2003 2004 Program Revenues Operating Grants and Charges for Contributions Services $ 146,520 $ 9,626 146,117 21,219 157,199 24,508 Capital Grants and Contributions $ 116,145 98,856 177,503 $ Taxes 167,105 167,153 183,039 General Revenues Unrestricted Investment Earnings Intergovernmental $ 57,492 $ 17,305 46,971 5,601 45,163 3,628 Miscellaneous $ 6,321 5,515 7,646 Total $ 520,514 491,432 598,686 Source: City of Scottsdale Financial Services Department Note: The City implemented GASB 34 for the fiscal year ended June 30, 2002. Prior statements have not been restated to comply with the new requirements. Amounts represent the results of operations for the primary government only. These amounts are presented on the accrual basis of accounting. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona General Governmental Expenditures by Function Table III General, Special Revenue, and Debt Service Funds Last Ten Fiscal Years (in thousands of dollars) Fiscal Year 1995 Citizen & Debt Capital General Financial Community Information Municipal Neighborhood Human Economic Planning and Streetlight Resources Resources Vitality Development Districts Service Outlay Total Government Police Services Transportation Services Systems Fire Services $ 13,977 $ 24,226 $ 4,496 $ 3,878 $ 18,256 $ - $ 8,435 $ 14,283 $ - $ - $ - $ 14,002 $ 458 $ 31,221 $ - $ 133,232 1996 16,797 27,253 4,967 4,870 19,937 - 10,132 16,405 - - - 16,553 486 36,440 - 1997 17,449 30,745 5,389 7,551 30,961 - 10,906 8,853 - - - 18,117 523 38,923 - 169,417 1998 13,209 35,093 5,983 5,763 36,316 6,118 11,817 7,602 - - - 17,090 449 44,725 - 184,165 1999 15,074 37,752 6,359 6,999 40,758 7,357 12,844 9,077 - - - 18,419 966 53,229 - 208,834 2000 16,104 41,392 6,448 7,335 41,790 6,681 14,338 9,695 - - - 19,903 942 59,106 - 223,734 2001 17,504 45,860 6,685 16,192 45,620 7,017 15,307 11,328 - - - 21,598 977 57,836 - 245,924 2002 2003 2004 19,175 16,010 16,121 49,362 52,371 55,510 7,135 7,752 7,222 10,016 10,869 9,399 49,276 48,950 50,494 7,380 7,386 7,328 16,281 17,745 19,265 11,214 11,553 8,774 2,235 2,446 2,754 3,375 3,290 6,268 6,199 18,040 11,746 11,218 1,044 1,099 1,024 56,214 61,096 57,842 3,770 1,294 2,938 251,142 259,960 259,378 Source: City of Scottsdale Financial Services Department Note: A departmental reorganization occurred in fiscal 1997/98. Prior years have not been recast. The Citizen & Neighborhood Resources Department was established in fiscal year 2001/02. Human Resources and Economic Vitality departments were established in fiscal year 2002/03. 153,840 129 Table of Contents 130 General Governmental Revenues by Source Table IV General, Special Revenue, and Debt Service Funds Last Ten Fiscal Years (in thousands of dollars) Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 $ Taxes (1) 71,635 81,389 89,086 102,138 141,067 156,017 162,567 164,459 166,739 181,881 Property InterRental and Streetlight Governmental Special Charges For Fines and Interest and Services Revenue Assessments Licenses Services Forfeitures Earnings Districts Miscellaneous Total $ 36,649 $ 5,514 $ 950 $ 12,410 $ 1,990 $ 6,365 $ 543 $ 10,896 $ 146,952 40,434 7,896 1,055 12,587 2,748 6,813 474 11,590 164,986 48,583 6,696 1,107 14,424 3,344 6,000 505 12,748 182,493 49,635 4,927 1,107 17,229 4,274 7,664 558 15,091 202,623 54,920 4,357 1,237 17,227 5,192 6,581 964 17,135 248,680 58,626 3,740 1,717 19,711 5,105 7,721 968 14,345 267,950 71,054 3,026 1,676 19,877 4,894 7,888 973 15,026 286,981 70,044 2,339 1,815 20,038 5,234 8,464 1,012 10,176 283,581 68,695 1,970 1,816 19,990 6,047 5,274 1,018 10,360 281,909 68,546 2,558 1,813 22,401 6,921 4,903 1,000 11,667 301,690 Source: City of Scottsdale Financial Services Department Tax Revenues by Source Table V General, Special Revenue, and Debt Service Funds Last Ten Fiscal Years (in thousands of dollars) Privilege & Use (1) Fiscal Year 1995 $ Transient Occupancy Tax General Property Franchise In-Lieu Property Total Taxes 43,755 $ 5,048 $ 18,383 $ 4,160 $ 289 $ 71,635 1996 49,476 5,702 21,396 4,533 282 81,389 1997 54,530 6,493 22,836 4,945 282 89,086 1998 61,771 7,096 27,663 5,332 276 102,138 1999 98,335 6,637 30,150 5,696 249 141,067 City of Scottsdale, Arizona 2000 110,069 7,235 32,591 5,891 231 156,017 2001 113,009 7,587 34,396 7,399 176 162,567 2002 111,698 6,691 38,413 7,461 196 164,459 2003 110,684 6,688 41,583 7,587 197 166,739 2004 120,156 7,227 46,088 8,228 182 181,881 Source: City of Scottsdale Financial Services Department Note: (1) Beginning in 1999, Privilege Tax for Transportation and McDowell Mountain were recorded in Special Revenue Funds. Prior to 1999, they were recorded in Capital Projects Funds. Prior years have not been recast. See also Table VI. Table of Contents City of Scottsdale, Arizona Excise Tax Collections by Source Table VI General, Special Revenue, and Debt Service Funds Last Ten Fiscal Years (in thousands of dollars) Transient Privilege State Shared State Revenue Light & Power & Use Privilege & Use - Occupancy Tax Sales Sharing Franchise Transportation McDowell Mtn $ 8,482 $ - $ 5,048 $ 10,020 $ 9,375 $ 3,004 9,522 9,085 5,702 10,676 9,936 3,187 10,545 10,663 6,493 11,870 12,734 3,484 11,963 12,168 7,096 12,537 14,387 3,769 13,673 13,927 6,637 13,439 16,795 3,972 15,880 15,540 7,235 14,772 18,637 4,314 15,831 16,070 7,587 15,514 19,560 4,979 15,587 15,814 6,691 15,621 21,142 5,238 15,335 15,645 6,688 15,853 21,574 5,147 16,628 16,981 7,227 17,054 18,278 5,488 Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Privilege & Use General $ 43,755 49,476 54,530 61,771 70,735 78,649 81,108 80,297 79,704 86,547 Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Cable TV Fire Insurance Franchise Premium Tax $ 1,003 $ 152 1,175 171 1,275 186 1,406 157 1,552 172 1,376 201 2,147 273 2,223 316 2,440 414 2,740 481 Business Development Licenses & Permits & Recreation Fines & Fees Fees Fees Forfeitures $ 950 $ 10,590 $ 1,820 $ 1,990 $ 1,055 10,918 1,669 2,748 1,107 12,019 2,405 3,344 1,107 15,595 2,734 4,274 1,237 14,311 2,916 5,192 1,717 16,641 3,070 5,105 1,676 16,850 3,027 4,894 1,815 15,764 2,806 5,234 1,816 15,853 3,000 6,047 1,813 17,291 2,440 6,921 Source: City of Scottsdale Financial Services Department Note: Beginning in 1999 Privilege Tax for Transportation and McDowell Mountain are recorded in Special Revenue Funds. Prior to 1999 they were recorded in Capital Projects Funds. Total 96,189 115,320 130,655 148,964 164,558 183,137 189,516 188,548 189,516 199,889 131 Table of Contents 132 Privilege and Use Tax Collections by Category Table VII General, Special Revenue, and Debt Service Funds Last Ten Fiscal Years (in thousands of dollars) Fiscal Year 1995 Automotive $ Construction 7,010 $ 10,322 $ Food 3,682 $ Hotel Major Department Stores Misc. Retail 3,373 $ 4,755 $ Other Tax 8,707 $ 2,785 $ Rentals Restaurants 4,816 $ 3,591 $ Utilities License Fees, Penalties, Interest & Refunds 2,335 $ 861 $ Total 52,237 1996 9,403 14,010 4,803 4,459 5,688 11,437 4,174 5,922 4,632 3,026 529 68,083 1997 10,494 16,078 5,571 5,035 5,765 12,160 5,189 6,677 4,930 3,390 449 75,738 1998 12,426 19,183 5,968 5,371 6,580 13,519 5,594 7,788 5,322 3,674 477 85,902 1999 14,533 23,876 7,292 5,332 6,173 15,592 6,118 9,178 5,852 3,966 423 98,335 2000 18,025 24,377 7,899 5,710 7,815 16,562 6,472 10,290 6,471 4,805 1,643 110,069 2001 20,297 22,733 7,194 6,296 8,456 16,925 6,850 11,537 7,313 5,245 163 113,009 2002 20,862 21,948 7,202 5,430 8,737 15,538 6,104 12,248 7,282 5,501 846 111,698 2003 20,411 18,658 7,472 5,331 9,172 15,990 6,517 12,697 7,672 5,381 1,383 110,684 2004 20,808 21,789 8,075 5,767 9,761 17,768 7,283 13,730 8,345 5,317 1,513 120,156 Source: City of Scottsdale Financial Services Department City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Privilege and Use Tax Collections by Source (1) Table VIII General, Special Revenue and Debt Service Funds Last Ten Fiscal Years (in thousands of dollars) Fiscal Year 1995 General $ 43,755 Transportation $ McDowell Preserve (3) (2) 8,482 $ Total - $ 52,237 1996 49,476 9,522 9,085 68,083 1997 54,530 10,545 10,663 75,738 1998 61,771 11,963 12,168 85,902 1999 70,735 13,673 13,927 98,335 2000 78,649 15,880 15,540 110,069 2001 81,108 15,831 16,070 113,009 2002 80,297 15,587 15,814 111,698 2003 79,704 15,335 15,645 110,684 2004 86,547 16,628 16,981 120,156 Source: City of Scottsdale Financial Services Department (1) Privilege Tax rates are 1 percent General, .2 percent for Transportation, and .2 percent for McDowell Reserve. Total City Privilege Tax rate is 1.4 percent. (2) Transportation Privilege Tax Legislation became effective in 1990 and is restricted to use for transportation capital projects only. (3) McDowell Preserve Privilege Tax Legislation became effective in 1996 and is restricted to use for acquisition of land for the McDowell Preserve. 133 Table of Contents 134 Property Tax Levies and Collections Table IX Last Ten Fiscal Years (in thousands of dollars) Tax Year Fiscal Year 1994 1995 1995 Total Tax Levy $ Current Tax Collections % of Levy Collected Total Collections % Outstanding Delinquent Future Year of Current Delinquent Tax Tax Total Tax Levy Taxes Collections Collections Collections 20,273 $ 18,993 93.7% $ 637 $ 9 $ 19,639 1996 21,475 20,960 97.6% 623 19 21,602 1996 1997 24,408 23,862 97.8% 533 21 1997 1998 28,202 27,433 97.3% 503 1998 1999 30,304 28,993 95.7% 1999 2000 32,747 30,896 2000 2001 32,581 2001 2002 2002 2003 728 3.6% 100.6% 706 3.3% 24,416 100.0% 553 2.3% 20 27,956 99.1% 657 2.3% 625 1 29,619 97.7% 783 2.6% 94.3% 890 - 31,786 97.1% 879 2.7% 31,230 95.9% 978 - 32,208 98.9% 960 2.9% 36,166 34,895 96.5% 964 - 35,859 99.2% 952 2.6% 2003 39,159 37,583 96.0% 999 - 38,582 98.5% 935 2.4% 2004 42,756 40,739 95.3% 1,638 - 42,377 99.1% 1,143 2.7% City of Scottsdale, Arizona Source: Maricopa County Treasurer's Office 2004 Secured Tax Levy Report and City of Scottsdale Financial Services Department Amounts represent property taxes recorded in the General, Debt Service and Self-Insurance Fund (beginning in 1995). 