2014 1900 circa Honoring Flagstaff’s Remarkable Past, Present and Its Promising Future 1910 1900 circa City of Flagstaff Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 1904 F L A G S TA F F, A R I Z O N A Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2014 City of Flagstaff, Arizona Prepared By: Management Services Division Finance and Budget Section City of Flagstaff Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal ......................................................................................................................................... iii GFOA Certificate of Achievement ......................................................................................................................xi Organizational Chart ........................................................................................................................................xii List of Elected and Appointed Officials ............................................................................................................ xiii FINANCIAL SECTION Independent Auditor’s Report ........................................................................................................................... 1 MANAGEMENT’S DISCUSSION AND ANALYSIS ........................................................................................................... 5 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position ................................................................................................................... 21 Statement of Activities ....................................................................................................................... 22 Fund Financial Statements: Balance Sheet – Governmental Funds.................................................................................................. 24 Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Activities ......... 26 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ............ 28 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................................... 30 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 32 Highway User Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 33 Transportation Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 34 Statement of Net Position – Proprietary Funds .................................................................................... 36 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds.......................................................................................... 38 Statement of Cash Flows – Proprietary Funds ..................................................................................... 40 Notes to the Financial Statements ............................................................................................................. 44 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds ........................................................................................ 93 Combining Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds ............................................................. 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds ........................................................................ 96 Non-Major Funds – Proprietary Funds…………………………………………………………………………………….98 Combining Statements and Schedules: Combining of Net Position – Non-major Proprietary Funds ................................................................ 99 i Combining Statement of Revenues, Expenditures and Changes in Net Position – Non-major Proprietary Funds .............................................................................. 100 Combining Statement of Cash Flows – Non-major Proprietary Funds ............................................... 101 SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: Schedule By Function and Activity .................................................................................................... 104 Schedule of Changes By Function and Activity .................................................................................. 106 Budgetary Comparison Schedules – Other Major Governmental Funds Special Assessment Bond Fund......................................................................................................... 107 Capital Projects Bond Construction .................................................................................................. 108 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ..................................................................................................................................... 109 BBB Fund .......................................................................................................................................... 110 Community Redevelopment Fund ..................................................................................................... 111 Metropolitan Planning Organization Fund ........................................................................................ 112 General Obligation Bond Fund .......................................................................................................... 113 Secondary Property Tax Revenue Fund ............................................................................................. 114 Financial Data Submission Schedules Net Position Accounts ...................................................................................................................... 115 Revenue, Expenses, and Changes in Fund Net Position Accounts ..................................................... 117 Revenue, Expenses, and Changes in Fund Net Position Accounts-Public Housing-Consolidated ...... 120 STATISTICAL SECTION Net Position by Component .................................................................................................................... 124 Changes in Net Position .......................................................................................................................... 126 Fund Balances, Governmental Funds ....................................................................................................... 128 Changes in Fund Balances, Governmental Funds .................................................................................... 129 Tax Revenue by Source, Governmental Funds ......................................................................................... 130 Intergovernmental Revenue by Source, Governmental Funds .................................................................. 131 Full Cash Value of Taxable Property........................................................................................................ 132 City Tax Revenue for Major Categories ................................................................................................... 133 Direct and Overlapping Property Tax Rates ............................................................................................. 134 Principal Property Tax Payers .................................................................................................................. 135 Property Tax Levies and Collections........................................................................................................ 136 Direct and Overlapping Sales Tax Rates .................................................................................................. 137 Ratios of Outstanding Debt by Type ....................................................................................................... 138 Ratios of General Bonded Debt Outstanding ........................................................................................... 139 Direct and Overlapping Governmental Activities Debt ............................................................................. 140 Legal Debt Margin Information ............................................................................................................... 142 Pledged Revenue Coverage ..................................................................................................................... 144 Demographic and Economic Statistics..................................................................................................... 149 Principal Employers ................................................................................................................................ 150 Full-time Equivalent City Government by Function/Program ................................................................... 151 Operating Indicators by Function/Program ............................................................................................. 152 Capital Asset Statistics by Function/Program .......................................................................................... 154 Insurance Summary ................................................................................................................................ 155 ii City of Flagstaff January 15, 2015 The Honorable Mayor, City Council and Citizens of the City of Flagstaff, Arizona I am pleased to submit the Comprehensive Annual Financial Report (CAFR) for the City of Flagstaff, Arizona (City) for the fiscal year ended June 30, 2014,, as required by Article VI, Section 5 of the City Charter. The report was prepared by the City’s Fina Finance nce Division in accordance 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 represe representations ntations concerning the finances of the City of Flagstaff. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these repres representations, entations, management of the City of Flagstaff 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 Flagstaff’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Flagstaff’s comprehensive framework of internal controls has been designed to provide reasonabl reasonable e rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Eide Bailly, LLP a firm of licensed certified public accountants have audited the City of Flagstaff’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Flagstaff for the fiscal fis year ended June 30, 201 2014,, 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 significa 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 un unmodified fied opinion that the City of Flagstaff’s financial financ statements for the fiscal year ended June 30, 2014,, 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. Arizona Relay Service 7-1-1 211 West st Aspen Avenue, Flagstaff, Arizona 86001 Main & TD TDD (928) 774-5281 • Fax (928) 779-7696 The independent audit of the financial statements of the City of Flagstaff 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 Flagstaff’s separately issued Single Audit Report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Flagstaff’s MD&A can be found immediately following the report of the independent auditors. The City of CITY OF FLAGSTAFF PROFILE Flagstaff is located in Coconino County, Arizona at the intersection of Interstate 17 and Interstate 40. Flagstaff is the largest city in Northern Arizona and is the regional center and county seat for Coconino County, the second largest county, by area, in the 48 contiguous states. The current population per the 2010 United States Census is 65,870. The City of Flagstaff became a town in 1894, incorporated as a city in 1928 and its boundaries currently encompass an area of approximately 65 square miles. Flagstaff is nestled at the base of the San Francisco Peaks and is surrounded by one of the largest ponderosa pine forests on earth. Flagstaff drew its name from a very tall pine tree made into a flagpole in 1876 to celebrate our nations’ centennial. At nearly 7,000 feet, Flagstaff is one of the highest elevation cities in the United States. Flagstaff operates under a council-manager form of government as provided by its Charter. The Mayor is elected at large on a non-partisan ballot for a two-year term and six City Council members are elected at 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 heads under service procedures specified by Charter. City service departments provide a full range of services including General Government, Police and Fire Protection, Environmental Services, Transportation, Library, Parks and Recreation, Airport, Water and Sewer, Housing Authority, and Stormwater Services. In addition, the Council appoints the City Attorney, City Clerk and City Magistrate of the Court. The City Manager appoints the City Treasurer. The annual budget serves as the foundation for Flagstaff’s financial planning and control. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for all funds and entities related to the City. All of these funds and entities are included in the basic financial statements. The City Manager submits to the Council each spring a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. A public hearing is held prior to the budget’s final adoption in order to obtain taxpayer comments. The budget is legally enacted through the passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. The legal level of control for the budget is the division level. Additional expenditures may be authorized for unanticipated and/or inadequately budgeted events threatening the public health or safety as prescribed in the State Constitution, Article 9, Section 20. iv FACTORS AFFECTING THE CITY’S FINANCIAL CONDITIONS Local economy The City of Flagstaff, like many municipalities, is experiencing positive economic growth in our community. Excluding sales tax collected on utilities, the City realized declines in all but four months between November 2007 and August 2010 in comparison to the same month in the prior year. Since September 2010, the City has had increases its sales tax collections 33 out of 41 months when compared to the prior year, same month. In Fiscal Year 2013-2014, most sales tax categories increased when compared to the prior year. The following chart summarizes the categorical changes from the prior fiscal year: Category FY 2013 FY2014 % Change $929,683 $1,038,953 11.75% 278,702 317,222 13.82% 2,066,174 2,187,904 5.89% 71,371 73,331 2.75% Commercial Property Rental 999,391 933,249 -6.62% Personal Property Rentals 420,974 497,313 18.13% Constructions Contracting 1,649,710 1,699,327 3.01% Retail Utilities Telecommunications Restaurants/Bars Amusements 7,791,090 8,017,986 2.91% Hotels/Motels 882,658 952,628 7.93% Other 194,904 179,982 -7.66% Total $15,284,6581 $15,897,896 4.01% While construction is showing growth for the second year in a row since FY 2008, this is still the most volatile of sales tax categories shown above. The City continues to follow its’ practice to not allocate 100% of construction related revenues to ongoing budgetary needs. Commercial Property Rental decreases were expected and are due to legislative changes that exempted sales tax payments on properties that had common ownership, even if different legal entities. State shared sales tax revenues have increased for the fourth year in a row at 6.3% for FY 2014. State income tax revenues increased by 9.1% even though the total revenue is still below FY 2008 levels. After six years of declines, the highway user (gas tax) revenues increased for the second year in a row at 2.7%. This category also has a great deal of volatility as the State of Arizona can choose to fund other State departments such as the Motor Vehicle Division or the Department of Public Safety as the State looks to balance its own budget. Our community partners in the public, private, and governmental sectors are also experiencing similar growth. The Flagstaff Unified School District continues to realize increases in enrolment for the second year. A number of new projects in the multifamily housing and retail sectors that had been delayed or canceled due to the lack of available capital have been constructed or are in development review. While revenue growth is occurring, there continues to be limited resource available for new or restored services within the community. Fixed costs, primarily public safety pensions, continue to match or outpace the revenue gains. The economic analysts for our local and state region continue to give mixed messages on when the recovery will be sustained. 1 The sales tax total reflected in this table is activity based and will vary from the City Sales Tax amount reflected in Schedule 5 found in the Statistical Section. v The City collects three different sales taxes: The first is a 1% tax on all general sales, except for food. This is a general purpose tax that benefits the General Fund. The City of Flagstaff is the only city left in the State of Arizona that has a sunset clause on the general sales tax. This tax must go before the voters every ten years and is currently authorized until November 2024. As indicated earlier, overall local sales tax increases have been realized for three years in a row. Per Schedule 5 in the Statistical Section, the 1% general city sales tax receipts have increased 8.1% from the prior fiscal year and are now at the highest collection level ever. Within that, Construction and Auto Sales (a subset of the Retail category) continue to be the two most unpredictable sales tax categories. Retail sales posted the highest incremental gain at $226,986, with auto sales making up 68.0% of the increased revenue. The second is a 0.721% sales tax on the same types of general sales; however the tax is restricted in use to certain transportation projects. Improvements, 4th The four components of this tax include Safety Improvements, Street Street Overpass, and Transit. The transportation tax components expire in 2020. As the use of this funding shift from construction to maintenance, the City will pursue a permanent component to this tax. As similar sales are taxed with this source, revenue trends are the same as the general sales tax. The third tax is a Bed, Board, and Beverage (BBB) tax that collects an additional 2% for motel rooms/campgrounds, restaurants, and bars. This revenue is restricted in use to certain economic, arts, beautification, recreation, or tourism activities. The BBB tax also has a sunset clause and it is currently authorized until 2028. Tourism is a major industry to our local economy. Overall sales decreased in FY2009 when gas prices were peaking but have since rebounded and have set record highs for four years in a row, now at $6.3 million dollars. On November 4, 2014, the City of Flagstaff voters adopted an additional sales tax of 0.33% on all general sales to fund a road repair and street safety initiative. The proceeds from this tax are specifically dedicated to providing overdue maintenance including reconstructions on deteriorating City streets. This tax has a twenty year life and the work program is anticipated to touch every City owned street within the corporate boundary. State shared revenues include a distribution of a portion of sales tax and income tax collected by the state. These distributions are made based on a city or towns relative share of population in comparison with all other cities and towns. This relative population share was set by the 2010 census. Historically, Flagstaff’s greatest challenge was that while population was growing, it was growing at a slower pace than some of the other communities in the state. In the past, this has translated into a decreased proportionate revenue share; however the 2010 census resulted in the City’s proportionate population share increasing from 1.25% to 1.31%. Overall state shared revenues grew by 7.9% in FY2014 and the State of Arizona projects continued growth. While recent revenue growth has been experienced, the City’s portion of the State Shared Sales Tax is still under the peak revenue year (FY 2007) by 1.4% and State Shared Income Tax is under FY2009 peak revenues by 19.8%. Continued reductions in corporate income tax liability will result in a prolonged recovery of this revenue source as the statewide boon to economic development has not been realized that was anticipated when these reductions were put into place. Highway user revenue (gas tax) funds (HURF) ended FY 2014 above FY 2013 by 2.7%. While this is a considerable increase, it is still 22.3% below FY 2006, the peak revenue year. HURF revenues that are available for distribution had experienced six consecutive years of decreases. These revenues are distributed based on vi a fairly complex Arizona Department of Transportation formula, based in part on the amount of fuel purchased in our region. The revenue decreases were initially due to the increased gas pricing resulting in lower sales. Additional decreases were due to the State shifting revenues ‘off the top’ to fund other public safety and motor vehicle department needs. The gross highway user revenues received by the State of Arizona increased by 2.6% in FY 2014 which translated into the local increase noted above. As evidenced by the increase in BBB taxes and other statistical data, the City remains a popular drive destination from Las Vegas, Los Angeles, and Phoenix; however this revenue is estimated to recover very slowly and is at continued risk for future revenue sweeps by the State of Arizona. Even after the value of new construction is added to the total taxable assessed value, property valuations decreased for the fourth year in a row by an additional 12.4% for this tax year. Assessed value has decreased a total of 26.8% from its peak year in FY 2010. Even though the City is statutorily allowed to set a primary property tax rate that would allow for 2% annual growth in revenue plus the additional revenue generated from new construction, the Flagstaff City Council has established a policy of flat revenue for existing properties. When the City doesn’t take advantage of the statutorily allowed 2% annual increase, it does not lose the ability to take the increase in the future. Two percent is allowed per year and accumulates (e.g. as the increase has not been taken for three years, the City now has future authority to take a 6% levy increase). The millage rate for the primary property tax is adjusted annually to generate a levy equal to the prior year, plus new construction. The millage rate for secondary property taxes remained the same, so as assessed valuation decreased, the revenue also decreased by 13.4% in comparison to the prior fiscal year. While revenues fluctuations continue in some areas, the City increased budgeted revenue in FY 2015 (excluding grants and miscellaneous revenue) by 4.0% which reflects increase in local and state revenues. The City of Flagstaff increased its’ overall staffing count by 2.6 full time equivalencies by adding staff in the Library, Water, and Tourism. This is the first year the City has increased its’ position count since 2009. Prior to this, the City experienced staffing reductions totaling 130 full time equivalencies. LONG-TERM FINANCIAL PLANNING The City’s responsiveness to emerging economic challenges and its careful long-range planning have been key factors in Flagstaff’s fiscal health. The City continues to plan in a five to ten year horizon as economic conditions change. STRATEGIC FINANCIAL PLAN Flagstaff’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 financial policy impacts all of which are further identified below. Financial Resource Planning – Strategic financial planning begins with determining the City’s fiscal capacity based upon long-term financial forecasts of recurring available revenues. Financial forecasts coupled with financial trend analysis help preserve the fiscal well being of Flagstaff. Strategic financial capacity planning is a critical element to reach long-term financial stability goals and to determine special financial needs for critical objectives of the City Council. The City is also developing policy regarding reserving funding generated from one-time resources to address aging infrastructure related to streets, facilities, water, wastewater, parks, and fleet. vii Multi-Year Budget Planning – Multi-year budget planning encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to the community expectations and broad goals of the City Council. The multi-year approach provides a better opportunity for staff to change its financial paradigm from what do we need this year to how do we accomplish our service objectives over-time, given our financial capacity. While the City is required to adopt an annual budget to meet State statutory requirements, Flagstaff builds a financial plan for the next five years to help anticipate future impacts and ensure achievement of City objectives within limited or decreasing resources. Strategic Capital Improvement Project Planning – Flagstaff 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. Financial Policy Planning – The City of Flagstaff financial policies dictate minimum fund balance levels for the General, Special Revenue, and Enterprise Funds. The General Fund is required to maintain a fund balance of 15% of ongoing revenues and special revenue and enterprise funds are to maintain a 10% fund balance, as calculated against ongoing revenues. As the recession began, the City Council provided a temporary waiver to the General Fund balance requirement reducing it from 15% to 12% for FY 2010. This provided approximately $1.5 million dollars in one-time funding that was spread over three fiscal years: FY’s 2010, 2011, and 2012. While this eased some of the financial shortfall the City was experiencing, it did contribute toward a structural deficit as some ongoing services were funded with this one-time money. As part of the FY2013 budget process, this structural deficit was eliminated and the General Fund balance was restored to 15%. In addition to restoring fund balance, the City Council also agreed to provide a greater cushion against future recessions by directing that the General Fund balance increase by 1% per year to 20%. This goal was achieved in just two years versus the five year plan and the City General Fund balance is budgeted to be 22.3% for FY 2015 and is maintained at a minimum of 20% over the next five fiscal years. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2014, Flagstaff continued work to maintain basic services while also fulfilling the City Council goals. These goals provide for strategies that move the community closer to economically viability and sustainable community objectives. The outcomes of these strategies have been many and in certain cases require sustained efforts over a period of time. The following are the Councils FY2014 ten goals and associated accomplishments. Repair, Replace, and Maintain Streets & Utilities Infrastructure  Completed 13 road projects totaling $15.13 million dollars  Completed 8 waterline and sewer line projects totaling $8.5 million dollars  Completed 9 water and wastewater capital projects totaling $4.3 million dollars  Increased ongoing pavement preservation by $1 million dollars on an ongoing basis  Increased pavement preservation by an additional $1 million dollars on a one-time basis viii Fund Existing, and Consider Expanded Recreational Services  Increased BBB Park maintenance from a level 4 to a level 2  Increased General Fund Park maintenance from a level 4 to a level 3  Added Adult Coed Hockey League, Children’s Health and Wellness Fair, and continued the Dew Downtown Festival  Developed the Bushmaster Park concept plan and funded $1.1 million in improvements Address Core Services Maintenance Facility (Prior activity included the passage of a $14 million dollar bond in 2012 to assist in funding this facility)  Selecting McAllister Ranch as the future location for this facility  Initiated design of the facility  Conducted initial neighborhood outreach regarding the sale of the current location Complete the Rio de Flag Flood Control Project  The Limited Reevaluation Report (LRR) was completed and submitted to the Army Corps of Engineers Headquarters for review.  Acquired $1.6 million dollars in federal funding as a result of the 2014 trip to Washington D.C. Retain, Expand, and Diversify the Economic Base  Increased passenger enplanements to the same volume as when there were two airlines  Added six new and expanding retailers leading to 225 jobs and 70,000 square feet of retail  Added three new non-retail businesses  Northern Arizona Center for Entrepreneurship and Technology (NACET) created 46 high wage/low impact jobs  Secured site, design, easement approval, and construction funding for the new Arizona Public Service (APS) substation. Complete Comprehensive Water Policy  Initiated the Feasibility Study with the Coconino Plateau Water Advisory Council Environmental Assessment for the pumping of Red Gap Ranch   Initiated water and wastewater master planning efforts Addressed response strategies for inclement weather conditions Review Financial Viability of Pensions  City Manager was the driving force and proposed the creation of a joint Pension Reform Task Force with the Government Financial Officers of Arizona and the Arizona League of Cities and Towns. The agencies agreed with the concept and created the task force in FY 2014. The Management Services Director is a member of this committee. Review all Commissions  In process: Work sessions have been held May 2013, April 2014, and September 2014 to review all commissions. Zoning Code Check In and Analysis of the Process and Implementation   Flagstaff voters adopted the Regional Plan in May 2014 Council conducted work sessions on the Zoning Code and evaluated policy and technical elements ix x xi City of Flagstaff Citizens of Flagstaff City Council Special Committees City Manager City Magistrates City Court Board and Commissions City Attorney Deputy City Manager Utilities, Service and Safety Deputy City Manager Community Enhancement Community Development Division Utilities General Administration Division Management Services Division Public Works Division IT Division Economic Vitality Division Human Resources Division Community Enrichment Division Police Department Fire Department xii Legal City of Flagstaff, Arizona List of Elected and Appointed Officials June 30, 2014 Mayor Elected Officials Gerald (Jerry) W. Nabours Vice Mayor Coral Evans Councilmember Celia Barotz Councilmember Jeff Oravits Councilmember Karla Brewster Councilmember Scott Overton Councilmember City Manager Mark Woodson Appointed Officials Kevin Burke City Attorney Michelle D’Andrea City Treasurer Barbara Goodrich City Clerk Elizabeth Burke xiii xiv Independent Auditor’s Report The Honorable Mayor and Members of the City Council City of Flagstaff, Arizona Flagstaff, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Flagstaff, Arizona (the City) as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, the aggregate remaining fund information and the budgetary comparison of the general fund and major special revenue funds of the City as of June 30, 2014, and the respective changes in financial position and, where, applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. www.eidebailly.com 1850 N. Central Ave., Ste. 400 | Phoenix, AZ 85004-4624 | T 602.264.5844 | F 602.277.4845 | EOE Adoption of New Accounting Standard As described in Note I.D to the financial statements, the City adopted the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. As discussed in Note I.D to the financial statements, the City has retroactively restated the previously reported net position to account for bond issuance costs in accordance with this statement. Our opinions are not modified with respect to this matter. Change in Accounting Principle As described in Note I.D to the financial statements, the City adopted a change in accounting principle wherein debt service payments, including both principal and interest reductions, are recognized when due. As discussed in Note I.D to the financial statements, the City has retroactively restated the previously reported governmental fund balance to account for timing of debt service payments in accordance with the change in accounting principle. Governmental and business-type activities net position was not impacted by the change. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis as noted on the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s financial statements. The introductory section, combining nonmajor fund financial statements, the capital assets schedule by function and activity, the budgetary comparison of the major debt service fund and nonmajor governmental funds, the financial data submission schedules and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The combining nonmajor fund financial statements, the capital assets schedule by function and activity, the budgetary comparison of the major debt service fund and nonmajor governmental funds, and the financial data submission schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements, the capital assets schedule by function and activity, the budgetary comparison of the major debt service fund and nonmajor governmental funds, and the financial data submission schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2 The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 15, 2015 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Flagstaff’s internal control over financial reporting. Phoenix, Arizona January 15, 2015 3 4 MANAGEMENT DISCUSSION AND ANALYSIS As management of the City of Flagstaff (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2014. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii –x of this report. FINANCIAL HIGHLIGHTS  The City has two items that required a restatement of financial statements for the fiscal year ended June 30, 2013. First was the implementation of GASB Statement 65, Items Previously Reported as Assets and Liabilities, to show deferred outflows and inflows of resources and presenting retroactively. The second was a change in accounting policy for recognition of debt. In prior years they City’s policy was to accrue the recognition of July 1 debt to the prior fiscal year. The City is now recognizing debt in the fiscal year that it is paid. Further discussions in the MD&A are based on the restatements.  The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $652.5 million (net position). Of this amount $68.3 million (unrestricted) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net position increased by $17.8 million during the fiscal year. This is a result of an increase in net position in the governmental activities of $10.1 million and an increase in net position in the business type activities of $7.7 million.  As of June 30, 2014, the City’s governmental funds reported combined ending fund balances of $80.4 million, an increase of $3.0 million in comparison with the prior fiscal year. Approximately 26.8% of this total amount ($21.6 million) is unassigned fund balance available for spending at the government’s discretion.  As of June 30, 2014, total unassigned fund balance for the general fund was $21.6 million, or 43.5% of total general fund expenditures ($49.6 million).  As of June 30, 2014, the City’s proprietary funds reported combined total net position of $344.2 million, and total unrestricted of $31.1 million. Unrestricted component of net position in the Water and Wastewater Fund are $19.9 million and in the Environmental Services Fund are $10.2 million. 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. 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 position presents information on all of the City’s assets, plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. 5 The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods such as revenues pertaining to uncollected taxes or expenses pertaining to earned but unused vacation leave. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (government activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include Police, Fire, Community Development, Parks, Recreation, City Council, City Manager, City Attorney, Municipal Courts, Human Resources, Risk Management, Information Services, Financial Services, Library, Streets and Transportation, Facilities Maintenance, Fleet Management, Cemetery, Beautification, Tourism, and Economic Development. The business-type activities of the City include Water and Wastewater, Airport, Environmental Services, Housing Authority, and Stormwater operations. The government-wide financial statements include not only the City itself (known as the primary government), but also the Municipal Facilities Corporation (MFC). The MFC, although also legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government as a blended component unit. The government-wide financial statements can be found on pages 19 - 21 of this report. Fund financial statements The fund financial statements are designed to report information about groupings of related accounts that are 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 two categories: governmental funds and proprietary funds. Governmental funds: Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds 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 evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the 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, capital projects, and debt service). Information is presented separately in the 6 governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General fund, Highway User Revenue fund, Transportation fund, Special Assessment Bond fund, and Capital Projects Bond Construction fund which are all considered to be major funds. Data from the remaining governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non- major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General fund, Special Revenue funds, Capital Projects funds, Debt Service funds, and Enterprise funds. A budgetary comparison statement has been provided for the General and special revenue major governmental funds to demonstrate compliance with the respective budgets. The basic governmental fund financial statements can be found on pages 22-32 of this report. Proprietary funds: Proprietary funds are generally used to account for services for which the City charges customers – either outside customers, or departments of the City. Proprietary funds provide the same type of information 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 function presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for Water and Wastewater, Airport, Environmental Services, Stormwater, and the Housing Authority. All are considered to be major funds of the City with the exception of the Housing Authority fund.  Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses an internal service fund to account for its workers compensation, health insurance, other risk related activity including claims adjustment, and general liability and property insurance. Because these services predominantly benefit governmental rather that business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service fund is combined into a single, aggregated presentation in the proprietary fund statements. The basic proprietary fund financial statements can be found on pages 34-43 of this report. 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. The notes to the financial statements can be found on pages 44-91 of this report. Combining statements The combining statements referred to earlier in connection with non-major governmental funds are presented on pages 92-96. 7 Other information In addition to the basic financial statements and accompanying notes, this report also presents certain other supplementary information concerning the City’s capital asset activity, budgetary comparison of other major and non-major governmental funds, and financial data submission schedules. supplementary information can be found on pages 98-117 of this report. Other GOVERNMENT WIDE STATEMENTS FINANCIAL ANALYSIS Analysis of Net Position As noted earlier, net position may serve as a useful indicator of a government’s financial position. For the City, assets plus deferred outflows of resources exceeded liabilities plus deferred inflows of resources by $652.5 million as of June 30, 2014. Of the City’s net position, 82.4% reflects its investment of $537.9 million in capital assets (e.g. land, buildings, and equipment), less any outstanding debt used to acquire those assets. 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, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. Net Position June 30, 2014 and 2013 (in thousands of dollars) Governmental Activities Business-type Activities 2013 2014 Current and other assets Capital assets $ 102,325 as restated $ Total 2013 2014 100,579 $ 46,690 2013 - as restated $ 43,851 2014 $ 149,015 as restated $ 144,430 307,939 299,629 354,714 352,170 662,653 651,799 410,264 400,208 401,404 396,021 811,668 796,229 1,139 457 36 1,139 493 Long-term liabilities 85,361 87,359 49,614 52,520 134,975 139,879 Other liabilities 17,757 15,136 7,616 7,090 25,373 22,226 103,118 102,495 57,230 59,610 160,348 162,105 Total assets Total deferred outflows of resources Total liabilities Net investment in capital assets - 227,347 222,691 310,553 304,561 537,900 527,252 Restricted 43,762 43,856 2,493 2,694 46,255 46,550 Unrestricted 37,176 31,623 31,128 29,192 68,304 298,170 $ 344,174 Total net position $ 308,285 $ $ 336,447 $ 652,459 60,815 $ 634,617 Total assets increased mainly due to the net change of restricted and unrestricted cash and investments along with the change in capital assets in the governmental activities. Total liabilities decreased mainly due to the amount of debt paid off versus issued. A portion of the City’s net position, $46.3 million (7.1%) represents resources that are subject to external restriction on how they may be used. The remaining balance of unrestricted component of net position, $68.3 million (10.5%) may be used to meet the government’s ongoing obligations to citizens and creditors. 8 At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position for the government as a whole, as well as for the business-type activities. Current assets for governmental activities have increased by 1.7% ($1.7 million). The largest increase was in cash and investments ($19.4 million) while the largest decreases are in restricted cash and investments ($12.0 million) and special assessments receivable ($2.3 million). Deferred outflows of resources for the governmental activities have increased 149.2% ($681,391) and are related to deferred loss on bond refunding. Capital assets of the governmental activities, funded through operations, debt proceeds, grants, and contributions, increased by 2.8% ($8.3 million) due to capital outlays in excess of current year depreciation and deletions. Major capital outlays include Observatory Mesa land ($12.1 million), street/utility bond construction ($4.5 million), annual street improvement program ($2.6 million), West/Arrowhead street improvements ($1.8 million) and Aquaplex solar project ($1.1 million). Governmental activities long-term liabilities decreased by 2.3% ($2.0 million) primarily due to defeasance of special assessment debt. Other liabilities increased by 17.3% ($2.6 million) primarily due to the increase in bonds, notes, and leases payable ($1.7 million) and accounts payable ($0.6 million). Total assets for business-type activities have increased by 1.4% ($5.4 million). The largest increases were for intergovernmental receivables ($2.7 million) and capital assets ($2.5 million). The largest decrease was for accounts receivable, net ($1.3 million). Total liabilities for business type activities decreased by 4.0% ($2.4 million). Major changes include decreases in bonds, notes and leases payable ($4.0 million) while largest increase was for accounts payable ($0.6 million). Overall, the business-type net position has increased by 2.3% ($7.7 million) due an increase in net investment in capital assets ($6.0 million) primarily in the water and wastewater fund. 9 Analysis of Change in Net Position The City’s overall net position has increased by $17.8 million during the current fiscal year. increases are explained in the government and business-type activities discussion to follow. These C h an g es in Net Po s itio n F o r th e Y ear s En ded Ju n e 30, 2014 an d 2013 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities Bu s in es s -ty pe A c tiv ities 2013 2014 To tal 2013 - as restated 2014 2013 - as restated 2014 as restated Rev en u es Program Revenues: Charges for services Operating grants and contributions Capital grants and contributions $ 7,758 $ 8,112 $ 39,867 $ 38,566 $ 47,625 $ 46,678 7,072 6,866 4,051 4,884 11,123 11,750 14,604 11,319 7,836 6,622 22,440 17,941 General Revenues: Property taxes 11,045 11,822 - - 11,045 11,822 Sales taxes 37,676 35,189 - - 37,676 35,189 State shared taxes 15,667 14,631 15,667 14,631 Investment earnings Other Total revenues 749 (396) - - 213 194 962 (202) 2,072 1,326 641 825 2,713 2,151 96,643 88,869 52,608 51,091 149,251 139,960 Ex pen s es General government 9,798 9,218 - - 9,798 9,218 28,730 27,269 - - 28,730 27,269 Public works 1,322 1,494 - - 1,322 1,494 Economic and physical development 8,434 8,609 - - 8,434 8,609 Culture and recreation 13,370 13,836 - - 13,370 13,836 Highways and streets 19,018 16,990 - - 19,018 16,990 2,947 2,902 - - 2,947 2,902 - - 24,366 22,569 24,366 22,569 Environmental - - 11,638 11,671 11,638 11,671 Airport - - 4,118 5,227 4,118 5,227 Housing Authority - - 6,091 5,986 6,091 5,986 Stormwater - - 1,577 1,197 1,577 1,197 Total expenses 83,619 80,318 47,790 46,650 131,409 126,968 Increase in net position before transfers 13,024 8,551 4,818 4,441 17,842 12,992 Transfers (2,909) 2,909 818 Change in net position 10,115 7,727 5,259 Public safety Interest on long-term debt Water and wastewater Net position at beginning of year, as restated Net position at end of year (818) 7,733 298,170 $ 308,285 $ 290,437 336,447 298,170 $ 344,174 $ - - 17,842 12,992 331,188 634,617 336,447 $ 652,459 621,625 $ 634,617 Governmental activities Governmental activities increased the City’s net position by $10.1 million. increase are as follows:  The key factors for this Revenues exceeded expenses by $13.0 million as compared to last year of $8.6 million.  Net transfers decreased to a negative $2.9 million versus last year of negative $0.8 million.  Charges for services have decreased 4.4% ($0.4 million).  Capital grants and contributions had the largest percentage increase of 29.0% ($3.3 million). Culture and recreation increased 41.3% ($1.8 million) related to a state grant to purchase Observatory Mesa property. Highways and streets increased 17.0% ($1.2 million) related to donated capital.  City sales tax revenues increased by 7.1% ($2.5 million). Comparing actual revenues to budgeted revenues the city exceeded the estimates by $2.5 million. The increase in the city general sales tax, the transportation taxes, and the Bed, Board, and Beverage sales taxes are $777,992, $492,614, and $406,727 respectively. The city has seen positive sales tax growth in the last three years.  State shared taxes had an increase of 7.1% ($1.0 million). This was related to anticipated increases in state shared income tax as these revenues are based on calendar year 2012 returns. 10  Property tax had a 6.6% decrease due to expected decreases in assessed valuation which affects the City’s secondary property tax revenue. This will the City’s impact our ability to pay our general obligation debt.  Expenses have increased by 3.3 million (4.1%) as the economy had stabilized over the last few years and the City are completing more projects and funding additional operational expenses. There were increases in general government ($0.6 million), public safety ($1.5 million), highways and streets ($2.0 million) and interest on long term debt ($44,489). Decreases were in public works ($0.2 million), economic and physical development ($0.2 million), and culture and recreation ($0.5 million). Many of the expenses are considered one-time funding as the organization attempts to manage its ongoing expenses in line with ongoing revenues. Business-type activities Business type activity had net position increase of $7.7 million. The key factors for this increase include:  Charges for service increased by 3.4% ($1.3 million). Funds with increases were Water and Wastewater ($802,291), Environmental Services ($490,113), Airport ($18,456), and Stormwater ($10,117). only fund with decreased charges for services this year was the Housing Authority ($19,939).   The Operating grants and contributions decreased $832,893. Capital grants and contributions increased by 18.3% ($1.2 million) due to increased grant funded construction at the Airport.  Investment earnings are up slightly ($19,029) and other revenues decreased by $183,720.  