96.9% $ Outstanding Delinquent % of Current Levy Table of Contents City of Scottsdale, Arizona Assessed and Estimated Actual Value of Taxable Property Table Xa Last Ten Fiscal Years (in thousands of dollars) COMPARATIVE ASSESSED VALUATION CLASSIFICATION Fiscal Year Real Estate Secured Personal Improvements 1995 P $ S 537,114 $ 1,175,121 666,182 $ 32,826 32,826 1996 P S 550,624 1,296,789 822,631 32,768 32,768 1997 P S 625,326 1,484,460 909,635 1998 P S 655,657 1999 P S Unsecured Personal Utilities Rails Wires $ $ 93,393 93,393 Gross Valuation 70,031 $ 70,058 1,371,372 1,399,573 50,496 50,496 73,949 73,976 39,384 39,384 45,358 45,358 1,652,051 1,120,622 39,510 39,510 786,999 1,867,600 1,257,665 2000 P S 888,057 2001 P S Exemptions $ Estimated Actual Valuation Net Taxable Valuation 456 $ 447 1,370,916 1,399,126 $ 9,913,549 10,081,538 1,454,002 1,530,496 410 407 1,453,592 1,530,088 10,916,431 11,361,417 101,115 101,143 1,670,317 1,720,846 122,496 129,045 1,547,821 1,591,801 11,615,286 11,869,943 49,608 49,608 102,884 102,946 1,844,053 1,968,343 122,998 129,293 1,721,055 1,839,050 13,064,052 13,876,821 41,123 41,123 50,270 50,270 99,765 99,825 2,058,758 2,235,882 120,569 133,530 1,938,189 2,102,352 14,824,243 14,875,966 2,197,631 1,565,076 42,123 42,123 54,263 54,623 105,941 106,030 2,399,958 2,655,909 148,417 171,524 2,251,541 2,484,385 17,194,773 18,597,657 - 2,505,879 2,831,301 41,290 41,290 75,333 75,333 110,584 110,715 2,733,086 3,058,639 126,116 143,258 2,606,970 2,915,381 19,705,159 21,770,704 2002 P S - 2,868,585 3,258,789 41,290 41,290 83,798 83,798 119,572 119,584 3,113,245 3,503,461 166,942 225,510 2,946,303 3,277,951 22,500,935 24,790,147 2003 P S - 3,182,885 3,581,204 30,258 30,258 88,982 88,982 130,305 130,305 3,432,430 3,830,749 200,976 304,144 3,231,454 3,526,605 24,690,513 26,456,051 2004 P S - 3,590,966 4,074,536 26,767 26,767 93,518 93,518 137,229 137,229 3,848,480 4,332,050 248,761 356,528 3,599,719 3,975,522 27,877,981 30,913,143 Source: AZ Department of Revenue/Property Tax Division, Abstract of the Assessment Roll 2003 Real estate and improvements are combined in the primary valuation. Under Arizona law, there are two property valuation bases: PRIMARY (P) and SECONDARY (S). The primary (limited assessed valuation is used when levying for maintenance and operation of cities, school districts, community college districts, counties, and the state. The secondary (full cash) assessed valuation is used when levying for debt retirement, voter-approved budget overrides, and maintenance and operation of special service districts. Beginning in 2001, Real Estate and Improvements are combined in the secondary valuation of the improvements total. 135 Table of Contents Assessed Values by Property Class Table Xb 136 Last Ten Fiscal Years (in thousands of dollars) Fiscal Year Class 1 Mines, Utilities, Telecom., Comm. & Industrial Class 5 Class 6 Class 4 Class 2 Railroad, Historic, NonResidential Class 3 Agricultural Private Car Co., commercial Leased & Residential & Vacant Special Use & Airlines Owner Occupied Common Areas Land 7 $ 7 Class 9 Improvements on Possessory Interest Class 8 Residential Historic Class 7 Commercial Historic - $ - 49 $ 49 Total Net Full Cash Assessed Value 1995 P $ S 510,175 $ 525,595 186,548 $ 192,308 597,708 $ 602,267 76,428 $ 78,901 - $ - 1996 P S 506,734 549,166 170,989 186,704 688,356 694,908 87,279 98,650 - 174 600 - - 59 59 1,453,591 1,530,087 1997 P S 548,255 574,576 169,960 178,832 725,151 727,402 104,198 110,978 - 181 235 - - 77 77 1,547,822 1,592,100 1998 P S 588,375 639,829 161,690 176,979 859,920 900,682 110,800 121,287 - 195 195 - - 77 77 1,721,057 1,839,049 1999 P S 650,741 720,457 174,147 234,448 992,490 1,019,159 120,495 127,840 - 240 372 - - 76 76 1,938,189 2,102,352 2000 P S 763,432 875,189 198,745 269,034 1,132,548 1,172,250 156,291 166,530 - 525 1,382 - - - 2,251,541 2,484,385 2001 P S 926,639 1,028,288 215,998 326,440 1,293,727 1,375,453 169,591 183,600 - 540 1,090 23 24 452 486 - 2,606,970 2,915,381 2002 P S 1,014,713 1,111,891 233,757 352,574 1,515,221 1,618,041 182,336 195,031 - 277 414 - - 2,946,304 3,277,951 2003 P S 1,117,558 1,237,805 244,980 368,844 1,677,085 1,720,500 190,953 197,972 - 878 1,484 - - 3,231,454 3,526,605 2004 P S 1,187,749 1,258,911 266,173 345,899 1,936,764 2,146,689 208,388 223,040 68 87 577 896 - - 3,599,719 3,975,522 The above classes were revised by Maricopa County for 2001 pursuant to HB 2634. Prior years were restated for comparison. City of Scottsdale, Arizona A statewide reappraisal program assesses property values by usage classification on varying percentages of actual cash value. These percentages are as follows: Property Class: 1. Mines, Utilities, Telecommunications, Comm. & Industrial 2. Agricultural & Vacant Land 3. Residential - Owner Occupied 4. Residential - Leased & Common Areas 5. Railroads, Private Car Cos., Airlines 6. Historic, Non-commercial Special Use 7. Commercial Historic 8. Residential Historic 9. Improvements on Gov Property 25% 16% 10% 10% 21% 5% 25% 10% 1% Sources: Arizona Department of Revenue/Property Tax Division Abstract of the Assessment Roll 2003 Maricopa County Department of Finance. - $ - 1,370,915 1,399,127 Table of Contents Property Tax Rates - Direct and Overlapping Governments Table XIa City of Scottsdale, Arizona Tax Rates Per $100 Assessed Valuation Last Ten Fiscal Years School Districts Fiscal Year City of Scottsdale Scottsdale Unified Community College Maricopa County State of Arizona Flood District Central Arizona Project Fire District Library EVIT Education Equalization Total 1995 P S Total 0.5987 0.8623 1.4610 4.5296 1.4114 5.9410 0.8934 0.8934 1.2394 0.0032 1.2426 0.4700 0.4700 0.3632 0.3632 0.1400 0.1400 0.0107 0.0107 0.0417 0.0417 0.0554 0.0554 0.5300 0.5300 8.2611 2.8879 11.1490 1996 P S Total 0.5477 0.8832 1.4309 4.6058 1.4597 6.0655 0.9455 0.1675 1.1130 1.1580 0.1464 1.3044 0.4700 0.4700 0.3332 0.3332 0.1400 0.1400 0.0108 0.0108 0.0099 0.0099 0.0693 0.0693 0.5300 0.5300 8.2570 3.2200 11.4770 1997 P S Total 0.6480 0.9032 1.5512 4.3390 1.5526 5.8916 0.9772 0.0704 1.0476 1.1054 0.1575 1.2629 - 0.3425 0.3425 0.1400 0.1400 0.0109 0.0109 0.0421 0.0421 0.1616 0.1616 0.5300 0.5300 7.5996 3.3808 10.9804 1998 P S Total 0.5763 0.9941 1.5704 4.1859 1.5365 5.7224 0.9747 0.1599 1.1346 1.1265 0.1364 1.2629 - 0.3425 0.3425 0.1400 0.1400 0.0105 0.0105 0.0421 0.0421 0.1216 0.1216 0.5300 0.5300 7.3934 3.4836 10.8770 1999 P S Total 0.5477 0.9365 1.4842 4.2161 1.5842 5.8003 0.9866 0.1259 1.1125 1.1472 0.1312 1.2784 - 0.3270 0.3270 0.1400 0.1400 0.0103 0.0103 0.0421 0.0421 0.1320 0.1320 0.5300 0.5300 7.4276 3.4292 10.8568 2000 P S Total 0.5450 0.8318 1.3768 4.3726 1.3965 5.7691 0.9741 0.1544 1.1285 1.1884 0.1085 1.2969 - 0.2858 0.2858 0.1400 0.1400 0.0100 0.0100 0.0421 0.0421 0.1217 0.1217 0.5217 0.5217 7.6018 3.0908 10.6926 2001 P S Total 0.5289 0.6577 1.1866 4.0442 1.4113 5.4555 0.9691 0.1503 1.1194 1.1641 0.1152 1.2793 - 0.2534 0.2534 0.1300 0.1300 0.0096 0.0096 0.0421 0.0421 0.1186 0.1186 0.5123 0.5123 7.2186 2.8882 10.1068 2002 P S Total 0.4858 0.6667 1.1525 4.0781 1.3597 5.4378 0.9583 0.1524 1.1107 1.1832 0.0876 1.2708 - 0.2319 0.2319 0.1300 0.1300 0.0091 0.0091 0.0421 0.0421 0.1120 0.1120 0.4974 0.4974 7.2028 2.7915 9.9943 2003 P S Total 0.5073 0.6456 1.1529 3.9430 1.3597 5.3027 0.9634 0.1493 1.1127 1.2108 0.0800 1.2908 - 0.2119 0.2119 0.1300 0.1300 0.0076 0.0076 0.0421 0.0421 0.1117 0.1117 0.4889 0.4889 7.1134 2.7379 9.8513 2004 P S Total 0.4783 0.6424 1.1207 3.8852 1.3026 5.1878 0.9410 0.1375 1.0785 1.2108 0.0700 1.2808 - 0.2119 0.2119 0.1200 0.1200 0.0070 0.0070 0.0521 0.0521 0.0976 0.0976 0.4717 0.4717 6.9870 2.6411 9.6281 Scottsdale residents residing outside Scottsdale Unified School District: 137 School District Balsz Elementary Cave Creek Fountain Hills Paradise Valley Tempe 2003/2004 Tax Rate Total $12.35 8.82 10.14 11.41 11.92 Source: Maricopa County Department of Finance Publications On-Line "2003 County Tax Rates" Table of Contents 138 Property Tax Levies - Direct and Overlapping Governments Table XIb Tax Levies Last Ten Fiscal Years (in thousands of dollars) School Districts Fiscal Year City of Scottsdale Scottsdale Unified Community College Maricopa County State of Arizona Flood District Central Arizona Project Fire District Library East Valley Institute of Technology Education Equalization Total City of Scottsdale, Arizona 1995 P $ S TOTAL 8,208 $ 12,064 20,272 67,793 $ 21,559 89,352 118,842 $ 118,842 164,865 $ 428 165,293 62,521 $ 62,521 - $ 35,319 35,319 - $ 18,930 18,930 - $ 1,447 1,447 - $ 5,638 5,638 - $ 2,864 2,864 70,502 $ 70,502 492,731 98,249 590,980 1996 P S TOTAL 7,961 13,514 21,475 71,686 23,677 95,363 127,583 23,643 151,226 156,257 20,671 176,928 63,421 63,421 36,078 36,078 19,767 19,767 1,518 1,518 1,398 1,398 2,391 1,452 3,843 71,517 71,517 500,816 141,718 642,534 1997 P S TOTAL 10,031 14,378 24,409 71,235 26,054 97,289 136,570 10,100 146,670 154,487 22,590 177,077 - 38,118 38,118 20,080 20,080 1,567 1,567 6,038 6,038 3,232 6,120 9,352 74,071 74,071 449,626 145,045 594,671 1998 P S TOTAL 9,919 18,283 28,202 75,973 29,651 105,624 146,259 25,144 171,403 169,046 21,447 190,493 - 42,339 42,339 22,013 22,013 1,646 1,646 6,620 6,620 3,673 4,275 7,948 79,533 79,533 484,403 171,418 655,821 1999 P S TOTAL 10,615 19,689 30,304 82,281 32,607 114,888 158,026 21,174 179,200 183,750 22,059 205,809 - 44,670 44,670 23,537 23,537 1,737 1,737 7,078 7,078 4,247 5,130 9,377 84,892 84,892 523,811 177,681 701,492 2000 P S TOTAL 12,204 20,543 32,747 96,625 33,734 130,359 170,116 28,833 198,949 207,541 20,264 227,805 - 44,311 44,311 26,148 26,148 1,874 1,874 7,863 7,863 3,970 5,922 9,892 91,109 91,109 581,565 189,492 771,057 2001 P S TOTAL 13,653 18,928 32,581 99,482 38,232 137,714 187,643 