Expenses have increased over prior year by 2.4% ($1.1 million). There were increases in the Water and Wastewater fund ($1.8 million), Housing Authority fund (104,282) and Stormwater fund ($380,276). There were decreases in the Environmental Services fund ($33,800), and Airport fund ($1.1 million). The following two charts illustrate the City's governmental expenses by function and its revenues by source. Expenses and Program Revenues – Governmental Activities Expenses $35,000,000 Program Revenues $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 General government Public safety Public works 11 Econ & phys development Culture & recreation Highways & streets Interest on long-term debt Revenues by Source – Governmental G Activities As shown, public safetty is the large est function as a measured by expense ((34.4%) follow wed by highw ways & 2.7%), and culture and recrreation (16.0% %). streets (22 General re evenues such as sales taxe es, state sharred taxes, and d property ta xes are not s shown by program, but are efffectively used d to support program p activities citywide . For governm mental activities overall, without regard to program, sales tax is the e largest single source of funds (39.0% %), followed b by state share ed tax (16.2%) an nd capital gra ants and contrributions (15..1%). Last yea ar sales tax wa as ranked firs st, state share ed tax was ranke ed second, and property taxes were rank ked third. The follow wing two cha arts illustrate the City's business type expenses byy function an nd its revenu ues by source. Expenses and Program Revenues – Business B Type e Activities $30,000,000 0 Exp penses $25,000,000 0 Program Revenues $20,000,000 0 $15,000,000 0 $10,000,000 0 $5,000,000 0 $0 Water and d wastewate er ental Environme 12 Airpo ort Hous sing Autho ority mwater Storm Revenues by Source – Business-type B e activities As shown n Water and Wastewater has expens ses of $24.4 4 million forr the fiscal year, followe ed by Environme ental Services s with $11.6 million, Hou using Authoriity with $6.1 million, the Airport with h $4.1 million an nd Stormwater with $1.6 million. m For th he fiscal year, program revvenue exceede ed expense fo or the Water and d Wastewater Fund, Environmental Serv vices fund, an nd Airport fun nd. The Housing Authoritty and Stormwate er funds program expens ses exceeded revenues m ainly due to depreciation of capital a assets. Water & Wastewater, W En nvironmental Services, and d Stormwater funds receive ed the majoritty of their pro ogram revenues through charrges for services (83.3%, 100.0%, and 97.6% respe ctively). The Housing Autthority fund rece eives the majority of its program p reven nue through operating grrants and con ntributions (7 76.8%) while the e Airport fun nd received the majority y of its prog gram revenue through c capital grants s and contributions (65.3%). Charges for services prov vided the larg gest share off revenues (75.8%) for all o of the business-type activities, followed by b capital gra ants and conttributions (14 4.9%). The la ast three years the ranking was w the same. The expenses for the business typ pe activities in ncreased (2.4 4%, $1.1 mill ion) as there were increas ses in Water and d Wastewater (8.0%, $1.8 million), Hous sing Authoritty (1.7%, $104 4,282), and S Stormwater (3 31.8%, $380,276) offset by decreases in Environmental Services S (0.3% %, $33,800) an nd Airport (21 1.2%, $1.1 million). Water and d wastewater increased use er fees rates in fiscal year 2014. Water and wastewa ater, Environm mental Services, Airport, A and Stormwater S fu unds increased charge for sservice revenue at 3.5%, 4.1%, 1.2% and d 0.7% respective ely. Only the Housing Auth hority fund sa aw a decrease in charges fo or services at 2.0%. 13 Financial Analysis of the City’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. 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, unassigned 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, Capital Project funds, and Debt Service funds. At the end of the fiscal year, the City’s governmental funds reported combined ending fund balances of $80.4 million, an increase of $9.3 million in comparison with the prior year. Approximately $21.6 million of the total ending fund balance constitutes unassigned fund balance, which is available for spending at the City’s discretion. The remainder of fund balance is (1) non spendable ($712,121) for inventory and perpetual care, (2) restricted ($50.0 million) for special revenue funds, debt service, development fee projects, court improvements and operations, grant purposes, perpetual care, and capital projects, and (3) assigned ($8.1 million) for court services, capital reserves, and real estate. Revenues for governmental functions overall totaled $97.4 million in the fiscal year ended June 30, 2014 which represents an increase of 11.9% or $10.4 million from the prior fiscal year. Seven revenue categories show increases over prior year. These include taxes (3.7%, $1.7 million), intergovernmental (4.7%, $870,753), grants and entitlements (34.7%, $3.9 million), special assessments (300.5%, $2.2 million), investment earnings ($1,2 million), contributions (114.5%, $288,963), and miscellaneous revenues (43.7%, $551,657). The increase in special assessments is due to a developer paying off debt in advance ($2.1 million). Grants and entitlements increased primarily related to a state grant to assist in the purchase of Observatory Mesa ($6.0 million). All other revenue categories experienced decreases including charges for services (15.6%, $503,633), fines and forfeitures (7.3%, $112,588), and rents (1.0%, $16,530). Expenditures for governmental functions ($102.4 million) increased by 14.8% ($13.2 million) from the prior fiscal year. Operation expenditures show an increase (5.5%, $3.5 million) which is related to public safety and highways and streets. Most of the increase in expenditures is related to capital project (44.5%, $7.4 million). Major capital projects have been discussed in prior sections. In addition debt service increase (34.2%, $2.2 million) was attributed to the early pay off of debt mentioned in the previous paragraph. In the fiscal year ended June 30, 2014 expenditures for governmental functions exceeded revenues by approximately $5.0 million. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $21.6 million. As a measure of liquidity, it may be useful to compare total unassigned fund balance and total fund balance to total fund expenditures. The unassigned fund balance represents 43.5% of General Fund expenditures. 14 The total fund balance in the City’s General Fund increased by $3.0 million during the fiscal year as revenue increased 7.7% and expenditures increased 6.5%. Overall, the General Fund’s performance resulted in revenues in excess of expenditures in the fiscal year ended June 30, 2014 of $2.7 million. This is an increase of approximately $0.7 million over the comparable figure from the prior year which resulted in expenditures in excess of revenues of $2.0 million. The Highway User Revenue fund balance increased by $757,107. Revenues increased $1.1 million primarily due the sale of property. Expenditures decreased by $1.5 million for a few reasons. Operating expenditures increased $3.3 million related the city making budgetary commitments to increased maintenance of our city streets. Capital expenses decreased by $1.8 million as the focus was more on maintenance this year and the 2010 bond project activity reduced and the bond moneys were spent. Debt service payments remained level this year. Net transfers in increased by $373,431 as the city transferred additional general fund money to assist with pavement maintenance. Transportation Fund balances increased by $4.1 million due a one-time transfer in from the BBB Funds to provide for funding of the FUTS expenditures that were moved to the Transportation Fund this fiscal year. The Special Assessment Bond fund balance decreased by $84,376. This is due to normal pay down of debt. Revenues and expenditure changes are related to the prior year early retirement of debt. The Capital Projects Bond Construction fund balance has decreased by $5.6 million as a result of the purchase of Observatory Mesa land ($12.1 million) and had offsetting grant revenues ($6.0 million). The rest of the purchase was paid with issuance of capital debt. Proprietary funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the fiscal year, the unrestricted component of net position had positive balances for Water and Wastewater, Environmental Services, Airport, Housing Authority, and Stormwater. The internal service fund, which is used to account for risk management and health insurance activities, had unrestricted net position of $4.3 million. The total growth in net position for the proprietary funds was $7.7 million. All funds except the Housing Authority had positive growth in their net position for the fiscal year ended June 30, 2014. The Housing Authority fund deceased of $0.7 million was due to depreciation and planned draw down on unrestricted . The major part of the increase is related to capital contributions ($11.2 million). Budget Highlights The City’s final budget matches the original budget which was approved by Council in June 2013. The City looks at the budget to actual at the division level and no division exceeded its appropriation. There was one revenue transfer that was not budgeted for. A transfer was made from the general fund to the capital projects fund ($13,963) to reimburse the costs related to the USGS campus. transfers that exceeded budget. There were two A transfer was made from the BBB fund to the Transportation fund ($310,146 additional) for a FUTS projects. Also, a transfer was made from the Environmental Services fund to the Solid Waste fund ($267,276 additional) as a result from transferring capital assets between the funds as they were split this fiscal year. 15 The general fund was less than 1% ($312,993) over the final budgeted total revenues primarily due to taxes, which exceeded budget by $1.4 million and was offset by grants and entitlements under budget by $1.2 million. Some of the reasons for grants and entitlements being under budget are due to the city not receiving a couple large fire grants, SAFER grant ($360,000) and Assistance to Firefighters ($350,000) along with only spending $18,301 of the $418,500 budget for Brownfields Assessments . Expenditures are under budget in all but one division due to controlled spending and carryover of some capital projects. Management services was the only division over budget by only $14,033 (less than 1.0%). The reason for being over this year was because the city needed additional staffing for software implementation and new financial reporting software. The divisions that are under budget by larger amounts are related to capital projects budgeted but not completed. Both transfers in and transfers out are less than budgeted (except for the transfer mentioned in the previous paragraph) as many transfers are based on the actual year end expenditure, most significant of which is the budgeted transfer from the general fund to the stormwater fund of $3.9 million for the Rio de Flag flood control project of which only $76,137 actually transferred at year end. The other significant transfer under budget by $1.6 million is related to funding for a new court facility which is carried forward to next fiscal year. Capital Assets and Debt Administration Capital Assets The City’s capital assets (net of accumulated depreciation) for its governmental and business-type activities as of June 30, 2014 amount to $662.6 million. Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total increase in the City’s capital assets for the current year was 1.7% ($10.9 million). The following table reflects the capital assets at the end of the fiscal year: C ap ital A s s ets , Net o f Dep r ec iatio n Ju n e 30, 2014 an d 2013 ( in th o u s ands o f do llar s ) G o v er n m en tal A c tiv ities 2014 Land and other non-depreciable assets $ 67,941 Buildings 56,074 Improvements Machinery and equipment Infrastructure Construction in progress Total Bu s in es s -Ty pe A c tiv ities 2013 $ 55,762 2014 $ 13,966 To tal 2013 $ 2014 13,966 $ 81,907 2013 $ 69,728 57,877 53,081 54,816 109,155 112,693 249,656 7,273 7,208 243,488 242,448 250,761 10,310 11,766 21,795 24,405 32,105 36,171 159,137 160,030 - - 159,137 160,030 7,204 6,986 22,384 16,535 29,588 23,521 $ 307,939 $ 299,629 $ 354,714 $ 352,170 $ 662,653 $ 651,799 Construction in progress had a net increase of 25.8% ($6.1 million). Major completed construction in progress includes the completion of street and utility bond projects ($5.7 million), completion of Observatory Mesa land purchase ($12.1 million), Woodlands/Beulah streetscape ($0.7 million), and Hillside sewer line replacement ($0.5 million). Major construction in progress at June 30 includes Rio de Flag drainage project ($14.1 million), Taxiway Westplex ($3.1 million), street and utility bond projects ($2.6 million), West/Arrowhead phase 2 ($2.6 million), Red Gap pipeline ($1.6 million), and Switzer Canyon waterline replacement ($1.3 million) . The increase to land ($12.2 million) is related to the purchase of Observatory Mesa and donated assets for right of way, easements, drainage, and open space. The decrease to buildings ($3.5 million) is related to depreciation and the sale of the old fire station. The increase in improvements ($1.1 million) is related to the completion of the solar projects ($2.9 million) and drainage improvements and contributed capital less depreciation. 16 Machinery and equipment decreased by $4.1 million mainly due to depreciation. Major additions include nine replacement vehicles ($248,312), ice resurface at the ice rink ($100,805), Utilities communication and security upgrades ($277,129). Infrastructure decrease is related to depreciation expense greater than the completion of street projects, streetscape improvements, and contributed capital. For government-wide financial statement presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year. purchases as expenditures. Fund financial statements record capital asset Please refer to Note IV C on pages 66-67 of the Notes to the Financial Statements for further information regarding capital assets. Long Term Debt During fiscal year 2014, the City made a decision to change the accounting practice for recognizing debt. In prior fiscal years the City’s policy was to accrue the recognition of July 1 debt to the prior fiscal year. The City is now recognizing debt in the fiscal year that it is paid. Therefore the fiscal year 2013 amounts are restated. At the end of the current fiscal year, the City had total long-term debt outstanding of $126.8 million. Of this amount, $55.1 million is general obligation bonds backed by the full faith and credit of the City, $8.6 million is improvement district bonds, $19.1 million is revenue bonds, $1.3 million is for the Municipal Facility Corporation, $3.2 million is for certificates of participation, and $39.5 million are outstanding leases or loans for the airport, water and wastewater, and city-wide energy conservation improvements. O u ts tan din g Debt Ju n e 30 , 2 01 4 an d 20 13 ( in th o u s an d s o f d o llar s ) Go v er n m en tal A c tiv ities 2014 General obligation bonds $ Special assessment bonds Revenue bonds 53,341 Bu s in es s -ty pe A c tiv ities 2013 $ 49,909 2014 $ 1,752 $ 2014 3,125 8,605 11,020 - - 15,495 15,615 3,635 3,972 Other debt 4,415 6,830 - - Lease/Loans 1,234 1,698 38,304 40,517 Total debt payable $ 83,090 $ 85,072 $ T o tal 2013 43,691 $ 47,614 $ $ 55,093 2013 $ 53,034 8,605 11,020 19,130 19,587 4,415 6,830 39,538 42,215 126,781 $ 132,686 During fiscal year 2014, the City’s total bonded debt increased by $5.9 million. The City issued $14.9 million in general obligation debt for open space projects ($5.5 million), parks and recreation facilities ($1.1 million), and for advance refunding ($8.7 million). The City obtained $46,169 in loans for water and wastewater projects for development of future water rights. The special assessment debt and revenue bond debt decreased due to early pay off of debt from a developer ($2.1 million) and annual payments. 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, 2014 is $40.2 million in the 6% category and $78.8 million in the 20% capacity. The allowable debt decreased from prior year due to lower assessed valuations and additional debt issued. Additional information on the debt limitations and capacities may be found in Schedule 16 in the statistical section of this report. 17 During the year, the City maintained the following bond ratings: C ity o f Flag s taff Bo n ded Debt Ratin g s A s o f Ju n e 30, 2 014 Mo o dy ' s In v es to r s S tan d ar d & S er v ic e Po o r ' s General Obligation Aa2 AA Municipal Facilities Corporation Aa3 AA Additional information on the City’s long-term debt can be found in Section IV F on pages 71-80 of the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The Fiscal Year 2014/2015 budget preparation was influenced by the following factors:  The City’s general fund budget was approved with no structural deficit in ongoing expenditures exceeding ongoing revenues.  Unrestricted fund balance in the general fund continues to be above the fiscal policy of 15% of operating revenues, currently at 20% projected.  General sales tax revenues exceeded budget by $500,000 million in FY 2014 and we are expecting continued growth of about $300,000 million in FY 2015.  Building permits exceeded budget by $320,000 yet we are conservative in our projections for FY 2015 as we rely on these types of revenues as a onetime impact.  The focus of the FY 2015 budget was for Council Priorities related to compensation, staffing, and infrastructure. o In the General Fund the City was able to fund $1.02 million for compensation, $620,000 for staffing and $890,000 for infrastructure. This was done with a combination of ongoing and onetime funding sources. o Other funds made similar funding options. Some of the larger items are $1.58 million for recreation facilities and parks improvements and $1.4 million programmed for improvements to our Fourth Street corridor.  The total authorized positions increased by 2.61 positions. While 7 new positions were added there was an offsetting 4.39 decreases in positions that were either one time funded or reduced to fund some of the new positions.  The three triggers put in place during FY 2014 budgeting to address pay for maintenance workers and equipment operators, a library reorganization, and phase two of the commissioned police pay structure were all funding in the FY 2015 budget.   Continue to monitor State legislature to be aware of potential budget impacts on cities. Property assessments stabilized this year versus the prior three years of declines. Primary assessed values increased by an average of 1.3%. The City adjusted the tax rate on primary property tax to maintain revenue levels. The secondary property tax assessments rates remain flat.  Due to changes in State legislation, the City Council elections will be moved from May 2014 to November 2014.   The continued pursuit of federal and state grant dollars to enhance the local economy. The continued implementation of electronic information sharing to facilitate transparency in service provision. 18  The city will continue to work on developing a new Core Maintenance Facility which was approved by voters.  The city will continue to work on the Flagstaff Watershed Protection Program which was approved by voters and is expected to begin forest thinning project in the Spring of 2015.  Utility rate increases are approved for next year to help support ongoing operational services and restore operation capital and the capital improvement plan to assist with aging infrastructure.  An updated utilities rate study is expected to be completed in FY 2015. Requests for Information The 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 Flagstaff Finance and Budget Section 211 W. Aspen Ave Flagstaff, AZ 86001 Main (928) 213-2000 Arizona Relay 7-1-1 19 20 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position June 30, 2014 Primary Government Governmental Activities Business-type Activities Total ASSETS Cash, investments and equivalents Accounts receivables, net $ 26,354,179 $ 100,258,551 7,550,977 5,109,998 12,660,975 122,514 51,798 174,312 Intergovernmental receivable 2,249,179 2,937,191 5,186,370 Special assessments receivable 8,561,461 - 8,561,461 Interest receivable 73,904,372 Internal balance 426,779 Deposits 112,900 Prepaid items Inventory Restricted cash and investments $ (426,779) - 29,596 142,496 102,000 33,751 135,751 491,439 193,801 685,240 8,803,155 12,406,525 21,209,680 Capital assets: Non-depreciable 75,145,414 36,350,755 111,496,169 Depreciable, net 232,793,661 318,363,313 551,156,974 410,263,851 401,404,128 811,667,979 1,138,519 - 1,138,519 Accounts payable 4,670,628 1,419,780 6,090,408 Accrued payroll 1,116,903 225,563 1,342,466 424,102 470,124 894,226 1,176,384 696,132 1,872,516 Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred loss on debt refundings LIABILITIES Construction retainage payable Interest payable Unearned revenue 496,189 984,045 1,480,234 1,106,270 364,672 1,470,942 Compensated absences 1,650,689 371,385 2,022,074 Claims and judgements 98,863 - 98,863 305,000 - 305,000 6,711,878 3,084,659 9,796,537 Compensated absences 2,079,636 541,995 2,621,631 Claims and judgements 120,832 - 120,832 - 7,649,302 7,649,302 Net OPEB obligation 3,704,242 816,305 4,520,547 Special assessment debt, government commitment 8,300,000 - 8,300,000 71,155,964 40,606,336 111,762,300 103,117,580 57,230,298 160,347,878 227,347,151 310,552,949 537,900,100 Deposits payable Noncurrent liabilities: Due within one year: Special assessment debt, government commitment Bonds, notes and leases payable, net Due in more than one year: Landfill closure and postclosure care costs Bonds, notes and leases payable, net Total liabilities NET POSITION Net investment in capital assets Restricted for: Capital projects 15,221,521 2,488,509 17,710,030 Debt service 14,248,005 - 14,248,005 Specific programming 13,828,476 - 13,828,476 223,788 4,053 227,841 Grant and contributions purposes Perpetual care: Expendable Nonexpendable Unrestricted Total net position 18,684 - 18,684 220,682 - 220,682 37,176,483 $ 308,284,790 The notes to the financial statements are an integral part of this statement 21 $ 31,128,319 68,304,802 344,173,830 $ 652,458,620 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2014 Program Revenues Indirect Expense Allocation Expenses Capital Grants and Contributions Operating Grants and Contributions Charges for Services Primary government Governmental activities: General government Public safety $ 10,732,510 $ (933,714) 28,730,111 $ - 4,568,438 $ 628,038 219,393 $ 2,554,510 18,292 137,652 Public works 1,573,541 (251,496) 1,215 - - Economic and physical development 9,018,496 (584,386) 903,233 1,093,486 231,475 Culture and recreation 12,919,475 450,207 1,656,628 3,203,897 6,006,000 Highways and streets 17,698,346 1,319,389 - 271 8,210,248 2,946,685 - - - - 83,619,164 - 7,757,552 7,071,557 14,603,667 4,712,620 Interest on long-term debt Total governmental activities Business-type activities: Water and wastewater 24,366,128 23,432,153 - Environmental 11,637,566 12,490,237 - - Airport 4,118,280 1,504,703 98 2,833,675 Housing authority 6,090,790 974,184 4,051,138 252,529 Stormwater 1,576,865 1,465,522 - 36,705 47,789,629 39,866,799 4,051,236 7,835,529 Total business-type activities Total primary government $ 131,408,793 $ 47,624,351 $ 11,122,793 General revenues: Property tax, levied for general purposes Property tax, levied for debt service Sales taxes State shared sales taxes - unrestricted Investment earnings Miscellaneous Gain on disposal of capital assets Contributions to permanent fund Transfers in (out) Total general revenues, contributions and transfers Change in net position Net position - beginning, as restated Net position - ending The notes to the financial statements are an integral part of this statement 22 $ 22,439,196 Net (Expenses) Revenues and Changes in Net Position Primary Government Governmental Activities $ Business-type Activities (4,992,673) $ $ (4,992,673) - (25,409,911) (1,320,830) - (1,320,830) (6,205,916) - (6,205,916) (2,503,157) - (2,503,157) (10,807,216) - (10,807,216) (2,946,685) - (2,946,685) (54,186,388) - (54,186,388) - 3,778,645 3,778,645 - 852,671 852,671 - 220,196 220,196 - (812,939) (812,939) (74,638) (54,186,388) (74,638) 3,963,935 $ 3,963,935 3,963,935 $ (50,222,453) 5,484,860 - 5,484,860 5,559,957 - 5,559,957 37,675,638 - 37,675,638 15,666,968 - 15,666,968 749,038 213,335 962,373 1,813,164 567,079 2,380,243 241,231 73,916 315,147 18,700 - 18,700 (2,908,700) 64,300,856 $ - (25,409,911) $ Total 2,908,700 - 3,763,030 68,063,886 10,114,468 7,726,965 17,841,433 298,170,322 336,446,865 634,617,187 308,284,790 $ 344,173,830 $ 652,458,620 23 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2014 Highway User Revenue Fund General Fund Transportation Fund ASSETS AND DEFERRED OUTFLOWS Cash and investments $ Accounts receivable, net 30,708,226 $ 4,023,647 Interest receivable 3,949,836 $ 753,931 10,517,074 1,476,061 45,994 5,387 24,439 Intergovernmental receivables 713,316 122,154 786,730 Interfund receivable 110,000 - - Special assessments receivable - - - Deposits - - 112,900 Inventory 440,644 - - Restricted cash and investments Total assets Total assets and deferred outflows $ - - - 36,041,827 4,831,308 12,917,204 36,041,827 $ 4,831,308 $ 12,917,204 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCE Liabilities: Accounts payable $ Accrued payroll and compensated absences 1,693,575 $ 993,645 Interfund payable Advanced revenue Guaranty and other deposits Total liabilities 531,998 $ 33,732 992,467 - - - - 280,994 - 141,443 1,106,270 - - 4,074,484 565,730 1,133,910 204,554 - - - - - 204,554 - - Deferred inflows of resources: Unavailable revenue - property taxes Unavailable revenue - special assessments Total deferred inflows of resources Fund balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities, deferred inflows and fund balances $ 440,644 - - 1,698,333 4,265,578 11,783,294 - 8,063,998 - 21,559,814 - - 31,762,789 4,265,578 11,783,294 36,041,827 The notes to the financial statements are an integral part of this statement 24 $ 4,831,308 $ 12,917,204 $ 427,364 $ - $ $ $ 23,338,968 - $ 968,520 69,081,368 7,222,159 383 - 40,559 116,762 - 251,500 375,479 2,249,179 - - - 110,000 8,561,461 - - 8,561,461 - - - 112,900 - - 50,795 491,439 - 4,783,564 4,019,591 8,803,155 8,989,208 5,174,964 28,793,912 96,748,423 8,989,208 2,400 $ $ 5,174,964 652,034 $ 28,793,912 $ 926,406 $ $ 96,748,423 4,798,880 - 1,886 87,640 1,116,903 - - 110,000 110,000 - - 73,752 496,189 - - - 1,106,270 2,400 653,920 1,197,798 7,628,242 - - - 204,554 8,561,037 - - 8,561,037 8,561,037 - - 8,765,591 - - 271,477 712,121 425,771 4,521,044 27,324,637 50,018,657 - - - 8,063,998 - - - 21,559,814 425,771 $ 139,900 Total Governmental Funds Other Governmental Funds Capital Projects Bond Construction Special Assessment Bond Fund 8,989,208 4,521,044 $ 5,174,964 27,596,114 $ 28,793,912 25 80,354,590 $ 96,748,423 CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES JUNE 30, 2014 Fund balances - total governmental funds balance sheet $ 80,354,590 Amounts reported for governmental activities in the statements of net position are different because (also see note II. A.): Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets Less: accumulated depreciation 501,516,989 (193,577,914) 307,939,075 Other assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Fines and forfeitures 299,538 299,538 Long-term receivable agreement related to future expenditures are not recognized during the current period and, therefore, are not in the governmental funds. Promissory note forgivable 102,000 102,000 Long-term liabilities, including bonds payable are not due and payable in the current period and therefore are not reported in the governmental funds. Governmental bonds payable Governmental interest payable Bond premium Bond refunding loss Other postemployment benefits Compensated absences (83,089,506) (1,176,384) (3,383,336) 1,138,519 (3,704,242) (3,730,325) (93,945,274) Certain revenues are not available to pay for current period expenditures and, therefore, are unearned in the governmental funds. Property tax Unavailable revenue for long-term special assessments is shown on the governmental fund balance sheet, but is reflected on the statement of net position Special assessments 204,554 204,554 8,561,037 8,561,037 The internal service fund is used by management to charge the cost of self insurance programs to individual funds. The assets and liabilities of the internal service funds that are reported with governmental activities. Net position of governmental activities - statement of net position The notes to the financial statements are an integral part of this statement 26 4,769,270 $ 308,284,790 27 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2014 Highway User Revenue Fund General Fund Transportation Fund REVENUES: Taxes $ Intergovernmental Grants and entitlements 25,100,084 $ - $ 11,836,972 16,516,056 - - 1,726,644 6,274,105 Special assessments - - - Charges for services 2,734,095 - - Licenses and permits 1,952,731 - - Fines and forfeitures 1,428,401 - - Rents 1,606,932 - - 418,374 20,709 92,557 6,000 Investment earnings Contributions 440,360 - Miscellaneous 393,760 867,930 - 52,317,437 7,162,744 11,935,529 Total revenues EXPENDITURES: Current: General governmental Public safety Public works 8,914,237 - - 26,564,902 - - 999,999 - - Economic and physical development 4,441,463 - - Culture and recreation 6,084,457 - 29,388 - 7,729,568 2,787,251 1,560,000 Highways and streets Debt service: Principal retirement 882,114 436,835 Interest and other charges 128,976 108,995 514,725 1,566,078 2,653,599 2,527,177 49,582,226 10,928,997 7,418,541 Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 2,735,211 (3,766,253) 4,516,988 - - - OTHER FINANCING SOURCES (USES): Refunding bonds issued Payment to bond refunding escrow agent - - - Issuance of capital debt - - - Bond premium Sale of capital assets Transfers in Transfers out - - 2,080 100,000 3,033,042 4,549,681 (3,287,452) Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year as restated Fund balances, end of year 533,980 $ 2,355,780 (28,401) (2,893,427) 279,570 4,523,360 3,014,781 757,107 4,079,341 28,748,008 3,508,471 7,703,953 31,762,789 The notes to the financial statements are an integral part of this statement 28 $ 4,265,578 (437,647) $ 11,783,294 Special Assessment Bond Fund $ Capital Projects Bond Construction - $ $ 11,869,702 Total Governmental Funds $ 48,806,758 - - 3,068,343 19,584,399 - 6,231,476 1,081,517 15,313,742 2,894,898 - - 2,894,898 - - - 2,734,095 - - - 1,952,731 - - - 1,428,401 - - 44,100 1,651,032 1,909 14,738 174,591 722,878 - - 94,980 541,340 - - 551,474 1,813,164 2,896,807 6,246,214 16,884,707 97,443,438 - 127,709 - 9,041,946 - 2,609 - 26,567,511 - 31,984 - 1,031,983 - - 3,771,309 8,212,772 - 133,259 5,198,992 11,446,096 - 7,290 97,202 10,621,311 2,415,000 - 2,993,508 8,287,457 566,183 250,568 1,557,022 3,126,469 - 17,036,766 279,135 24,062,755 2,981,183 17,590,185 13,897,168 102,398,300 (84,376) (11,343,971) 2,987,539 (4,954,862) - - 8,270,000 8,270,000 - - (9,382,710) (9,382,710) - 5,500,000 1,100,000 6,600,000 - 98,954 1,218,713 1,317,667 - 91,106 830 727,996 - 19,829 2,144,523 12,102,855 - - (5,450,161) (11,659,441) - 5,709,889 (2,098,805) (84,376) (5,634,082) 510,147 $ - Other Governmental Funds 425,771 10,155,126 $ 4,521,044 $ 7,976,367 888,734 3,021,505 26,707,380 77,333,085 27,596,114 29 $ 80,354,590 CITY OF FLAGSTAFF RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 Net change in fund balances - total governmental funds $ 3,021,505 Amounts reported for governmental activities in the statements of activities are different because (also see note II. B.): Government funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Expenditures for capital assets Less current year depreciation 24,062,755 (13,275,318) 10,787,437 (14,870,000) (1,317,667) 1,361,303 (86,136) (728,548) 8,287,457 179,784 8,565,000 817,710 (86,638) 321,387 2,443,652 Some items reported in the governmental funds are sources and uses of current financial resources and therefore are not reported as revenues or expenses in the statement of activities. These items include: Capital-related debt issued Premium on debt issued Donated capital Compensated absences Other postemployment benefits Principal payments on debt Interest payment on debt Partial advance refunding on debt Advance refunding loss Refunding loss amortization Bond premium amortization Certain expenditures in the governmental funds that provide future financial uses are not included in the statement of activities because they were recognized in a prior period. However, other expenditures that are unrecognized in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the statement of activities. Issuance of promissory note receivable 102,000 102,000 Certain transactions related to capital assets in the governmental funds reflect proceeds. However, in the statement of activities these transactions reflect net gain (loss). Loss on disposal of capital assets Transfer of capital assets to business-type activities The notes to the financial statements are an integral part of this statement 30 (486,765) (3,352,114) (3,838,879) (continued) CITY OF FLAGSTAFF RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 Certain revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. However, other revenues that are unearned in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the statement of activities. Special assessments Property tax Fines and forfeitures (2,334,790) (86,303) (8,707) (2,429,800) Internal service funds are used by management to charge the costs of certain activities, such as the City's self-insurance program to individual funds. The following activities of the internal service fund is reported with governmental activities. Net allocated (loss) assigned to governmental activities Investment income 2,393 26,160 28,553 Change in net position of governmental activities - statement of activities $ The notes to the financial statements are an integral part of this statement (concluded) 31 10,114,468 CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Taxes $ Intergovernmental Grants and entitlements 23,676,706 $ 23,676,706 $ 25,084,848 $ 1,408,142 16,111,938 16,111,938 16,516,056 2,894,407 2,894,407 1,726,644 (1,167,763) 404,118 (178,258) Charges for services 2,912,353 2,912,353 2,734,095 Licenses and permits 1,388,960 1,388,960 1,952,731 563,771 Fines and forfeitures 1,977,038 1,977,038 1,428,401 (548,637) Rents 1,426,893 1,426,893 1,606,932 180,039 207,500 207,500 202,597 12,120 12,120 440,360 428,240 (771,756) Investment earnings Contributions Miscellaneous (4,903) 1,165,516 1,165,516 393,760 51,773,431 51,773,431 52,086,424 312,993 General administration 8,470,643 8,470,643 8,003,390 467,253 Management services 3,171,917 3,171,917 3,185,950 Fire 10,346,646 10,346,646 9,541,383 805,263 Police 17,556,777 17,556,777 17,091,853 464,924 4,293,997 4,293,997 4,126,187 167,810 10,674,003 10,674,003 8,308,991 2,365,012 Total revenues EXPENDITURES: Current: Community development Public works Economic vitality Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 612,978 612,978 3,526,720 3,526,720 (14,033) 226,897 386,081 (970,068) 4,496,788 1,565,000 1,565,000 67,643 1,497,357 60,218,681 60,218,681 49,582,226 10,636,455 2,504,198 10,949,448 (8,445,250) (8,445,250) 4,000,000 4,000,000 - 30,300 30,300 533,980 3,506,081 3,506,081 3,033,042 (3,287,452) OTHER FINANCING SOURCES (USES): Issuance of capital debt Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year 503,680 (473,039) (8,991,479) (8,991,479) (1,455,098) (1,455,098) 279,570 1,734,668 (9,900,348) (9,900,348) 2,783,768 12,684,116 19,552,029 - 19,552,029 $ (4,000,000) 19,552,029 9,651,681 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 9,651,681 $ 22,335,797 $ 2,783,768 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 231,013 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 32 3,014,781 5,704,027 $ 12,684,116 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Actual Amounts Budgetary Basis 6,155,798 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ Investment earnings 6,155,798 $ 6,274,104 $ 6,000 Contributions 540,000 540,000 - Miscellaneous - - 867,931 867,931 6,701,798 6,701,798 7,162,744 460,946 109,645 109,645 109,645 - 66,108 66,108 66,108 - Total revenues 20,709 118,306 6,000 14,709 (540,000) EXPENDITURES: Current: General administration Management services Community development 7,310,840 7,310,840 2,981,067 4,329,773 Public works 8,859,022 8,859,022 7,123,603 1,735,419 Economic vitality Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 13,892 13,892 13,892 - 638,062 638,062 634,682 3,380 100,000 100,000 - 100,000 17,097,569 17,097,569 10,928,997 6,168,572 (10,395,771) (10,395,771) (3,766,253) 6,629,518 - - OTHER FINANCING SOURCES (USES): Bonds issued 36,000 Sale of capital assets Transfers in Transfers out - - 2,080 9,102,904 9,102,904 4,549,681 (28,401) Total other financing sources (uses) Net change in fund balances budgetary basis Budgetary fund balances, beginning of year Budgetary fund balances, end of year 36,000 $ (28,401) 9,110,503 9,110,503 (1,285,268) (1,285,268) 2,546,353 2,546,353 1,261,085 The notes to the financial statements are an integral part of this statement 33 $ 1,261,085 2,080 (4,553,223) (28,401) - 4,523,360 $ (4,551,143) 757,107 2,078,375 2,546,353 - 3,303,460 $ 2,078,375 CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Taxes $ Grants and entitlements Investment earnings Contributions Miscellaneous Total revenues 11,081,675 $ 11,081,675 $ 11,832,359 $ 750,684 1,239,339 1,239,339 - (1,239,339) 89,000 89,000 92,557 3,557 - - 6,000 6,000 4,500,000 4,500,000 - (4,500,000) 16,910,014 16,910,014 11,930,916 (4,979,098) 41,592 41,592 41,592 - EXPENDITURES: Current: General administration Management services Community development Economic vitality Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 251,419 251,419 251,419 - 3,446,341 3,446,341 391,209 3,055,132 5,455 5,455 5,455 - 6,943,202 6,943,202 6,686,784 256,418 - - 42,082 10,688,009 10,688,009 7,418,541 3,269,468 (42,082) 6,222,005 6,222,005 4,512,375 (1,709,630) - - 100,000 OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 100,000 2,045,634 2,045,634 2,355,780 (7,332,486) (7,332,486) (2,893,427) 4,439,059 310,146 (5,286,852) (5,286,852) (437,647) 4,849,205 935,153 935,153 4,074,728 3,139,575 4,397,568 4,397,568 4,397,568 - 5,332,721 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 5,332,721 $ 8,472,296 $ 4,074,728 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 4,613 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 34 4,079,341 $ 3,139,575 35 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position Proprietary Funds June 30, 2014 Business-type Activities - Enterprise Funds ASSETS Current assets: Cash and investments Receivable, net Interfund receivables Intergovernmental receivables Prepaid items Inventory Total current assets Noncurrent assets: Restricted cash and investments Refundable deposit Capital assets, non-depreciable Capital assets, depreciable, net Total non-current assets Total assets Water and Wastewater Fund $ LIABILITIES Current liabilities: Accounts payable Accrued payroll Construction retainage payable Accrued payroll and compensated absences Interest payable Advanced revenue Claims and judgements Interfund payable Deposits payable Bonds and lease payable, net - current Total current liabilities Noncurrent liabilities: Compensated absences Net OPEB obligation Claims and judgements Landfill closure and postclosure care costs Capital lease payable Bonds and notes payable, net Total noncurrent liabilities Total liabilities Environmental Services Fund 17,190,900 3,704,612 2,015,000 123,503 193,801 23,227,816 $ 7,507,009 1,212,749 8,719,758 Airport Fund $ 44,825 34,582 2,813,688 2,893,095 1,593,915 29,596 15,139,753 245,560,936 262,324,200 285,552,016 10,812,610 1,890,420 6,959,217 19,662,247 28,382,005 3,241,416 37,375,168 40,616,584 43,509,679 742,948 98,077 195,277 185,599 696,132 788,066 309,407 2,904,056 5,919,562 93,895 102,364 111,390 49,228 29,447 386,324 366,320 15,162 256,560 15,901 14,641 2,015,000 20,647 180,603 2,884,834 192,744 369,176 2,281,026 36,556,208 39,399,154 45,318,716 122,406 285,328 7,649,302 8,057,036 8,443,360 13,596 48,182 1,690,570 78,532 1,830,880 4,715,714 218,764,122 8,849,637 38,410,319 1,593,915 19,875,263 240,233,300 894,594 10,194,414 19,938,645 383,646 38,793,965 NET POSITION Net investment in capital assets Restricted: Grant and contributions purposes Capital projects Unrestricted Total net position $ The notes to the financial statements are an integral part of this statement 36 $ $ Governmental Activities Business-type Activities - Enterprise Funds Total Other Proprietary Fund Stormwater Fund $ $ 792,800 162,736 955,536 $ 818,645 47,117 33,751 899,513 Total $ 26,354,179 5,161,796 2,015,000 2,937,191 33,751 193,801 36,695,718 Internal Service Fund $ 4,823,004 35,032 4,858,036 14,620,710 24,915,087 39,535,797 40,491,333 1,458,456 3,552,905 5,011,361 5,910,874 12,406,525 29,596 36,350,755 318,363,313 367,150,189 403,845,907 4,858,036 101,191 9,960 18,287 6,370 135,808 115,426 52,125 132,110 5,171 304,832 1,419,780 225,563 470,124 371,385 696,132 984,045 2,015,000 364,672 3,084,659 9,631,360 295,850 98,863 394,713 5,927 40,580 46,507 182,315 207,322 73,039 280,361 585,193 541,995 816,305 7,649,302 3,971,596 36,634,740 49,613,938 59,245,298 120,832 120,832 515,545 39,517,510 5,011,361 310,552,949 - 791,508 40,309,018 4,053 310,267 5,325,681 4,053 2,488,509 31,555,098 344,600,609 4,342,491 4,342,491 $ $ Some amounts reported for business-type activities in the statement of net position are different because certain internal service fund assets and liabilities are included with business-type activities Net position of business-type activities $ (426,779) 344,173,830 37 $ CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2014 Business-type Activities - Enterprise Funds Water and Wastewater Fund OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ 23,432,153 74,255 23,506,408 OPERATING EXPENSES: Personal services Contractual services, materials and supplies Insurance claims and expenses Depreciation and amortization Total operating expenses Operating income (loss) NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements Gain (loss) on disposal of capital asset Passenger facility charges Interest expense Total non-operating revenues (expenses) Income (loss) before capital contributions and transfers Capital contributions related to grants Capital contributions from external sources Capital contributions from internal sources Transfers in Transfers out Change in net position $ 1,504,703 33,590 1,538,293 590,100 936,430 (2,464,323) 136,384 32,553 (1,450,541) (1,281,604) 65,796 7,771 73,567 5,142 98 250,545 (115,786) 139,999 (691,504) 1,009,997 (2,324,324) 240,233,300 The notes to the financial statements are an integral part of this statement 38 $ 4,083,578 6,326,829 1,227,504 11,637,911 670,719 564,137 2,767,760 4,002,616 (322,671) 687,326 233,090,229 $ 12,490,237 84,104 12,574,341 Airport Fund 4,851,030 9,888,758 8,176,520 22,916,308 228,679 4,483,941 3,279,750 (157,795) 7,143,071 Total net position, beginning of year as restated Total net position, end of year Environmental Services Fund 2,833,675 43,000 (33,567) 518,784 19,251,319 $ 19,938,645 38,275,181 $ 38,793,965 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund $ 1,465,522 641 1,466,163 Total Other Proprietary Fund $ 491,228 592,580 493,104 1,576,912 $ 1,001,862 4,684,161 404,767 6,090,790 (110,749) 6,013 6,013 39,866,799 350,124 40,216,923 $ 11,098,417 22,056,465 13,069,655 46,224,537 7,173,563 7,173,563 7,169,933 7,169,933 (4,959,072) (6,007,614) 3,630 4,051,138 4,051,138 213,335 4,051,236 40,324 250,545 (1,566,327) 2,989,113 26,160 26,160 (104,736) (907,934) (3,018,501) 29,790 36,705 72,364 338,573 (310,954) 31,952 252,529 (655,405) 3,314,883 4,520,646 3,352,114 381,573 (824,987) 7,725,728 29,790 40,277,066 $ 974,184 157,534 1,131,718 Internal Service Fund Total 40,309,018 $ 5,981,086 336,874,881 5,325,681 $ 344,600,609 Some amounts reported for business-type activities on the statement of activities are different because the net revenue (expense) of certain internal service funds is reported with business-type activities Change in net position of business-type activities $ 1,237 7,726,965 39 4,312,701 $ 4,342,491 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2014 Business-type Activities - Enterprise Funds Water and Wastewater Fund Cash flows from operating activities: Receipts from customers Interfund services provided Other receipts Payments to suppliers Interfund services used Interfund reimbursement used Payments to employees Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Transfer from other funds Transfer to other funds Interfund loans provided Interfund loans received Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Receipts from grantors Capital contributions Acquisition and construction of capital assets Principal payments on capital debt Interest paid on capital debt Proceeds from capital debt Proceeds from sales of capital assets Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest received on investments Net cash provided (used) by investing activities $ Cash and cash equivalents at end of year $ Classified as: Cash, cash equivalents, and investments Restricted cash and cash equivalents $ $ The notes to the financial statements are an integral part of this statement 40 12,507,529 213,750 (4,831,701) (3,166) (1,375,538) (3,986,807) 2,524,067 Airport Fund $ 1,542,004 284,135 (208,444) (25,639) (325,523) (660,743) 605,790 (157,795) (2,015,000) - (322,671) - 43,000 (33,567) 2,015,000 (2,172,795) (322,671) 2,024,433 151,860 1,839,657 (5,259,082) (3,798,136) (1,516,229) 46,169 32,553 (47,884) 6,695 232,741 (2,709,988) (170,898) (115,786) - (8,503,208) (41,189) (2,763,931) 129,020 129,020 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Totals 24,113,068 388,430 (7,397,721) (85,243) (1,841,700) (4,713,835) 10,462,999 Environmental Services Fund (83,984) 18,868,799 18,784,815 17,190,900 1,593,915 18,784,815 64,527 64,527 $ $ $ 2,224,734 16,094,885 18,319,619 7,507,009 10,812,610 18,319,619 4,497 4,497 $ $ $ (129,211) 174,036 44,825 44,825 44,825 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund $ 1,442,402 49,726 641 (411,162) (117,448) (489,882) 474,277 Total Other Proprietary Fund $ 338,573 (310,954) 27,619 $ $ $ 40,720,881 651,906 442,310 (17,285,914) (352,949) (3,660,209) (10,827,440) 9,688,585 $ 7,177,896 (7,194,207) (16,311) - 381,573 (824,987) (2,015,000) 2,015,000 - - (443,414) - (791,853) - 4,303,667 (194,234) - 4,688,268 1,839,657 (9,003,041) (3,969,034) (1,632,015) 46,169 39,248 - (791,853) 4,109,433 (7,990,748) - 6,438 6,438 $ 1,115,878 157,534 (4,436,886) (238,901) (976,173) (4,378,548) Internal Service Fund Total (283,519) 1,076,319 792,800 792,800 792,800 - $ $ $ (269,115) 1,087,760 818,645 818,645 818,645 $ $ $ 204,482 204,482 34,062 34,062 1,458,905 37,301,799 38,760,704 17,751 4,805,253 4,823,004 26,354,179 12,406,525 38,760,704 (continued) 41 $ $ $ 4,823,004 4,823,004 Statement of Cash Flows Proprietary Funds Year Ended June 30, 2014 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund Airport Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ 590,100 $ 936,430 $ (2,464,323) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 8,176,520 1,227,504 Landfill closure and postclosure costs - 238,906 2,767,760 - Other receipts - - 250,545 951,540 150,584 28,000 - Prepaid items (15,956) - - Inventories (45,019) - - (Increase) decrease in assets: Accounts receivable Allowance for doubtful accounts 89,455 (20,000) Increase (decrease) in liabilities: Accounts payable 625,069 (122,482) 4,531 Accrued payroll, compensated absences 63,431 41,764 240 OPEB 73,764 55,007 9,737 Deposits payable 13,829 (12,550) Advanced revenue Total adjustments Net cash provided (used) by operating activities 1,721 8,904 9,872,899 1,587,637 $ 10,462,999 $ $ 2,644,284 $ (13,512) (18,643) 3,070,113 2,524,067 $ - $ 605,790 Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers Trade-in of capital asset - Capital assets transferred from governmental activities transfer Total noncash investing, capital and financing activities 6,300 3,279,750 $ 5,924,034 The