31,377 219,020 225,397 24,051 249,448 - 44,309 44,309 27,141 27,141 1,997 1,997 8,790 8,790 4,786 6,155 10,941 99,193 99,193 630,154 200,980 831,134 2002 P S TOTAL 14,313 21,853 36,166 110,638 40,515 151,153 204,648 34,930 239,578 252,676 20,072 272,748 - 45,323 45,323 29,787 29,787 2,086 2,086 9,646 9,646 5,198 6,259 11,457 106,221 106,221 693,694 210,471 904,165 2003 P S TOTAL 16,393 22,766 39,159 114,544 42,133 156,677 221,157 36,526 257,683 277,949 19,566 297,515 - 44,868 44,868 31,805 31,805 1,859 1,859 10,297 10,297 6,120 6,176 12,296 112,231 112,231 748,394 215,996 964,390 2004 P S TOTAL 17,217 25,539 42,756 123,274 45,550 168,824 239,464 37,777 277,241 308,122 19,235 327,357 - 51,154 51,154 33,011 33,011 1,931 1,931 14,316 14,316 12,042 12,042 120,038 120,038 808,115 240,555 1,048,670 Source: Maricopa County Department of Finance Publications On-Line "Tax Levy 2003" The primary (P) tax levy is for maintenance and operation of cities, school districts, community college districts, counties, and the state. The secondary (S) tax levy is for debt retirement, voter-approved budget overrides, and maintenance and operation of special state districts. Table of Contents City of Scottsdale, Arizona Principal Taxpayers Table XII June 30, 2004 Taxpayer Arizona Public Service Company Scottsdale Fashion Square Qwest Communications, Inc. First American Tax Valuation DC Ranch, LLC Gainey Drive Associates General Dynamics Southwest Gas Corporation Desert Mountain Properties, LP CMD Properties Inc. Type of Business Gas and Electric Utility Shopping Center Telecommunications Resort Real Estate Development Resort Industrial Park Gas Utility Real Estate Development Office Buildings Assessed Valuation (in thousands of dollars) $ 48,461 44,415 37,363 24,345 22,805 18,572 13,289 13,125 12,697 12,201 $ 247,273 % of Secondary Assessed Valuation 1.22% 1.12% 0.94% 0.61% 0.57% 0.47% 0.33% 0.33% 0.32% 0.31% 6.22% Source: The City of Scottsdale's Property Tax Auditor, as obtained from the Arizona Department of Revenue, CVP Department and the 2003 Maricopa County Treasurer's Roll. The Salt River Project Agricultural Improvement and Power District's (SRP) assessed valuation is not reflected in the total assessed valuation of the City. SRP is subject to a "voluntary contribution" in lieu of ad valorem taxation. The 2003/04 secondary assessed valuation of the Salt River Project within the City is $20,073,212 . The estimated secondary in lieu contribution is $202,864. 139 Table of Contents 140 Special Assessment Billings and Collections Last Ten Fiscal Years (in thousands of dollars) Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Special Assessments Billed $ 3,381 5,438 4,390 3,373 2,849 2,675 2,268 1,690 1,402 1,579 Current Assessments Collected $ 4,222 5,696 5,026 3,755 3,464 3,056 2,531 1,989 1,730 2,151 Source: City of Scottsdale Financial Services Department Table XIII City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Table XIV Ratio of Net General Obligation Bonded Debt to Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years Fiscal Year 1995 Assessed Value $ Population June 30 General Obligation Bonded Debt Less Fund Balance Reserved for Debt Service Net Bonded Debt Net Bonded Debt Per Capita Ratio of Net Bonded Debt to Assessed Value 1,399,126,179 168,176 $ 121,915,000 $ 342,402 $ 121,572,598 8.7% $ 722.89 1996 1,530,088,317 172,820 131,340,000 829,933 130,510,067 8.5% 755.18 1997 1,591,801,942 180,240 152,235,000 588,100 151,646,900 9.5% 841.36 1998 1,839,050,044 189,060 165,140,000 2,270,562 162,869,438 8.9% 861.47 1999 2,102,351,943 197,250 182,200,000 4,305,508 177,894,492 8.5% 901.87 2000 2,484,385,416 202,705 237,609,000 1,993,643 235,615,357 9.5% 1,162.36 2001 2,877,733,056 210,770 262,484,000 5,158,963 257,325,037 8.9% 1,220.88 2002 3,277,950,767 215,320 319,657,000 8,448,962 311,208,038 9.5% 1,445.33 2003 2004 3,526,604,612 218,940 305,003,000 9,006,329 295,996,671 8.4% 1,351.95 3,975,522,083 222,600 389,598,000 3,468,780 386,129,220 9.7% 1,734.63 Source: City of Scottsdale Financial Services Department Includes all General Obligation Bonds outstanding at June 30 except for the 1986 Water System Improvement General Obligation Bonds and all general obligation refunding bonds paid out of the Water Enterprise Fund. Excludes original issue premium. Also excludes all general obligation bonds of community facilities districts, since such bonds are not obligations of the City. Includes the fund balance of the General Obligation Bond Debt Service Fund only. 141 Table of Contents Computation of Legal Debt Margins Table XV June 30, 2004 (in thousands of dollars) Net Secondary Assessed Valuation as of June 30, 2004 $ Debt Limit Equal to 20% of Assessed Valuation 3,975,522 795,104 General Obligation Bonded Debt Subject to 20% Debt Limit (net of amounts available in Debt Service Funds for payment on July 1, 2004): 1993 Refunding 1993A Refunding 1997 GO Refunding 1989 GO