notes to the financial statements are an integral part of this statement 42 $ 6,300 - $ - Governmental Activities Business-type Activities - Enterprise Funds Total Other Proprietary Fund Stormwater Fund $ (110,749) $ $ (6,007,614) $ 3,630 493,104 404,767 13,069,655 - - - 238,906 - - - 250,545 - 26,606 92,480 1,310,665 4,333 - - 8,000 - 49,264 - - 63,970 33,308 (45,019) (40,890) (6,650) 7,996 - 107,659 16,815 163,319 (65,646) 106,842 585,026 580,524 15,696,199 $ $ 36,705 $ - - - (19,941) 9,688,585 $ $ 2,680,989 $ 6,300 $ - $ - 72,364 109,069 (4,378,548) (24,274) (77,879) 114,860 474,277 - 530,198 8,874 - $ $ (4,959,072) Internal Service Fund Total (16,311) - 3,352,114 $ 6,039,403 $ (concluded) 43 - CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2014 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Financial Reporting Entity The City of Flagstaff (the City) was incorporated as a town in 1894 and as a city in 1928. The current City Charter was approved June 29, 1998. The Charter provides for the Council-Manager form of government and the authority to provide municipal services, as limited by the State Constitution. The accounting policies of the City of Flagstaff conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to Governmental Units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. For the year ended June 30, 2014, the City implemented the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB Statement No. 65 amends or supersedes the accounting and financial reporting guidance for certain items previously required to be reported as assets or liabilities, for the determination of major funds and addresses other statement of net position and governmental funds balance sheet presentation. The City implemented the provision of GASB Statement No. 66, Technical Corrections – 2012; an amendment of GASB Statements No. 10 and No. 62. The requirements of this statement will improve financial reporting by resolving conflicting guidance that resulted from the issuance of two prior pronouncements. The City also implemented GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, which improves the accounting and reporting by local governments that extend and receive nonexchange financial guarantees. The implementation of these standards did not have an impact on the financial statements. The City of Flagstaff is a municipal corporation governed by an elected Mayor and six-member council. The accompanying financial statements include the City and all of its component entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities are, in substance, part of the government’s operations and so data from these units are combined with data of the primary government. Discretely presented component units are reported in a separate column in the Government Wide Statement of Net Position and Activities to emphasize they are legally separate from the government. The City of Flagstaff has no discretely presented component units. Blended Component Unit: The Municipal Facilities Corporation (MFC) is a non-profit corporation created by the City for the purpose of constructing, acquiring and equipping municipal facilities. transactions of the MFC are included as if it were part of the City’s operations. For financial reporting purposes, In fiscal year 2001 the MFC issued $4.7 million in bonds for construction on additional facilities owned by the City and currently leased to the United States Geological Survey (USGS). These bonds will be repaid through USGS lease proceeds. In fiscal year 2004 the MFC issued $25 million in bonds for construction of the Fourth Street Overpass and was partially advance refunded in 2012 . The voters approved this debt financing in the May 2000 General Election. These bonds will be repaid with the transportation sales tax that was also approved in the May 2000 Election. 44 Related Organizations: The City of Flagstaff officials are also responsible for appointing board members of other organizations. However, as the City’s control is limited to making the appointments and there is not a significant operational nor a significant financial relationship between these organizations and the City, they are not included as part of these financial statements. B. Government-Wide and Fund Financial Statements The government-wide financial statements (statement of net position and statement of activities) report on the City and its component units as a whole. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported by fees and charges for services. The government-wide statement of activities demonstrates the degree to which the direct expenses of the various functions and segments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Interest on general long-term debt and depreciation expense on assets shared by multiple functions are not allocated to the various functions. Program revenues include: 1) charges to customers or users who purchase, use or directly benefit from goods, services or privileges provided by a particular 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, investment income and other revenues not identifiable with particular functions or segments are included as general revenues. The general revenues support the net costs of the functions and segments not covered by program revenues. Generally, the effect of interfund activity has been removed from the government-wide financial statement. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. Interdepartmental services performed by one department for another are credited to the performing department and charged to the receiving department to reflect the accurate costs of programs. These indirect costs have been eliminated as part of the program expenses reported for the various functional activities. The rates used are intended to reflect full costs in accordance with generally accepted cost accounting principles and are part of the fund statements. Interfund services provided and used are eliminated in the process of consolidation. The government-wide statement of net position reports all financial and capital resources of the government. It is displayed in a format of assets plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) net investment in capital assets, 2) restricted, and 3) unrestricted. Net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in the net position. The portion of unspent related debt proceeds or deferred inflows of resources at the end of the reporting is not included in the calculation of net investment in capital assets; instead that portion of the debt or deferred inflows of resources is included in the same net position component as the unspent amount. Restricted net position is when a constraint placed on their use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or law or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net position not otherwise classified as restricted, is shown as unrestricted. Generally, the City would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. 45 Restrictions of net position imposed by the reporting government, whether by administrative policy or legislative actions of the reporting government, are not shown on the government-wide financial statements. Also part of the basic financial statements are fund financial statements for governmental funds and proprietary funds. The focus of the fund financial statements is on major funds, as defined by GASB Statement No. 34. Although the reporting model sets forth minimum criteria for determination of major funds (a percentage of assets, liabilities, revenues, or expenditures/expenses of fund category and of the governmental and enterprise funds combined), it also gives governments the option of displaying other funds as major funds, which the City has not elected. Other non-major funds are combined in a single column on the fund financial statements and are detailed in combining statements included as supplementary information after the basic 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 funds. 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 recorded as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are prepared on a current financial resources measurement focus and modified accrual basis of accounting. This is the traditional basis of accounting for governmental funds. This presentation is deemed most appropriate to 1) demonstrate legal and covenant compliance, 2) demonstrate the sources and uses of liquid resources, and 3) demonstrate how the City’s actual revenues and expenditures conform to the annual budget. Since the governmental fund financial statements are presented on a different basis than the governmental activities column of the governmental-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements. The proprietary fund financial statements are prepared on the same basis (economic resources measurement focus and accrual basis of accounting) as the government-wide financial statements. Therefore, most lines for the total enterprise funds on the proprietary fund financial statements will directly reconcile to the business-type activities column on the government-wide financial statements. Because the enterprise funds are combined into a single business-type activities column on the government-wide financial statements, certain interfund activities between these funds may be eliminated in the consolidation for the government-wide financial statements, but are included in the fund columns in the proprietary fund financial statements. The net costs/income of the internal service fund is also partially allocated to the business-type activities column on the government-wide financial statements. On the proprietary fund financial statements, operating revenues are those that flow directly from the operations of that activity, i.e. charges to customers or users who purchase or use the goods or services of that activity. Operating expenses are those that are incurred to provide those goods or services. Non-operating revenues and expenses represent items like investment income, interest expense, and other items that do not fit in any other category and are not a result of the direct operations of the activity. The City uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. 46 A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, deferred outlflows of resources, liabilities, deferred inflows of resources, fund equity, revenues and expenditures/expenses. The City uses the following fund categories: Governmental Fund Types Governmental Funds are those through which most of the governmental functions of the City are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. General Fund is the primary operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The General fund will always be considered a major fund in the basic financial statements. Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments or major capital projects) that are legally restricted to expenditures for specified purposes. There are two special revenue funds that are presented as major funds in the basic financial statements. They are the:  Highway User Revenue Fund, which receives and expends the City’s allocation of the Highway User Revenue money. Resources allocated to this fund come mainly from the State and must be used for Street construction, reconstruction and maintenance.  Transportation Tax Fund accounts for the receipt and expenditures of the Transportation Tax money as authorized by voters on May 16, 2000. These resources are restricted to financing improvements in the Areas of the 4th Street overpass project, Safe to School/Pedestrian and Bike projects, Traffic Flow and Safety improvements, Transit Service operations and enhancements, and to repay the bonding related to the 4th Street overpass. Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general longterm obligation principal and interest. The Special Assessment Bond Fund is presented as major in the current year.  Special Assessment Bond Fund, accounts for the accumulation of resources for and the payment of principal, interest and related costs for all improvement district bonds issued by the City and repaid by the special assessment district. Capital Projects Fund is used to account for major capital acquisition and construction separate from ongoing operating activities. Resources for capital projects typically result from the issuance of general obligation or other government debt. Capital Projects Funds are presented as major funds. Permanent Funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs. generated from ongoing plot sales with a portion allocated to perpetuity. Resources are Proprietary Fund Types Proprietary Funds are used to account for the City’s ongoing organizations and activities, which are similar to those found in the private sector and where cost recovery and the determination of net income is useful or necessary for 47 sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, net position, and cash flows. Enterprise Funds are used to account for operations that provide services to the general public for a fee. Under GASB Statement No. 34, enterprise funds are also required for any activity whose principal revenue sources meet any of the following criteria: 1) any activity that has issued debt backed solely by the fees and charges of the activity, 2) if the cost of providing services for an activity, including capital costs such as depreciation or debt service, must legally be recovered through fees and charges, or 3) it is the policy of the City to establish activity fees or charges to recover the cost of providing services, including capital costs. The City has five enterprise funds, four of which are presented as major funds in the basic financial statements.  Water and Wastewater Fund accounts for the City water pumping, treatment and distribution systems and the City wastewater collection, and treatment systems.  Environmental Services Fund accounts for the operations of City refuse and management of the City landfill. A recycling collection services as well as the management of sustainability programs.  Airport Fund that accounts for the construction, operations and maintenance of the City airport.  Stormwater Fund accounts for the construction, operations and maintenance activities of the City stormwater system. Internal Service Fund accounts for the operations that provide services to other departments of the government on a cost-reimbursement basis, thus the internal service fund is presented with the proprietary fund financial statements. The internal service fund represents the self-insurance services provided to other departments and accounts for the risk management function of the City as well as maintaining the costs of the City’s liability insurance and any claims paid under the City’s self-insurance program. These costs are allocated to all operational activities of the City. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds are accounted for using a current financial resources measurement focus whereby only current assets plus deferred outflows of resources, equals current liabilities plus deferred inflows of resources, plus fund balance. Operating statements present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net change in fund balances. Enterprise funds are accounted for on a flow of economic resources measurement focus whereby all assets plus deferred outflows of resources, less liabilities and deferred inflows of resources associated with the operation of these funds, equals net position, as presented on the statement of net position. increases (i.e., revenues) and decreases (i.e., expenses) in net total position. Operating statements present The modified accrual basis of accounting is used by governmental funds. Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures are generally recorded when the related fund liability is incurred, as under accrual accounting. Principal and interest on general long-term debt are recorded as fund liabilities when due. However, debt service 48 expenditures, as well as, expenditures related to compensated absences, claims and judgments are recorded only to the extent they have matured. Revenues susceptible to accrual include property tax, privilege license tax, highway user tax, state shared sales tax, vehicle license tax, and interest earned on investments. Licenses and permits, charges for services, fines and forfeitures, parks and recreation charges and miscellaneous revenues are recorded when received in cash since they are generally not measurable until actually received. Only the portion of special assessment receivables due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. The accrual basis of accounting is followed for all enterprise funds. Revenues are recognized in the accounting period in which they are earned and become measurable, and expenses are recognized when incurred. Enterprise funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund’s principal ongoing operations. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating items. Budgets and Budgetary Accounting The City uses the following procedures in establishing the budgetary data reflected in the accompanying financial statements. • The maximum legal expenditure permitted for the year is the total budget as adopted. The expenditure appropriations in the adopted budget are maintained in the City’s financial system by department within individual funds. Department appropriations may be amended during the year, within administrative guidelines and adopted Council policies. • The initial budget for the fiscal year may be amended during the year in a legally permissible manner. • The City Manager is generally authorized to transfer budgeted amounts within any specific section’s expenditure appropriation. Any budget revisions requiring a transfer between divisions must be approved by the City Council. City manager, human resources, and information technology are example sections of the general administration division. • All unencumbered expenditure appropriations expire at the end of the fiscal year. • Encumbered amounts are re-budgeted in the following year as deemed appropriate and necessary after review by the Budget Committee. Budgetary carry forwards are approved by the City Council as part of the budget adoption process. • All funds of the City have legally adopted budgets with the exception of the internal service fund and perpetual care fund. Formal integration of these budgets into the City’s financial systems is employed as a management control device during the year for all funds. The City prepares its annual budget on a modified cash basis, which differs from GAAP, GASB Statement 34 requires that budgetary comparison statements for the General Fund and major special revenue funds be presented in the annual financial statements. These statements must display original budget, amended budget and actual results on a budgetary basis at the legal level of budgetary control. The City’s legal level of budgetary control is at the division 49 level; however the City’s financial statements are presented at the functional level of detail. Budgetary comparisons provided in the basic financial section are presented for the general fund and major special revenue funds at the division level; these are presented as statements. The supplemental section provides budgetary comparisons for non-major special revenue funds, capital projects funds and debt service funds at the same functional level of detail used in financial statements presentation; these are presented as schedules. D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position Cash and Investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the government to invest in the State’s Local Government Investment Pool (LGIP), in obligations of the U.S. Treasury, commercial paper and repurchase agreements. Investment Income from pooled cash and investments is allocated monthly based on the percentage of a fund’s average daily equity in pooled cash and investments to the total average daily-pooled equity in pooled cash and investments. Investments are stated at fair value based on quoted market prices. The City also has an investment policy. Details of the City’s investment policy can be found in Note IV.A. The LGIP is a part of the State of Arizona Treasurer’s office. The State Board of Deposit provides oversight for the State Treasurer’s pools, and the LGIP Advisory Committee provides consultation and advice to the Treasurer. Investments in the State of Arizona LGIP are stated at fair value, which also approximates the value of the investment upon withdrawal. For purposes of the statement of cash flows, the City considers cash and cash equivalents, including restricted cash and cash equivalents, to be currency on hand, demand deposits with banks, amounts included in pooled cash and investment accounts and liquid investments with a maturity of three months or less. Cash and cash equivalents are included in both unrestricted as well as restricted assets. Receivables and Payables Accounts receivable and taxes receivable, are shown net of an allowance for uncollectible accounts. 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 Coconino County Assessor. September 1 and March 1. Levies are due and payable in two installments on First half installments become delinquent on November 1; second half installments become delinquent on May 1. Interest at the rate of 12% per annum accrues following delinquent dates. Coconino County bills and collects all property taxes, at no charge to the taxing entities. A lien against property assessed attaches on the first day of January preceding assessment and levy thereon. Under Arizona tax laws, there are two property tax levies, primary and secondary. Primary property taxes are not restricted as to use and are used to finance the general operations of the City. Secondary property taxes are restricted for general obligation bonded debt service. The secondary property tax levy is recorded as revenue in a debt service fund and transferred to the Water and Wastewater Fund and the General Obligation Bond Fund. General Obligation bonds are serviced by each of these funds. For fiscal year 2013-2014, primary and secondary property tax collections amounted to $5,527,539 and $5,512,116 respectively. 50 Deferred Outflows of Resources Current refunding and advance refunding resulting in defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt is reported as a deferred outflow of resources or a deferred inflow of resources and recognized as a component of interest expense in a systematic and rational manner over the remaining life of the old debt or the life of the new debt, whichever is shorter. Inventory Inventory is valued at cost, which approximates market, using the weighted average cost method. Inventory consists of expendable supplies held for consumption and is charged to expenditure accounts as consumed. Restricted Assets Certain debt proceeds of the City’s bonds, as well as certain resources set aside for their repayment, are classified as restricted on the balance sheet, or statement of net position, because they are maintained in trust accounts and their use is limited by applicable debt covenants. Typically, restricted assets, committed assets and assigned assets are used prior to using unassigned assets when both are available for the same purpose. Grant Revenue The City, a recipient of grant revenues, recognizes revenues (net of estimated uncollectible amounts, if any), when all applicable eligibility requirements, including time requirements, are met. Resources transmitted to the City before the eligibility requirements are met are reported as deferred revenues. Some grants and contributions consist of capital assets or resources that are restricted for capital purposes – to purchase, construct, or renovate capital assets associated with a specific program. These are reported separately from grants and contributions that may be used either for operating expenses or for capital expenditures of the program at the discretion of the City. Deferred Inflows of Resources Revenues and other governmental fund financial resources are recognized in the accounting period in which they become both measurable and available. When an asset is recorded in governmental funds financial statements but the revenue is not available, the government reports a deferred inflow of resources until such time as the revenue becomes available. Revenue related to property tax and special assessment liens are recorded in governmental funds but the revenue is not available in the current period so it is reported as a deferred inflow of resources. Capital Assets Capital assets, whether owned by governmental activities or business-type activities, are recorded and depreciated (unless the modified approach is used) in the government-wide financial statements. The City has chosen not to apply the modified approach to any networks or subsystems of infrastructure assets. depreciation are shown in the governmental fund financial statements. No long-term assets or Capital assets, including public domain infrastructure (i.e., roads, bridges, curbs and gutters, streets and sidewalks, and other assets that are immovable and of value only to the City) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets as assets with an initial, individual cost of more than $5,000 ($25,000 for capital improvement projects and infrastructure assets) and an estimated useful life greater than three years. Such assets are recorded at historical cost or estimated historical cost if actual amounts are unknown. Donated capital assets are recorded at estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life, are not capitalized. Major improvements are capitalized and depreciated over the remaining useful life of the related asset. 51 Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, if material. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives (land and construction-in-progress are not depreciated): Assets Useful life (years) Buildings 10-50 Improvements 10-20 Machinery and Equipment 5-25 Infrastructure 25-75 Compensated Absences Vacation and sick leave is granted to all regular and part-time permanent employees. The annual amount of vacation time accrued varies depending on classification and years of service. Accumulated vacation leave vests and the City is obligated to make payment if the employee terminates. Sick leave accrues at rates based on the full time equivalency status of each employee. Sick leave is vested with 20 years of service. Sick leave is payable upon termination (if vested) or retirement, up to 50 percent (not more than 520 hours) of accumulated sick leave. For the governmental fund financial statements, the current payroll and current portion of the compensated absences are recorded as a current liability of the applicable funds. Long-term liabilities of governmental funds are not shown on the fund financial statements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the accrued liabilities for compensated absences are recorded as a liability. Other Postemployment Benefits Retirees are allowed to participate in the same healthcare plan as active employees and pay the same premium for this benefit which results in an implicit rate subsidy. Even though the City makes no direct payments on behalf of the retirees the City is required to report this implicit cost for active employees who will be able to continue to purchase health insurance once they retire. To recognize the cost of other postemployment benefits (OPEB) for healthcare over the active service life of the employee rather than on a pay-as-you-go basis, the net OPEB obligation includes the amortized future cost of the unfunded actuarial accrued liability. In the government-wide statements, and proprietary fund types in the fund financial statements, the net OPEB obligations are reported as long-term liabilities in the statement of net position. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight line method, though the GAAP preferred method is the effective rate model. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs in the period in which the bonds are issued. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuance 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. 52 Interfund Transactions Interfund transactions, consisting of services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as a reimbursement reducing expenditures in the fund performing the services. Exceptions include water sales, sewer charges, and environmental service charges that are recorded as revenue in the enterprise funds and expenses or expenditures in the department receiving the service. In addition, transfers are made between funds to shift resources from a fund legally authorized to receive revenue to a fund authorized to expend the revenue. Fund Balance In the fund financial statements, restricted fund balance is defined as that portion of fund balance that can be spent only for the specific purposes stipulated by constitution, external resource or through enabling legislation. Committed fund balance includes amounts constrained to specific purposes determined by a formal action of the City itself, using its highest level of decision-making authority (i.e. City Council). To be reported as committed, amounts cannot be used for any other purpose unless the City takes the same highest level action to remove or change the constraint, this action would represent a city ordinance. Assigned fund balance amounts are intended to be used by the government for specific purposes but do not meet the criteria to be restricted or committed. Intent can be expressed by the City Council or by the budget committee with final review completed during the annual budget process; the City has no formal policy in place. Assigned fund balance represents the remaining amount that is not restricted or committed in governmental funds other than the general fund, which is classified as unassigned. Nonspendable fund balance represents amounts that are required to be maintained intact, such as inventories, and nonexpendable portion of permanent funds. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Standard and Change in Accounting Principle The implementation of GASB Statement No. 65 is a change in accounting principle, which cause certain prior period net position/fund balances to be restated. Under previous accounting standards, bond issuance costs were expensed in the year incurred as part of the governmental funds, then were deferred and amortized over the life of the bonds in the government-wide and proprietary fund statements. GASB Statement No. 65 requires that bond issuance costs no longer be deferred; causing an adjustment to beginning net position that reflects the removal of unamortized bond issuance costs. The City also elected to change the way debt service is recognized as related to the application of early recognition related to debt service within the governmental funds. This application is allowable under the standards if certain criteria are in place however, the City has elected not to apply early recognition as a way to best align financial reporting with other municipalities and common practices. The following restated net positions are part of the government-wide financial statements: 53 Governmental Fund Balance at Fund Balance Restatement June 30, 2013 General fund Highway user revenue fund $ 28,324,180 3,508,471 Other governmental funds Total fund balances 22,943,320 $ 71,038,408 Transportation fund Special assessment bond fund Capital projects bond fund Change in accounting principle-debt principal $ 5,872,664 234,647 10,155,126 385,000 - Change in accounting principle-debt interest $ 1,560,000 $ 2,993,508 4,938,508 38,828 - Governmental Fund Balance at July 1, 2013 $ 271,289 275,500 - $ 770,552 1,356,169 28,748,008 3,508,471 7,703,953 510,147 10,155,126 $ 26,707,380 77,333,085 II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of Certain Differences between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Position The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual accounting basis while the government-wide financial statements are prepared on a long-term economic resources measurement focus and accrual accounting basis. Reconciliation briefly explaining the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements immediately follow each fund financial statement. 54 Reconciliation of Governmental Funds Balance Sheet and the government-wide Statement of Net Position: Total Long-Term Internal Reclass Statement of Governmental Capital Assets - Service and Net Position Funds Assets (1) Liabilities (2) Fund (3) Eliminations (4) Totals A s s ets Cash and cash equivalents $ Accounts receivable, net 69,081,368 $ - 7,222,159 - 116,762 - Intergovernmental receivables 2,249,179 Special assessments receivable 8,561,461 Interest receivable Interfund receivable Inventory Restricted cash and cash equivalents Refundable deposits $ - $ 4,823,004 299,538 $ - $ - 7,550,977 - 5,752 - 122,514 - - - - 2,249,179 - - - - 8,561,461 110,000 - - 491,439 - - - - 491,439 8,803,155 - - - - 8,803,155 426,779 (110,000) 426,779 112,900 Promissory note forgivable 112,900 - Capital assets Total Assets 73,904,372 29,280 - 102,000 - - - 102,000 - - 307,939,075 - 307,939,075 96,748,423 307,939,075 401,538 5,284,815 - - 1,138,519 - (110,000) 410,263,851 Defer r ed O u tflo ws o f Res o u r c es Deferred loss on bond refunding - 1,138,519 Total assets and deferred outflows of resources $ 96,748,423 $ 307,939,075 $ 1,540,057 $ 5,284,815 $ (110,000) $ 411,402,370 L iab ilities Accounts payable $ Accrued payroll & compensated absenc 4,798,880 $ - $ - $ 295,850 $ - $ 5,094,730 1,116,903 - - - Interfund payable 110,000 - - - Advanced revenue 496,189 - - - - 496,189 1,106,270 - - - - 1,106,270 - - 3,383,336 Interest payable Guaranty and other deposits Unamortized bond premium - - Unamortized loss on debt refunding 1,176,384 3,383,336 - - 1,116,903 - - 1,176,384 (110,000) - - Compensated absences - - Claims and judgements - - Other postemployment benefits - - 3,704,242 - Unmatured long-term debt Total liabilities 3,730,325 - - 83,089,506 7,628,242 - 95,083,793 219,695 515,545 - 3,730,325 - 219,695 - 3,704,242 (110,000) 83,089,506 103,117,580 Defer r ed in flo ws o f r es o u r c es 204,554 - (204,554) - - - Unavailable revenue - special assessme Unavailable revenue - property taxes 8,561,037 - (8,561,037) - - - Total deferred inflows of resources 8,765,591 - (8,765,591) - - - Fu n d Balan c e - Net Po s itio n Fund balance/Net Position Total liabilities, deferred inflows and fund balance-net position $ 80,354,590 307,939,075 96,748,423 $ 307,939,075 55 (84,778,145) 4,769,270 - 308,284,790 $ 1,540,057 $ 5,284,815 $ (110,000) $ 411,402,370 (1) Capital assets (land, buildings, equipment, etc.) used in governmental activities are purchased or constructed with the costs of those assets are reported as expenditures in governmental funds, and thus a reduction in fund balance. However, the statement of net position includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation $ $ 501,516,989 (193,577,914) 307,939,075 (2) Certain receivables are not recognized in the governmental funds, but are earned in the statement of net position. Promissory note forgiveable Court receivables $ 102,000 299,538 401,538 Certain defered outflows of resources are not recognized in the governmental funds, but are reported in the statement of net positions. Deferred loss on bond refunding $ 1,138,519 Long-term liabilities 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 fund statement. All liabilities, both current and long-term are reported in the statement of net position. Governmental bonds payable Governmental interest payable Compensated absences $ Other postemployment benefits 1,176,384 5,381,014 3,704,242 Unamortized bond premium Subtotal Less: current portion compensated absences 83,089,506 3,383,336 $ 96,734,482 1,650,689 95,083,793 Revenue for the long-term special assessment receivables and property tax shown on the governmental fund statements is not reflected on the statements of net position. Special assessment Property tax $ $ 8,561,037 204,554 8,765,591 (3) Internal service funds are used by management to charge the costs self insurance to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position, but are not included on the governmental fund balance sheet. ISF net position (4) $ 4,769,270 Certain interfund transactions between governmental activities and between business-type activities are eliminated in the consolidation of those activities for the statement of net position. Interfund receivables Interfund payables $ $ 56 110,000 (110,000) - 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 Reconciliation of Governmental Funds Statements of Revenues, Expenditures and Changes in Fund Balance and the government-wide Statement of Activities: Total Capital Long-Term Internal Adjustments Statement of Governmental Related Revenues/ Service and Activities Funds Items (1) Expenses (2) Fund (3) Eliminations (4) Totals R e ve nue s a nd Othe r Source s Taxes $ 48,806,758 $ - $ (86,303) $ - $ - $ 48,720,455 Intergovernmental 19,584,399 - - - (3,917,431) 15,666,968 Grants and entitlements 15,313,742 - - - 3,917,431 19,231,173 Special assessments 2,894,898 - Charges for services 2,734,095 - Licenses and permits 1,952,731 Fines and forfeitures 1,428,401 Rent - - 560,108 - - - 2,734,095 - - - - 1,952,731 - (8,707) - - 1,419,694 1,651,032 - - - - 1,651,032 Investment earnings 722,878 - - 26,160 - 749,038 Contributions 541,340 - - - 1,902,643 - - 1,813,164 26,160 - 96,401,101 Miscellaneous 1,361,303 1,813,164 Total revenue 97,443,438 (2,334,790) - - 1,361,303 (2,429,800) E xp e nd iture s/E xp e nse s General governmental Public safety 9,041,946 563,652 193,489 (291) 26,567,511 1,852,972 310,480 (852) 933,714 - 10,732,510 28,730,111 Public works 1,031,983 237,412 52,689 (39) 251,496 Economic and physical development 8,212,772 240,648 (19,060) (250) 584,386 Culture and recreation 11,446,096 1,833,078 90,905 (397) (450,207) 12,919,475 Highways and streets 10,621,311 8,547,556 (564) (1,319,389) 17,698,346 (150,568) Principal retirement 8,287,457 - (8,287,457) - - Interest and other charges 3,126,469 - (179,784) - - Capital outlay Total expenditures/expenses 24,062,755 (24,062,755) 102,398,300 (10,787,437) (7,989,306) - - (2,393) - 1,573,541 9,018,496 2,946,685 83,619,164 OT HE R FIN AN CIN G SOUR CE S (USE S): Issuance of capital debt 14,870,000 Payment to bond refunding escrow agent Bond (discount) premium Sale of capital assets - - - 9,382,710 - - - 1,317,667 - (1,317,667) - - - - - 727,996 Transfers in Transfers out Total other financing sources (uses) Net change for the year - (9,382,710) $ - (14,870,000) (486,765) 12,102,855 - - - (11,659,441) - - - 7,976,367 3,021,505 (486,765) $ 11,661,975 57 $ (6,804,957) (1,245,451) $ 28,553 - 241,231 12,102,855 (3,352,114) (15,011,555) (3,352,114) $ (3,352,114) (2,667,469) $ 10,114,468 (1) When capital assets that are to be used in the 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 useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year. Capital outlay Depreciation expense $ Disposal of capital assets Donated capital assets 24,062,755 (13,275,318) (486,765) $ 1,361,303 11,661,975 (2) Special assessment principal payments received are reported as revenue on the governmental fund statements, but are reductions to the outstanding special assessment debt for government-wide reporting. Property tax revenue not received within 30 days of year end are unearned for governmental fund reporting, but are not for governmentwide reporting. Special assessment received Property tax Court revenue $ (2,334,790) $ (2,429,800) (86,303) (8,707) When bonds are issued the proceeds and related premiums are reported as an other financing sources (uses) in the governmental funds. However, the bond premium and any loss on bond refunding are amortized (expensed) over the life of the bonds. Capital debt issued Bond premium $ Amortization of bond premium Amortization of refunding loss on debt Partial advance refunding of debt (14,870,000) (1,317,667) 321,387 $ (86,638) 9,382,710 (6,570,208) 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. Delivery of forgivable promissory note Accrual of long-term compensated absences Accrual of bond interest Accrual of other postemployment benefits $ $ 102,000 (86,136) 179,784 (728,548) (532,900) 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 City as a whole, however, the principal payments reduce the long-term liabilities in the statement of net position and do not result in an expense in the statement of activities Principal bond payments $ $ 8,287,457 8,287,457 (3) Internal service funds are used by management to charge the costs of self insurance to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. Revenue Expenditures $ $ 26,160 2,393 28,553 (4) Certain interfund transactions between governmental activities and between business-type activities are eliminated in the consolidation of those activities for the statement of net position. Transfer of capital assets to enterprise fund 58 $ $ (3,352,114) (3,352,114) Fund Balance Classification Fund balances for governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of nonspendable, restricted, committed, assigned, and unassigned designate the relative strength of the constraints placed on how the amounts can be spent. Classification of fund balances imposed by the reporting government, whether by administrative policy or legislative action of the City Council, are shown in aggregate on the government fund financial statements, but not on the proprietary statement of net position. Restricted net position on the government-wide financial statements reflects restrictions imposed by external sources. Nonspendable fund balance represents amounts that are nonspendable such as inventories and nonexpendable portion of permanent funds. Restricted fund balances represent constraints placed on the use of resources imposed externally by creditors, grantors, contributors, or laws and regulations of other governments. Resources imposed by constitutional provisions of enabling legislation that allows the ability to levy, charge, or mandate payment of resources are also classified as restricted. Committed fund balance includes amounts that can be used only for the specific purposes determined by adoption of a city ordinance by the City Council, the government’s highest level of decision-making authority. A formal action would also be required to modify or rescind an established commitment as related to the adopted city ordinance. Assigned fund balance amounts are intended to be used by the government for specific purposes but do not meet the criteria to be restricted or committed. Assigned fund balance is expressed by the direction of the City Council and budget committee as part of the annual budgeting process. Authority to assign amounts used for specific purposes is confirmed as part of the annual budgeting process, the City has no formal policy that establishes this practice. Unassigned fund balance represents the remaining amount that is not restricted, committed, nonspendable nor assigned in the general fund. Consideration is made that committed amounts are reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes which both restricted and unrestricted fund balance is available. Also, committed, assigned, or unassigned amounts are considered to have been spent when expenditure is incurred for purposes for which amounts in unrestricted fund balance classification could be used. Absent of a minimum fund balance policy, the City, through the budgeting process establishes a minimum fund balance level to maintain as part of that process. A minimum balance of 12% is suggested in the general fund and a 10% fund balance is suggested for special revenue and enterprise funds. 59 Governmental fund balances as of June 30, 2014 are as follows: General Fund Special Other Total Highway User Transportation Capital Assessment Governmental Governmental Revenue Fund Fund Projects Fund Bond Fund Funds Funds Fund balances: Nonspendable: Perpetual care $ - Inventory $ 440,644 - $ - - $ - - $ - - $ - 220,682 50,795 $ 220,682 491,439 Restricted for: Library services - - - - - 952,750 952,750 Library branch services - - - - - 1,027,965 1,027,965 1,563,857 Library programs board directed Court improvements and operatio Debt services - - - - - 1,563,857 846,370 - - - - - 846,370 - - - - 425,771 13,822,234 14,248,005 Regional planning - - - - - 45,377 45,377 Street improvements - 4,265,578 3,938,021 - - - 8,203,599 Transit - - 3,618,323 - - - 3,618,323 Economic development - - - - - 1,343,780 1,343,780 Arts and science - - - - - 502,423 502,423 Culture and recreation - - - - - 3,450,364 3,450,364 Perpetual care Development fee projects Other capital projects - - - - - 18,684 18,684 806,073 - - - - - 806,073 45,890 - 4,226,950 4,521,044 - 4,597,203 13,391,087 Assigned to: Court services 47,960 - - - - - 47,960 Capital reserve 6,927,183 - - - - - 6,927,183 Real estate Unassigned: Total fund balances 1,088,855 - - - - - 1,088,855 21,559,814 - - - - - 21,559,814 $ 31,762,789 $ 4,265,578 $ 11,783,294 $ 4,521,044 $ 425,771 $27,596,114 $80,354,590 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Budget Basis of Accounting The City's accounting records for general government operations (general, special revenue, and debt service funds) are maintained on a basis consistent with Generally Accepted Accounting Principles (GAAP) with measurable revenues recorded when they become available to finance expenditures in the current fiscal year. "Available" is defined as: collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures, other than principal and interest on debt, are recognized in the accounting period in which the liability arises. State statute allows for encumbrances to be recognized for a 60-day period following the end of the prior fiscal year as uses of prior year appropriations. To ensure that appropriations do not lapse, departments are directed to re-budget for all items delivered after June 30. For the enterprise funds, the annual budget is prepared on a basis that differs from GAAP because state law requires capital purchases and debt service payments to be budgeted as expenses, and bond proceeds and grants that are to be utilized are to be budgeted as revenues. 60 The accounting and budgeting systems for the City are in accordance with Generally Accepted Accounting Principles (GAAP) format, with minimal variances between the two systems. Budget basis for enterprise funds differ primarily due to state laws. The major differences are as follows:  Encumbrances (contractual commitments) are considered the equivalent of expenditures. Encumbrances at year-end for goods or services, which are not received prior to the end of the fiscal year, are cancelled.   Fund balances reserved to inventory and bonded debt are not included in the budget. Certain expenditures, such as depreciation, compensated absences and landfill closure and post closure accrual, are not included in the budget.   Enterprise funds budget capital expenditures and debt service payments as expenses. Enterprise funds budget bond proceeds as revenues. The City will utilize a number of different fund types to segregate the financial activity within the City either due to regulatory reasons or as designated internally. The fund classifications are Governmental funds, Proprietary funds, and Fiduciary funds. Review and Approval Issues presented during the review and approval period include discussion topics of the Council during the fall and spring retreats. The fall and spring retreats were held in November and February respectively, to give City staff the opportunity to present major discussion points to Council and the public. The goal is for Council to make policy decisions and direct staff in preparing the budget. This provides adequate time for the Council to gather input on major budget issues prior to preparation of the budget. The City Council holds Study Sessions in April. The Council reviews and discusses the issue papers included in the Budget Review Book as well as all personnel recommendations, capital equipment recommendations, and the capital improvement plan. The Council arrives at a consensus for all decisions needed. The Study Sessions provide the opportunity for City management, departments, and the public to offer information and recommendations to the City Council. The proposed budget is presented to Council for tentative adoption on or before the third Monday in June. Two public hearings are held on the content of the budget. State law requires the operating budget to be all-inclusive. Therefore, the budget includes provisions for contingent revenues, e.g., passengers facility charges, and expenditures that cannot be accurately determined when the budget is adopted, e.g., grants. The Resolution adopting the annual budget requires Council authorization for any expenditure from contingencies, as well as transfer of budget authority between departments. The City operates under the State Expenditure Limitation with a one-time adjustment to the base. The adjustment provided for an increase to the base limit to allow for the expenditure of funds resulting from the addition of a 2% Bed, Board, & Beverage Tax. Flagstaff is not a Home Rule city. Alternative Home Rule Expenditure Control municipalities require voter approval every four years. The adopted budget reflects the total funds appropriated. Certain exclusions are allowed by the state [e.g., bond proceeds, debt service, grants] in computing the Expenditure Limitation and this total cannot be exceeded. Budget authority can be transferred between line items within a section. At year-end, division budgets are reviewed and budget authority is transferred from contingencies by Resolution, if between divisions, as necessary. Council can also amend total appropriations for a division during the year by Resolution as long as there is a corresponding increase/decrease in another division so that the expenditure limitation is not exceeded. 