Series I (1998) 1999 Preservation GO 2001 Preservation GO 2001 Refunding 2002 GO Series 2002 Refunding 2003 Refunding 2004 GO Series $ 6,681 2,374 17,405 4,445 16,925 28,225 39,660 52,000 40,630 15,020 96,400 Net Outstanding Bonded Debt Subject to 20% Limit 319,765 Legal 20% Debt Margin (Available Borrowing Capacity) $ 475,339 Debt Limit Equal to 6% of Assessed Valuation $ 238,531 General Obligation Bonded Debt Subject to 6% Debt Limit (net of amounts available in Debt Service Funds for payment on July 1, 2004): 1993 GO Refunding 1993A Refunding 1997 Series H Roads 1997 Refunding 1989 Series I (1998) 1999A Streets 1999A Pima Road 2001 Refunding 2002 GO Series 2002 Refunding 2004 GO Series $ 9,924 1,451 1,235 2,365 3,645 4,219 1,280 1,695 9,295 22,875 17,000 Net Outstanding Bonded Debt Subject to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) 74,984 $ 163,547 (1) Under Arizona law, cities can issue general obligation bonds for purposes of water, sewer, light, parks, and open space purposes, but outstanding bonds issued for such purposes may not exceed 20 percent of the City's net secondary assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of the city's net secondary assessed valuation. (2) The computation of legal debt margins excludes premium on capital appreciation bonds. (3) General obligation bonds of community facilities districts are not subject to or included in this computation since they are not bonds of the City of Scottsdale. Source: City of Scottsdale Financial Services. 142 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Table XVI Summary of General Governmental Bond Expenditures and Debt Ratios Last Ten Fiscal Years (in thousands of dollars) Fiscal Year 1995 Principal $ 5,050 Total Debt Service Interest $ 6,860 $ Total General Governmental Operating Expenditures Ratio of Total Debt Service To Total Operating Expenditures 11,910 $ 134,366 8.86% 1996 5,575 7,493 13,068 153,841 8.49% 1997 6,605 8,064 14,669 169,417 8.66% 1998 8,140 8,394 16,534 184,165 8.98% 1999 8,140 9,099 17,239 211,051 8.17% 2000 10,400 12,555 22,955 223,734 10.26% 2001 11,150 13,038 24,188 245,924 9.84% 2002 12,850 15,407 28,257 251,142 11.25% 2003 2004 15,885 17,664 33,549 259,960 12.91% 16,775 16,188 32,963 259,378 12.71% Source: City of Scottsdale Financial Services Department Amounts exclude 1986 Water System Improvement General Obligation Bonds and all general obligation refunding bonds paid out of the Water Enterprise Fund. Also excluded are all general obligation bonds of community facilities districts, since such bonds are not obligations of the City. Includes total expenditures of the General, Special Revenue, and Debt Service Funds. 143 Table of Contents 144 Summary of Water and Sewer Utility Bond Expense and Debt Ratios Table XVII Last Ten Fiscal Years (in thousands of dollars) Operating & Net Development Fiscal Operating Maintenance Operating Fee Year Revenue Expenses Revenue Revenue (1) $ 56,900 $ 31,738 $ 25,162 $ 14,934 $ 1995 1996 68,523 39,422 29,101 15,821 1997 74,708 41,621 33,087 18,896 1998 76,468 42,056 34,412 27,463 1999 85,411 49,264 36,147 32,723 2000 83,305 46,953 36,352 24,581 2001 87,417 53,421 33,996 26,361 2002 97,802 49,840 47,962 15,087 2003 95,064 46,991 48,073 17,648 2004 97,813 49,662 48,151 21,574 City of Scottsdale, Arizona Fiscal Year (1) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Ratio of Total Net Revenue to Total Bond Expense 5.61 6.52 7.84 9.54 6.00 5.16 5.10 5.31 5.52 10.03 Ratio of Net Operating Revenue to Total Bond Expense 3.52 4.23 4.99 5.30 3.15 3.08 2.87 4.04 4.04 6.92 Ratio of Net Operating Revenue to Revenue Bond Expense 7.82 10.04 10.24 7.87 4.55 4.89 5.20 7.34 7.38 8.00 Total Net Revenue 40,096 44,922 51,983 61,875 68,870 60,933 60,357 63,049 65,721 69,725 Ratio of Total Net Revenue to Revenue Bond Expense 12.47 15.50 16.09 14.14 8.66 8.19 9.23 9.65 10.10 11.58 $ Revenue General Bond Obligation Bond Expense Expense 3,216 $ 3,927 $ 2,898 3,987 3,231 3,402 4,375 2,112 7,951 3,527 7,436 4,367 6,538 5,290 6,535 5,345 6,510 5,402 6,022 933 Revenue Bond Indenture Required Ratio 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 Source: City of Scottsdale Financial Services Department Revenue - includes all operating revenues and interest earnings recorded in the Water and Sewer Utility Enterprise Fund. Expenses - includes total operating expenses and interest expense of the Water and Sewer Utility Enterprise Fund, excluding depreciation and amortization. (1) 1995 interest expense has been restated to reflect an accounting adjustment. Total Bond Expense 7,143 6,885 6,633 6,487 11,478 11,803 11,828 11,880 11,912 6,955 Table of Contents City of Scottsdale, Arizona Total Direct and Overlapping General Obligation Debt Table XVIII (in thousands of dollars) The City's proportionate share of general obligation debt of all local governmental units which provide services within the City's boundaries and which must be