61 IV. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments The City maintains a cash and investment pool that is available for use by all funds. Each fund type’s portion of this pool is displayed on the government-wide Statement of Net Position as “Cash and cash equivalents,” “Cash with fiscal agents,” “Investments,” and “Restricted cash and investments.” Deposits At June 30, 2014, the carrying amount of the City’s deposits was $23,169,365 and the bank balance was 23,733,069. The $563,704 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2014. Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. Statutes and the City’s investment policy require collateral for demand deposits, certificates of deposit, and repurchase agreements at 102 percent of all deposits not covered by federal depository insurance. All investments are either registered in the City’s name or are held by a third party in the City’s name. All deposits were collateralized at June 30, 2014. Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy matches maturities with cash flow dates, unless matched to a specific requirement the City may not invest more than 25 percent of the portfolio for a period greater than three years or any portion of the portfolio for a period greater than 10 years. At June 30, 2014, the City’s investments included the following Investment Type Federal Agency Securities Municipal Obligations U.S. Treasuries State Investment Pool Wells Fargo - money market Corporate Notes Total fair value of Investments Portfolio weighted average maturity $ Fair Value 24,449,582 $ 73,722 5,022,109 98,298,865 1,380,554 34,281,065 33,091,833 Weighted Average Maturity (in years) 2.940 3.440 2.910 2.000 1.000 2.670 2.605 62 Credit Risk City resolution and State Statutes authorized the City to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, repurchase agreements, SEC registered money market accounts, certificates of deposit within the top three ratings by a nationally recognized rating agency, and the State of Arizona Local Government Investment Pool (LGIP). The credit quality ratings of investments as described by nationally recognized Standard and Poor’s and Moody’s rating service as of June 30, 2014 is as follows: Concentration of Credit Risk The City’s investment policy establishes that its investment portfolio, to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities shall not exceed the following. Fully insured or collateralized CD’s no more than 25%, US agency securities 100%, State, county, school district and other district municipal bonds or debt with an A rating or better no more than 25%, repurchase agreements 100%, and local government investment pool 100%. At June 30, 2014, the City’s cash and investments included the following: T ota l City ca sh d e p osits a nd inve stme nts a t fa ir va lue a re a s follows: Carrying amount of investments Carrying amount of cash deposits Total pooled cash and investments $ 98,298,865 23,169,366 $ 121,468,231 Pooled cash,equivalents and investments - unrestricted Restricted cash and investments Total pooled cash and investments $ 100,258,551 21,209,680 $ 121,468,231 Cash and cash equivalents at June 30, 2014 consisted of the following: Investments included in cash and cash equivalents Carrying amount of unrestricted city deposits Cash on hand $ Total cash and cash equivalents per statement of net position 63 82,388,440 17,857,531 12,580 $ 100,258,551 Investment income comprises the following for the year ended June 30, 2014: Net interest and dividends Net increase (decrease) in the fair value of investments Total net investment income per statement of activities $ 746,596 $ 962,373 215,777 The net increase in the fair value of investments during fiscal year 2013-2014 was $215,777. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. The unrealized gain (loss) on investments held at June 30, 2014 was $472,793. In previous years, the City recognized a decrease in fair value of $1,473,712 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 others in May 2003. The case is presently pending litigation. There have been several distributions since June 2006. The distributions include payments from the trustee and settlement proceeds received from pending litigation. The City did receive distributions this year in the amount of $9,417 and the total recovery to date is $1,126,225. In previous years, the City recognized a decrease in fair value of $289,104 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool relating to Lehman Brothers Chapter 11 filing. The State has filed claims on behalf of the LGIP investors. The City received a distribution this year in the amount of $35,212 and the total recovery to date is $78,191. 64 B. Receivables Receivables as of June 30, 2014, including allowances for uncollectible accounts, are as follows: Fund G ove rnme nta l Activitie s General fund Highway user revenue fund Transportation fund Special assessment fund Capital projects fund Other governmental funds Less: allowance for uncollectibles Total government funds Internal services funds Total governmental activities Busine ss-T yp e Activitie s Water and wastewater Environmental services Airport Stormwater Flagstaff housing authority Less: allowance for uncollectibles Total business-type activities Total activities Accounts Interest $ 5,101,813 753,931 1,525,061 $ 45,994 5,387 24,439 383 40,559 - 7,521,697 29,280 7,550,977 Intergovernmental 713,316 122,154 786,730 $ Total Receivables 251,500 375,479 - - 8,561,461 - $ 5,861,123 881,472 2,336,230 116,762 5,752 2,249,179 - 8,561,461 - 18,449,099 35,032 122,514 2,249,179 8,561,461 18,484,131 3,769,121 1,239,984 34,348 166,428 78,159 (178,042) 35,491 13,765 1,234 1,308 - 123,503 2,813,688 - - 3,928,115 1,253,749 2,849,270 167,736 78,159 (178,042) 5,109,998 51,798 2,937,191 - 8,098,987 $ 12,660,975 $ 174,312 $ 5,186,370 $ 8,561,461 $ 26,583,118 994,020 (853,128) $ Special Assessments 8,561,844 251,500 1,410,058 (853,128) The receivables not expected to be collected within one year include $108,000 of the general fund, $55,000 of the transportation fund, $100,000 of the water and wastewater, $32,000 of the environmental services fund, $10,000 of the airport fund, $5,000 of the Stormwater fund, and $31,042 of the flagstaff housing authority. 65 C. Capital Assets A summary of capital asset activity, for the government-wide financial statements, as of June 30, 2014 is as follows: G ove rnme nta l a ctivitie s: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets Balance July 1, 2013 $ Depreciable assets: Buildings Improvements Machinery and equipment Infrastructure Total depreciable assets Accumulated depreciation: Buildings Improvements Machinery and equipment Infrastructure Total accumulated depreciation Governmental activities capital assets, net 55,762,393 6,985,735 62,748,128 $ 12,068,334 4,893,368 16,961,702 76,490,638 19,977,480 33,215,505 288,874,498 418,558,121 1,055,970 568,951 6,837,435 8,462,356 (18,614,045) (12,769,464) (21,449,835) (128,843,691) (181,677,035) $ Additions 299,629,214 Deletions and Retirements $ (450,757) (49,246) (736,066) (496,668) (1,732,737) (1,666,866) (974,339) (1,998,010) 314,659 32,475 709,019 (8,636,103) (13,275,318) $ 12,148,740 (128,467) (128,467) 318,286 1,374,439 $ (486,765) Transfers In (out) $ 110,729 (4,546,678) (4,435,949) 1,083,835 1,083,835 - - $ (3,352,114) Less: associated debt Less: unamortized premium Less: construction retainage Plus: unamortized loss on current refunding Plus: unspent capital related debt, series 2013 Plus: unspent capital related debt, series 2014 Net investment in capital assets 66 Balance June 30, 2014 $ 67,941,456 7,203,958 75,145,414 76,039,881 20,984,204 33,048,390 296,299,100 426,371,575 (19,966,252) (13,711,328) (22,738,826) (137,161,508) (193,577,914) 307,939,075 (83,089,506) (3,383,336) (424,102) 1,138,519 4,075,722 1,090,779 $ 227,347,151 Busine ss-typ e a ctivitie s: Non-depreciable assets: Land Construction -in-progress Balance July 1, 2013 $ Total non-depreciable assets $ 6,559,675 30,501,593 Depreciable assets: Buildings Improvements Machinery and equipment Total depreciable assets Buildings Improvements Machinery and equipment Total accumulated depreciation 100,785,223 366,292,541 37,000 5,284,578 (45,968,939) (123,845,031) (2,206,571) (7,992,126) 352,170,452 $ (803,274) (710,513) (710,513) (464,812) (553,416) 88,604 459,588 548,192 $ Transfers In (out) $ (88,604) (2,870,958) (13,069,655) $ - 385,128 5,706,706 (20,445,480) (190,259,450) $ Deletions and Retirements 6,559,675 44,850,545 511,928,309 Accumulated depreciation: Business-type activities capital assets, net 13,966,395 16,535,198 Additions (5,224) 4,062,627 4,062,627 28,191 (28,191) - $ 3,352,114 Less: associated debt Less: construction retainage Net investment in capital assets Balance June 30, 2014 $ 13,966,395 22,384,360 36,350,755 100,822,223 375,551,142 44,770,861 521,144,226 (48,147,319) (131,776,744) (22,856,850) (202,780,913) 354,714,068 (43,690,995) (470,124) $ 310,552,949 Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: G ove rnme nta l Activitie s: General government $ Public safety Public works 563,652 1,852,972 237,412 Economic and physical development 240,648 Culture and recreation 1,833,078 Highway and streets Total depreciation expense - governmental activities 67 $ 8,547,556 13,275,318 D. Interfund Receivables, Payables, and Transfers Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $426,779 are included in the government-wide financial statements at June 30, 2014. The interfund balances at June 30, 2014 are short-term loans to cover temporary cash deficits in various funds. This occasionally occurs prior to bond sales or grant reimbursements. All interfund balances outstanding at June 30, 2014 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2013: 68 Transfers The net transfers of $2,908,700 from governmental activities to business-type activities on the government-wide statement of activities are primarily debt service and operational subsidies from the General Fund. There were no significant transfers during fiscal year 2014 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. The following transfers are reflected in the fund financial statements for the year ended June 30, 2014: Fund G ove rnme nta l Activitie s: General fund Highway user revenue fund Transportation fund Capital projects bond fund Other governmental funds Total governmental funds Internal service fund Total governmental activities Busine ss-T yp e Activitie s: Water and wastewater fund Environmental services fund Airport fund Transfers out $ 3,287,452 28,401 2,893,427 5,450,161 11,659,441 11,659,441 157,795 322,671 33,567 Stormwater fund Total business-type activities Total governmental and business-type activities 310,954 824,987 $ 12,484,428 Less: fund eliminations Add: net capital assets transfer Transfers In $ 3,033,042 4,549,681 2,355,780 19,829 2,144,523 12,102,855 12,102,855 43,000 338,573 381,573 $ 12,484,428 (12,927,842) 3,352,114 Total government-wide statement of activities $ 2,908,700 E. Leases Operating Leases Expenditures The City leases library spaces under both non-cancellable and cancellable operating leases. The non-cancellable lease is for the East Flagstaff Library. The initial intergovernmental agreement was dated September 10, 2002, and was amended on September 8, 2008, to reflect an ending date of June 30, 2017. The agreement has automatic renewal for an additional two years, terminating on June 30, 2019, if neither party send a written notice of intent to terminate to the other party at least 60 days prior to the expiration of the initial term. Either party may terminate the lease at any time for any reason or no reason, without penalty, upon 180 days written notice. Fiscal year 2014 lease expense for the library was $83,213. The schedule below for future minimum lease expenses reflects the change in the rental rate as of June 30, 2014. The additional cancellable lease is the Chevelon Butte School District #5 and Coconino county Library District for facility use. It is a four (4) year lease beginning September 1, 2011, and is automatically renewed an additional four years, indefinitely, unless 30 days notice is given by either party. Total lease expense was $7,200 for FY 2014. 69 Operating Lease Expenditures Year Ending June 30 2015 2016 2017 2018 2019 Total East Flagstaff Library $ Chevelon Butte School Dist.#5 83,213 83,213 83,213 83,213 83,213 416,065 $ $ $ 7,200 7,200 7,200 7,200 7,200 36,000 In addition, the City has entered into several operating lease agreements, with cancellation provisions, for the purpose of leasing office space and land. Lease expenditures for these items for the period ending June 30, 2014 were $165,070 (inclusive of the Chevelon Butte School Library). Operating Lease Revenues The City leases several City-owned buildings under cancellable and non-cancellable agreements. Certain leases contain provisions for future rate increases based on changes in the consumer Price Index. Total revenue for fiscal year 2014 was $1,661,408. The City currently has one lease with non-cancellable terms that is for the USGS building #6, which is guaranteed through August 2018. The following table represents the future minimum lease receivable from the lease with non-cancellable terms. The amounts shown include revenue related to the asset and the operational expenses. Year Ending June 30 2015 2016 2017 2018 Total USGS Building #6 $ $ 799,451 799,451 799,451 66,621 2,464,974 In addition, the Airport Fund has several leases under cancellable agreements. The leases are for terminal space, hangars, shades, tiedowns, ground leases and a cafe. Lease revenue in the airport fund for fiscal year 2014 was $1,332,345. 70 F. Long-Term Debt General Obligation Bonds The City of Flagstaff issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The water and wastewater general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, these bonds are carried as a liability of the water and wastewater fund to reflect the intention of the City to retire those bonds from resources in the water and wastewater Fund. On April 8, 2014, the City issued $6,600,000 in GO bonds, series 2014A, related to capital projects approved by voters. Open space projects for $5.5M was approved by voters on the May 18, 2004 election ballot, these proceeds assisted in the land acquisition of Observatory Mesa. The election of November 5, 1996 resulted in approval of $1.1M for improvements related to parks and recreation facilities. On April 8, 2014, the City issued $8,270,000 in GO refunding bonds, series 2014B, with interest rates ranging between 3.00% and 5.00%. The City issued the bonds to partially advance refund $8,565,000 of the outstanding series 2006A general obligation bonds of projects 2004, with a interest rate ranging between 3.25% and 4.50%. The city used the net proceeds along with other resources to purchase U.S. Treasury securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 2006A series bonds. As a result, that portion of the 2003 series bonds is considered defeased, and the City has removed the liability from its’ accounts. The outstanding principal of the defeased bonds is $8,565,000 at June 30, 2014. The partial advance refunding of April 8, 2014, reduced total debt service payments over the next ten years by $374,454. This results in an economic gain, the difference between the present values of the debt service payments on the old and new debt, of $309,965, inclusive of $3,822 funds on hand. General obligation bonds outstanding at June 30, 2014: Purpose Governmental activities $ Governmental activities - current refunding Governmental activities - advance refunding Business-type activities Business-type activities - refunding Total general obligation bonds outstanding $ 71 Amount 44,857,927 212,704 8,270,000 1,504,660 247,296 55,092,587 Governmental activities: $3,015,000 GO Refunding Series 2011 - Parks and recreation portion of $1,394,136, due in annual installments of $212,704 to $964,104 through July 1, 2014; interest rate at 2.0% to 5.0%. Parks improvements. $ $31,500,000 Capital projects, series 2006 due in annual installments of $1,180,000 to $2,445,000 through July 1, 2023; interest rate at 3.25% to 5.25%. Consturction related to recreation facilities, fire facilities and equipment, and open space acquistion. This series was partially refunded on April 8, 2014. 212,704 10,995,000 $8,270,000 Capital projects, series 2014B partial refunding of series 2006 due in annual installments of $1,940,000 to $2,205,000 through July 1, 2021; interest rate at 3.00% to 5.00%. Construction related to recreation facilities, fire facilities and equipment, and open space acquistion. 8,270,000 $12,845,000 Capital projects, series 2011 due in annual installments of $335,000 to $2,320,000 through July 1, 2020; interest rate at 1.0% to 4.0%. Construction related to fire facilities, streets and utility improvements, and public safety communication system. 12,510,000 $3,952,287 Public Safety Communications, series 2011 due in annual installments of $289,956 to $446,582 through July 1, 2021; interest rate at 2.40%. Construction related to public safety communication system. 3,292,927 $11,460,000 Capital projects, series 2013 due in annual installments of $560,000 to $950,000 through July 1, 2028; interest rate at 1.625% to 4.0%. Construction related to forest initiative, streets and utility improvements, and open space/Flagstaff Urban Trail System. 11,460,000 $6,600,000 Capital projects, series 2014A due in annual installments of $200,000 to $460,000 through July 1, 2034; interest rate at 1.5% to 5.0%. Construction related to parks and recreation facilities improvements and land purchase for open space/Flagstaff Urban Trail System. 6,600,000 Total governmental activities 53,340,631 Business-type activities: $3,015,000 GO Refunding Series 2011 - Water improvement project bonds as portion of $1,620,864, due in annual installments of $247,296 to $1,120,896 through July 1 2014; interest rate at 2.0% to 5.0% 247,296 $1,633,933 Water infrastructure finance authority, due in annual installments of $61,745 to $107,043 through July 1, 2031; interest at 3.104%. Original amount $1,833,828 less deobligated amount of $199,895. Red Gap Wells. 1,504,660 Total business-type activities 1,751,956 Total General Obligation Bonds $ 72 55,092,587 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2015 Govermental Activities Principal Interest 4,420,973 1,590,852 2016 2017 5,102,348 5,441,644 2018 2019 2020-2024 2035 Total 1,596,591 1,613,152 4,886,164 4,920,912 19,923,590 2025-2029 2030-2034 Business-type Activities Principal Interest 310,957 48,190 65,637 67,675 1,642,375 1,448,091 3,649,142 69,775 71,941 394,622 39,508 37,308 151,085 461,050 6,130,000 2,055,000 1,048,250 303,900 459,789 311,560 460,000 $ 53,340,631 9,200 $ 12,901,553 1,751,956 $ 43,710 41,641 84,905 14,703 $ Statutory Debt Limitation Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, wastewater, electric, parks and open space, streets, and public safety purposes may not exceed 20% of the City of Flagstaff’s net secondary assessed valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of the City’s net secondary assessed valuation. The City’s computation of legal debt margins available for creation of additional debt at June 30, 2014 was $78,751,669 and $40,241,777 for the 20 percent and 6 percent debt limits, respectively. Also, see Schedule 16 in the Statistical Section for related information. Special Assessment Bonds Proceeds from special assessment bonds are used for improvements such as paving, sidewalks, and sewers. Payments made by the assessed property owners are pledged as collateral. In the event of default by a property owner, the lien created by the assessment is sold at public auction and the proceeds are used to offset the defaulted assessment. If there is no purchase at the public auction, the City is required to buy the property with funds appropriated from the General Fund. On November 15, 2013, $810,000 of Aspen Place at the Sawmill Improvement District bonds were defeased and $1,270,000 in bonds were defeased on April 7, 2014. Special assessment bonds outstanding at June 30, 2014: Purpose Governmental activities $ 73 Amount 8,605,000 Special assessment bonds payable at June 30, 2014 consist of the following individual issues: Special Assessment Bonds Governmental activities: $11,690,000 Improvement district bonds, due in annual installments of $325,000 to $870,000, through January 1, 2032; interest at 5.0%. Aspen Place at the Sawmill district improvements. $ 8,605,000 Total Special Assessment Bonds $ 8,605,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2032 Total Govermental Activities Principal Interest $ 305,000 $ 430,250 320,000 415,000 340,000 399,000 355,000 382,000 370,000 364,250 2,155,000 1,524,000 2,750,000 928,500 2,010,000 205,000 $ 8,605,000 $ 4,648,000 Revenue Bonds Highway User Revenue Fund bonds (HURF) are issued specifically for the purpose of constructing street and highway projects. These bonds are repaid out of the HURF 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. In fiscal year 2004, the MFC issued $25 million in bonds for the construction of the Fourth Street Overpass on land owned by the City. The City will make lease payments equal to the debt service on both issues and will obtain legal title upon payment in full of the bonds. The City has collateralized the contracts payable to the MFC by a pledge of the City’s State Shared Revenues which comprise sales and income taxes imposed and collected by the State and distributed to counties and municipal governments pursuant to law and State revenue-sharing which the City presently or in the future receives from the State and which are not earmarked by the State for a contrary or inconsistent purpose. Greater Arizona Development Authority revenue bonds are issued specifically for the purpose of constructing public infrastructure projects. These bonds have state shared revenue pledged as a repayment revenue stream. These bonds funded the Business Incubator building. 