borne by properties in the City is summarized below: Net Bonds Outstanding Name of Governmental Unit Maricopa County $ Applicable within the City of Scottsdale 20,165 14.4680% 261,015 14.4680% 37,764 Tempe Elementary School District No. 3 66,645 0.0005% - Balsz Elementary School District No. 31 18,805 5.1282% 964 Scottsdale Unified School District No. 48 263,725 68.8066% 181,460 Paradise Valley Unified School District No. 69 334,110 31.0474% 103,732 Cave Creek Unified School District No. 93 56,480 72.4859% 40,940 Fountain Hills Unified School District No. 98 30,690 2.1664% 665 Phoenix Union High School District No. 210 170,935 0.3223% 551 12,055 20.5302% 2,476 Scottsdale Mountain Community Facilities District 5,160 100.0000% 5,160 McDowell Mountain Community Facilities District 17,970 100.0000% 17,970 DC Ranch Community Facilities District 20,000 100.0000% 20,000 3,225 100.0000% 3,225 100.0000% 417,824 389,598 Maricopa County Community College District East Valley Institute of Technology District No. 401 Via Linda Road Community Facilities District $ % Applicable within the City of Scottsdale $ Total Overlapping Debt City of Scottsdale Total Direct and Overlapping Debt Source: Maricopa County Assessor's Office 389,598 $ 2,917 807,422 145 Table of Contents 146 Demographic Statistics Table XIX Last Ten Fiscal Years Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Population 168,176 172,820 180,240 189,060 197,250 202,705 210,770 215,320 218,940 222,600 (1) Per Capita Income (1) $ 30,300 31,900 33,600 35,400 37,200 39,158 41,200 43,400 43,400 45,500 Median Age 39.1 39.1 39.7 39.7 39.7 41.0 41.0 41.0 42.1 40.4 (1) School Enrollment Unemployment Rate (2) (%) (3) 24,089 2.5 24,467 2.6 25,103 2.1 26,011 1.9 26,796 2.1 25,985 1.9 26,101 2.8 26,051 3.8 26,051 3.7 25,488 3.6 City of Scottsdale, Arizona Sources: (1) City of Scottsdale Economic Vitality staff (2) Arizona Department of Education (Enrollment statistics are not available until six months after the close of the fiscal year. The numbers presented on each line represent the prior year's statistics.) (3) Arizona Department of Economic Security - Arizona Unemployment Statistics Program Special Unemployment Final Report Table of Contents City of Scottsdale, Arizona Property Value and Construction Table XX Last Ten Fiscal Years (in thousands of dollars) Property Value Fiscal Year 1995 Commercial $ (1) Residential Commercial Construction (2) Nontaxable Number of Permits Residential Construction (2) Number of Dwelling Units Value Value 3,269,864 $ 6,810,085 $ 743,351 2,751 $ 162,541 4,954 $ 652,363 1996 3,345,470 8,024,934 735,698 2,923 152,488 4,449 607,708 1997 3,400,495 8,448,076 723,545 3,275 305,836 4,451 621,891 1998 3,658,231 10,217,960 806,235 3,512 595,530 5,102 792,477 1999 4,352,786 9,951,148 2,351,799 3,665 437,945 4,486 775,957 2000 5,209,857 13,386,035 923,343 3,296 294,157 4,134 743,286 2001 6,175,315 15,670,793 844,520 2,957 291,003 3,325 615,942 2002 6,651,152 18,219,402 1,307,018 2,464 247,372 2,019 453,430 2003 7,256,497 19,211,932 1,866,782 2,215 199,223 2,046 400,500 2004 7,197,862 23,715,210 2,243,314 2,512 252,328 2,903 426,203 Source: (1) Arizona Department of Revenue 2003 Abstract of the Assessment Roll (2) City of Scottsdale Planning and Development Services Department, Building Inspection Services ` 147 Table of Contents 148 Schedule of Insurance Table XXI June 30, 2004 Carrier Policy Description Amount of Coverage Various Limits By Peril City of Scottsdale, Arizona Allianz Insurance Company Property Insurance Repair or Replace $100,000 Deductible AIG Group and various layers of coverage Excess Liability Coverage $2,000,000 Deductible Per Occurrence $50,000,000 Per Occurrence and Aggregate ACE/Lloyds of London Airport Premises and Hangarkeepers Liability $100,000,000 Per Occurrence and Aggregate Midwest Employees Casualty Company Excess Workers' Compensation Coverage $600,000 Deductible each Occurrence Great American Insurance Company Fidelity/Crime Insurance $25,000 Deductible Sun Life Insurance Company Excess Stop Loss Insurance for Self Insured Group Health Benefits Plan Statutory $5,000,000 Annual Maximum Amount $150,000 Each Claim and a not to exceed annual plan aggregate calculated by plan enrollment population Source: City of Scottsdale Financial Services Department, Risk Management Division and Human Resources Department Table of Contents City of Scottsdale, Arizona Salaries and Surety Bonds of Principal Officials Table XXII For Fiscal Year Ended June 30, 2004 Official Title Mayor Salary $ Councilmen (6) 36,000 Bond $ 1,000,000* 18,000 included in above 153,941 included in above 79,997 included in above City Attorney 145,018 included in above City Judge 127,900 included in above 97,552 included in above City Manager/City Treasurer City Clerk City Auditor *annual maximum amount Employee Dishonesty and Computer/Wire Fraud Coverage Employee Dishonesty Coverage - All City Employees $5,000,000 annual maximum amount Computer/Wire Fraud Coverage Accounting Staff With Wire Transfer Authority $5,000,000 annual maximum amount Source: City of Scottsdale Financial Services Department 149 Table of Contents City of Scottsdale, Arizona Miscellaneous Statistical Data June 30, 2004 Date of Incorporation Date Charter Adopted Form of Government - Population 1950 Census 1960 Census 1965 Special Census 1970 Census 1975 Special Census 1980 Census 1985 Census 1990 Census 1995 Census 2000 Census 2002 Est. 6/30/02 2003 Est. 6/30/03 2004 Est. 6/30/04 Table XXIII June 25, 1951 November 16, 1961 Council/Manager 2,032 10,026 54,504 67,823 78,065 88,412 108,447 130,069 168,176 202,705 215,320 218,940 222,600 Area (Square Miles) 1951 .62 1961 8.80 1970 62.20 1975 85.80 1979 88.60 1982 113.60 1986 183.60 1987 184.00 1988 184.60 1990 184.60 2000 184.60 2001 184.60 2002 184.60 2003 184.60 2004 184.60 Miles of Sewers Storm ...................................................................................................................................................... 137.7 Sanitary................................................................................................................................................ 1,280.5 Fire Protection Number of Stations ..................................................................................................................................... 12 The City of Scottsdale has no fire employees but contracts with Rural/Metro Corporation to provide fire service to all residents. Police Protection Number of Employees .............................................................................................................................. 591 Number of Traffic Charges (Excluding parking and Criminal) ............................................................ 34,777 Number of Photo Radar Citations (Began Photo Radar in Jan. 1997) ............................................... 36,021 Number of Vehicles................................................................................................................................... 286 The City jail is a holding facility. All long-term prisoners are incarcerated in the County jail. Recreation Parks - Developed parks acreage ............................................................................................................ 849 Number of Swimming Pools ......................................................................................................................... 3 Number of Other Recreation Facilities ....................................................................................................... 60 These include schools and school playgrounds in cooperation with Scottsdale Unified School District and Paradise Valley School District. Water Enterprise Number of Water Customers............................................................................................................... 83,359 Annual Consumption (Gallons).............................................................................................. 21,904,681,773 System Capacity (Gallons Per Day) ........................................................................................... 146,609,280 Miles of Distribution Lines ................................................................................................................... 1,854.3 Number of Streetlights ............................................................................................................................. 10,500 Employees as of June 30, 2004 Full-Time................................................................................................................................................. 1,839 Part-Time................................................................................................................................................... 406 Grant and Trust funded – (# is included in full/part-time totals) ................................................................. 13 Total .................................................................................................................................................... 2,245 Elections Number of registered voters as of last general election, March 2004 .............................................. 116,221 % of registered voters voting in last general election, March 2004.................................................... 31.28% Population Median Age of Residents (est. 6/30/04) .................................................................................................. 42.1 Median Household Income (est. 6/30/04).......................................................................................... $66,600 Median Home Value - Single Family (est. 6/30/04)......................................................................... $278,800 Source: City of Scottsdale Financial Services Department 150 City of Scottsdale, Arizona