74 Water & Sewer Revenue bonds are issued as authorized by the voters for the construction, acquisition, furnishing, and/or equipping of water and sewer facilities and related systems. The Water & Sewer Revenue bonds are collateralized by revenue in excess of operating and maintenance expenses of the City’s water & sewer utility system, and are repaid via user charges or fees for service. Advance Refunding On March 21, 2012, the City issued $12,530,000 in pledged revenue refunding bonds with interest rates ranging between 3.0% and 5.0%. The City issued the bonds to advance refund $13,025,000 of the outstanding series 2003 Fourth Street Municipal Facility Corporation revenue bonds, with an interest rate ranging between 4.0% and 5.25%. The City used the net proceeds along with other resources to purchase U.S. Treasury securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 2003 series bonds. As a result, that portion of the 2003 series bonds is considered defeased, and the City has removed the liability from its accounts. There is no outstanding principal of the defeased bonds at June 30, 2014. Revenue bonds outstanding at June 30, 2014: Purpose Governmental activities Governmental activities - partial advance refunding Business-type activities Total revenue bonds outstanding $ $ Amount 2,965,000 12,530,000 3,634,606 19,129,606 Revenue bonds at June 30, 2014 consist of the following individual issues: Revenue Bonds Governmental activities: $12,530,000 Fourth Street Pledged Revenue Refunding bonds, series 2012 due in annual installments of $695,000 to $2,165,000 through July 1, 2020; interest at 3.0% to 5.0%. Street and bridge infrastructure. $ $3,370,000 Greater Arizona Development Authority revenue bonds, series 2010A, due in annual installments of $50,000 to $240,000 through August 1, 2030; interest at 2.0% to 4.625%. Business incubator construction. 12,530,000 2,965,000 Total Governmental activities 15,495,000 Business-type activities: $6,775,760 Water and wastewater revenue bonds, series 2003 due in annual installments of $238,431 to $462,398 through July 1, 2022; interest at 3.548%. Water and sewer improvements. Total Revenue Bonds 3,634,606 $ 75 19,129,606 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2015 2016 Govermental Activities Principal Interest $ 2017 2018 594,313 552,487 $ 15,495,000 349,864 362,274 $ 3,190,457 69,453 1,756,693 $ - 3,634,606 122,732 110,100 97,021 83,477 402,214 593,213 227,638 21,968 $ 375,127 388,434 312,113 5,070,000 1,005,000 470,000 $ 485,662 403,063 2,155,000 2020-2024 Total $ 1,990,000 2,060,000 2019 2025-2029 2030-2031 820,000 1,925,000 Business-type Activities Principal Interest 127,352 $ - 610,135 Other Debt Municipal Facility Corporation Bonds The Municipal Facilities Corporation (MFC) is a non-profit corporation created by the City for the purpose of constructing, acquiring, and equipping municipal facilities. In fiscal year 2001, the MFC issued $4.7M certificates of participation for the construction of a new United States Geological Survey (USGS) facility on land owned by the City. In fiscal year 2004 the MFC issued $25M in bonds for construction of the Fourth Street Overpass, as approved by voters in May 2000 general election. This issue was partially refunded on March 21, 2012 with pledged revenue bonds. Municipal Facility Corporate bonds outstanding at June 30, 2014: Purpose Governmental activities $ Amount 1,260,000 Municipal facility corporation bonds are comprised of the following issues: Governmental activities: $4,700,000 USGS Project Municipal Facility Corporation bonds, series 12 (2001) due in annual installments of $255,000 to $440,000, through August 1, 2016; interest at 4.0 to 4.75%. Facility construction. $ 1,260,000 Total Municipal Facility Corporation Bonds $ 1,260,000 76 Annual debt service requirements to maturity for municipal facility debt are as follows: Municipal facility corp bonds Year Ending June 30 2015 2016 2017 Total Govermental Activities $ $ Principal 400,000 420,000 440,000 1,260,000 $ $ Interest 50,350 30,875 10,450 91,675 Certificates of Participation Capital lease certificates of participation series 2009 were issued to complete various street overlay projects and to finance fire operating equipment. Principal and interest on the bonds are payable from capital lease payments and are not considered general obligations of the City. They are appropriated along with all other expenditures of the general government. Certificates of participation bonds outstanding at June 30, 2014: Purpose Governmental activities $ Amount 3,155,000 Certificates of participation are comprised of the following issues: Governmental activities: $4,690,000 Certificates of participation, series 2009 due in annual installments of $435,000 to $575,000, through October 1, 2019; interest at 3.3137%. Roadway overlay improvements and fire equipment. Total Certificates of participation Annual debt service requirements to maturity for certificates of participation debt are as follows: 77 $ 3,155,000 $ 3,155,000 The following is a summary of debt service requirements, including interest requirements, to maturity for long-term debt at June 30, 2014: Fiscal Year 2015 General Obligation Bonds 6,370,972 2016 6,808,286 2017 7,164,112 2018 6,637,822 2019 6,478,252 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Less interest 6,333,204 6,036,683 4,458,902 3,986,992 3,302,659 1,544,899 1,546,558 1,543,553 1,541,021 1,546,914 581,803 581,255 580,105 469,700 472,300 469,200 (13,362,603) $ 55,092,587 Municipal Special Assessment Bonds 735,250 735,000 739,000 737,000 734,250 735,750 736,250 730,750 739,500 736,750 733,000 738,250 737,000 734,500 735,750 730,500 739,000 745,500 - (4,648,000) $ 8,605,000 Facility Revenue Bonds 1,886,908 Corporation Bonds 450,350 2,949,862 450,875 2,947,810 450,450 2,934,974 - 2,938,780 - 2,935,826 2,926,578 720,861 718,462 245,531 247,881 244,913 246,250 246,769 246,825 246,418 245,550 - - - (3,800,592) $ 19,129,606 - (91,675) $ 1,260,000 Cetificates of Participation 586,445 586,670 585,673 582,900 583,313 586,500 - (356,500) $ 3,155,000 Total 10,029,926 11,530,693 11,887,044 10,892,696 10,734,594 10,591,281 9,699,511 5,910,513 5,444,953 4,284,940 2,525,780 2,529,721 2,526,803 2,522,290 2,529,489 1,558,721 1,565,805 1,325,605 469,700 472,300 469,200 (22,259,370) $ 87,242,193 Authorized and Issued Debt The voters of the City authorize capital projects and the related debt mechanism to finance these capital projects. On May 18, 2004, voters approved $47.4M for various capital projects and $46.6M for future water rights and production, as of June 30, 2014, $5.0M remains unissued for capital projects and $.76M remains unissued for future water rights and production. November 2, 2010 voters approved $21.2M for public safety communication system and various street and utilities improvements, as of June 30, 2014 $.36M remains unissued. November 6, 2012 voters approved $14M for a Core Service Maintenance Facility and $10M for Forest Health and Watershed Protection, as of June 30, 2014 $14M and $8M remains unissued, respectively. Loans Payable The City of Flagstaff has various loan agreements with the Water and Wastewater Infrastructure Finance Authority of Arizona Revolving Fund Loan Program for the acquisition and construction of water and wastewater facilities and obtaining water rights. The Airport has an agreement with the Arizona Department of Transportation which provides financing for the construction of 14 T hangars at the City Airport. 78 Loans outstanding as of June 30, 2014: Purpose Business-type activities $ Amount 33,873,144 Loan payables at June 30, 2014 consist of the following individual financing options: Business-type activities: Water and wastewater: $7,900,000 Water infrastructure finance authority due in annual installments of $295,000 to $525,000 through July 1, 2026; interest at 3.28%. Water infrastructure acquisition. $ $23,100,000 Wastewater infrastructure finance authority due in annual installment of $815,834, to 1,571,901 through July 1, 2027; interest at 3.512%. Sewer treatment plant improvements. 5,645,000 18,404,554 $8,500,000 Water infrastructure finance authority due in annual installment of $289,766 to $591,940 through July 1, 2028; interest at 3.073%, as adjusted on 12/7/12 . Water production improvements and acquisition. 6,923,844 $2,100,000 Water infrastructure finance authority due in annual installment of $77,263 to $138,320 through July 1, 2029; interest at 3.113%. Amount issued to-date $1,506,835. Remaining available $593,165. Water feasibility study. 1,183,053 $232,500 Water infrastructure finance authority due in annual installment of $8,737 to $15,054 through July 1, 2029; interest at 2.905%. Well improvements. 196,001 $594,950 Water infrastructure finance authority due in annual installment of $22,813 to $33,603 through July 1, 2029; interest at 2.45%. Original amount issued $1,000,000, amount deobligated $405,050. Well infrastructure improvements. 451,188 $1,100,000 as amended 10/02/09, $800,000 Water infrastructure finance authority due in annaual installment of $31,475 to $70,168 through July 1, 2029; interest at 2.45%. Amount issued to-date $1,008,891. Local aquifer study. 942,142 Total water and wastewater loan payable Airport: $600,000 Arizona Department of Transportation due in quarterly installments of $5,337 to $13,548 through January 1, 2016; interest at 5.60%. Hangar construction. Total 79 $ 33,745,782 $ 127,362 $ 33,873,144 Annual debt service requirements to maturity for loan payables are as follows: Year Ending June 30 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030 Total $ Business-type Activities Principal Interest 1,964,145 $ 1,153,452 $ 12,171,750 11,192,317 118,823 33,873,144 2,031,607 2,078,489 2,120,175 2,195,836 1,093,167 1,020,593 947,773 873,001 3,148,531 912,181 3,641 9,152,339 $ Obligations under Capital Leases On June 24, 2013, the City entered into a new capital lease agreement for the installation of renewable energy equipment consisting of solar panels at three sites; the Aquaplex, along with the Wildcat and Rio de Flag Wastewater Treatment Plants. Construction is in progress for the installation of the panels. Capital lease agreement for energy saving equipment related to governmental activities has assets of $615,612 and renewable energy equipment for governmental activities, $1,038,372. Capital lease agreements related to business- type activities consist of the construction of a co-generator at the Wildcat Wastewater Treatment Plant, $1,133,884, construction of airport hangars, $409,494, renewable energy equipment, $1,834,927. These lease agreements generally require annual payments and the lease terms vary from 10 to 21 years. The lease agreements qualify as capital leases for accounting purposes and, therefore have been recorded at the present value of their future minimum lease payments as of the date of inception. Fiscal Year Ending Governmental June 30, 2014 2015 $ 2016 2017 2018 2019 Business Activities 319,416 Type Activities $ 642,867 85,325 645,550 84,779 644,506 85,895 86,486 2020-2024 395,680 396,810 442,166 2025-2029 2,002,625 354,919 Total future minimum lease payments Less: imputed interest costs Present value of future minimum lease payments $ 80 1,458,986 (225,111) 1,233,875 793,284 $ 5,521,322 (1,090,033) 4,431,289 Pledged Revenues The City has pledged future water utility and wastewater utility revenues to repay Water Infrastructure Financing Authority Bonds issued during the period of 1992-2014. The various bonds were issued for the purchase or construction of various water or wastewater infrastructure including wells, water distribution lines, wastewater collection lines, and treatment plant improvements. At June 30, 2014, $37,380,388 remains outstanding to be repaid by future water and wastewater revenues, if such revenues prove insufficient, the remainder will be repaid as a general obligation of the City. For the fiscal year ended June 30, 2014, net revenue available for service of this debt was $8,903,004. The debt principal, interest and fees paid in fiscal year 2014 equal $3,037,699 (34.12% of available pledged net revenues). For additional information on pledged revenues related to revenue bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $25,000,000 in Municipal Facility Corporation bonds issued in 2004. The bonds were issued to construct transportation infrastructure. The bonds have a senior lien on the 0.16% transportation sales tax and a secondary lien on the excise taxes and state shared revenues not specifically reserved by law or other regulation to be expended for other purposes. On March 21, 2012 a partial advance refunding of $12,530,000 was completed on the 2004 bonds and replaced with pledged revenue refunding bonds series 2012, holding the 2004 bonds senior. At June 30, 2014, $12,530,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2014, net revenues available for service of the debt were $42,048,872. The debt principal and interest paid in fiscal year 2014 was $2,071,375 (5.17% of available pledged net revenues). For additional information on pledged revenues for MFC transportation bonds, refer to Schedule 17 in the Statistical Section of this report.5 The City has pledged certain revenues for the repayment of $4,700,000 in Municipal Facility Corporation bonds issued in 2001 for the construction of a multipurpose office facility. The bonds are secured by a pledge of the City’s state shared revenues not specifically reserved by law or other regulation to be expended for other purposes. At June 30, 2014 $1,260,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2014, net revenues available for service of this debt were $12,621,801. The debt principal and interest paid in fiscal year 2014 was $453,753 (3.59% of available pledged net revenues). For additional information on pledged revenues for MFC other than transportation bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $3,370,000 Greater Arizona Development Authority (GADA) revenue bonds issued in 2011 for the construction of a business incubator facility at the U.S. Geological Survey Campus. The bonds are secured by a pledge of the City’s state shared revenues not specifically reserved by law or other regulation to be expended for other purposes. At June 30, 2014, $2,965,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2014, net revenues available for the service of this debt were $10,302,188. The debt principal and interest paid in fiscal year 2014 was $248,238 (2.41% of available pledged net revenues). For additional information on pledged revenues for GADA revenue bonds, refer to Schedule 17 in the Statistical Section of this report. 81 Changes in long-term liabilities Liquidation of compensated absences for governmental funds has been made out of the General, HURF, BBB, Library, and MPO funds. Non-current liability activity for the year ended June 30, 2014 was as follows: As Restated Additions Reductions Ending Balance Due Within One Year $ 49,909,139 $ 14,870,000 $ (11,438,508) $ 53,340,631 $ 4,420,973 3,625,000 83,374,139 14,870,000 (470,000) (16,388,508) 3,155,000 81,855,631 485,000 6,430,973 Beginning Balance G ove rnme nta l a ctivitie s: Bonds payable: General obligation bonds Special assessment bonds Revenue bonds Municipal facility corporate bonds Certificates of participation Total bonds payable Capital leases Bond premium Loss on advance refunding Compensated absences Other postemployment benefits Claims and judgements Governmental activity long-term liabilty 11,020,000 15,615,000 3,205,000 - 1,697,823 2,436,739 (457,128) 3,644,189 2,975,694 314,074 1,317,666 (768,029) 1,664,263 728,548 127,779 (2,415,000) (120,000) (1,945,000) (463,948) (371,069) 86,638 (1,578,127) (222,158) 8,605,000 15,495,000 1,260,000 305,000 820,000 400,000 1,233,875 3,383,336 (1,138,519) 3,730,325 3,704,242 219,695 287,325 298,580 (161,308) 1,650,689 98,863 $ 93,985,530 $ 17,940,227 $ (18,937,172) $ 92,988,585 $ 8,605,122 $ 3,124,597 3,972,483 $ $ (1,372,641) (337,877) $ 1,751,956 3,634,606 $ 46,169 (1,852,509) 33,745,782 1,915,315 398,569 (31,526) 35,835 (329,950) 913,380 342,296 Busine ss-typ e a ctivitie s: Bonds payable: General obligation bonds Water & sewer revenue bonds Total bonds payable Water & sewer loan payable Airport loan payable Capital lease payable Total loan and leases payable Bond premium Deferred loss on current refunding Compensated absences Other postemployment benefits Landfill closure/postclosure Business-type activity long-term liability - 7,097,080 - 35,552,122 173,551 4,791,107 40,516,780 46,169 31,526 (35,835) 844,761 652,986 7,410,396 $ 56,517,694 $ 163,319 238,906 846,963 82 (1,710,518) (46,189) (359,818) (2,258,516) $ (4,294,675) 5,386,562 127,362 4,431,289 38,304,433 816,305 7,649,302 $ 53,069,982 310,957 349,864 660,821 48,830 459,693 2,423,838 $ 3,426,955 V. OTHER INFORMATION A. Risk management The City is exposed to various risks of loss related to torts and public officials’ errors and omissions. The City purchases commercial insurance to cover these losses. However, $50,000 of each claim resulting in a loss is retained by the City. The City provides for the self-insurance retention in the internal service fund. Outstanding claims as of June 30, 2014 have potential exposure to the City of approximately $219,695 based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The City uses an application of historical experience to determine claims payable. However, due to the preliminary status of the claims, no determination can be made as to the likelihood, if any, of an unfavorable outcome. The net position of the Internal Service Fund is designated for future losses related to the self-insurance retention. Settled claims have not exceeded commercial coverage in the last three fiscal years. Fiscal Year 2011-12 Beginning of Year Liability $ 304,742 Current Year Claims and Changes in Estimates $ 57,776 End of Year Liability Claim Payments $ 101,404 $ 261,114 2012-13 261,114 198,203 145,243 314,074 2013-14 314,074 127,779 222,158 219,695 The City of Flagstaff participates in a risk sharing pool for employee health care, through the Northern Arizona Public Employees Trust, a public entity risk pool. Members do not bear any risk of loss. The overall experience rating of the trust determines premium charges. B. Commitments and contingent liabilities The city is involved in litigation arising in the ordinary course of it operations. The City believes that its ultimate liability, if any, in connection with these matters will not have a material adverse effect on the City’s financial position, changes in financial position, or liquidity. See schedule 23 in the statistical section for further information related to the City’s insurance coverage. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. 83 The following table presents the City’s commitments and encumbrances as of June 30, 2014: Governmental Activities: General fund $ Highway users revenue fund Capital projects bond fund 599,546 1,406,555 1,545,923 Other government funds Total governmental activities 1,005,702 4,557,726 Business - Type Activities: Water and wastewater fund Environmental services fund 2,864,433 175,726 Airport fund Stormwater fund 3,574,303 767,913 Total business-type activities Total governmental and business-type activities $ 7,382,375 11,940,101 C. Retirement and pension plans All full-time employees of the City are covered by one of three pension plans. The Arizona State Retirement system is for the benefit of the employees of the state and certain other governmental jurisdictions. All full-time City employees, except sworn fire and police personnel, are included in the Arizona State Retirement System. Sworn police and fire personnel participate in the Public Safety Retirement System. In addition, the Mayor and City Council members are covered by the State’s Elected Officials Plan. Plan Descriptions - The City contributes to the three plans described below. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer defined benefit pension plan that covers general employees of the City. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, and Article 2. The Public Safety Personnel Retirement System (PSPRS) is an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium plan that covers public safety personnel who are regularly assigned hazardous duty as employees of the State of Arizona or one of its political subdivisions. The PSPRS, acting as a common investment and administrative agent, is governed by a five-member board, known as The Fund Manager, and the participating local boards according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The Elected Officials Retirement Plan (EORP) is a cost-sharing multiple-employer defined benefit pension plan and a cost-sharing, multiple-employer defined benefit health insurance premium plan that covers elected officials and judges of certain state and local governments. The EORP is governed by The Fund Manager of PSPRS according to the provisions of A.S.R. Title 38, Chapter 5, and Article 3. The health insurance premium plan benefit of the EORP is not established as a formal trust; the EORP is reported in accordance with GASB Statement No. 45 as an agent multiple-employer defined benefit plan. Accordingly, the disclosures that follow reflect the EORP as if it were an agent multiple-employer defined benefit plan. 84 Each plan issues a publicly available financial report that includes its financial statements and required supplementary information. A report may be obtained by writing or calling the applicable plan. ASRS PSPRS and EORP P.O. Box 33910 Phoenix, AZ 85016-4416 3300 N. Central Ave. 3010 E. Camelback Rd., Suite 200 Phoenix, AZ 85067-3910 (602) 240-2200/(800) 621-3778 (602) 255-5575 www.psprs.com Funding Policy - The Arizona State Legislature establishes and may amend active plan members' and the City's contribution rates. Cost Sharing Plans - For the year ended June 30, 2014, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.54% (11.30% retirement and 0.24% long-term disability) of the members' annual covered payroll and the City was required by statute to contribute at the actuarially determined rate of 11.54% (10.65% retirement, .65% for health insurance premium, and 0.24% long-term disability) of the members’ annual covered payroll. The City's contributions to ASRS for the years ended June 30, 2014, 2013, and 2012 were $3,074,097, $2,999,221, and $2,884,448 respectively, inclusive of Housing Authority. The City contribution for the current and two preceding years, all of which were equal to the required contributions, were as follows: In addition, active EORP members were required by statute to contribute 13.00% of the members' annual covered payroll. The City was required to contribute 26.62% of the members' annual covered payroll, the aggregate of which is determined by actuarial valuation. The health insurance premium portion of the contribution rate for normal cost was actuarially set at 1.80% of covered payroll. The City's contributions to EORP for the years ended June 30, 2014, 2013, and 2012 were $53,890, $59,060, and $55,498 respectively, which equal the required contributions for each year, and is inclusive of Housing Authority. The City contributions for the current and two preceding years, all of which were equal to the required contributions, were as follow: Agent Plan - For the year ended June 30, 2014, active PSPRS members were required by statute to contribute 10.35% of the members' annual covered payroll, and the City was required to contribute at the actuarially determined rate of 22.52% and 34.64% for Police and Fire respectively. contributed $558,291 during fiscal year 2013-2014. Police personnel contributed $991,439; Fire personnel The City annual pension and OPEB cost of $2,157,217 for police and $1,868,520 for fire is based on actual payroll costs and may vary to the City’s annual required contribution since the actuary basis is based on estimated payroll costs. Benefit and contribution provisions are established by state law and may be amended only by the State of Arizona Legislature (A.R.S. Section 38-843). 85 Annual Pension Cost - The City's pension cost for the agent plan for the year ended June 30, 2014, the date of the most recent actuarial valuation, and related information follow. Three Year Trend Information for PSPRS - Information for the agent plan as of most recent actuarial valuations follows. 86 Schedule of Funding Progress - An analysis of funding progress for each of the agent plans as of the most recent actuarial valuations; June 30, 2012 reporting period determines the rates for fiscal year 2014. disaggregated and reported separately. The EORP, by statue, is a cost-sharing plan. Benefits are However, because of its statutory construction, in accordance with GASB Statement No. 43, paragraphs 5 and 41, the valuation for the EORP on its statutory basis as a cost-sharing plan and, therefore, actuarial information for the City, as a participating government, is not available. 87 D. Other Post Employment Benefits (OPEB) Plan Postemployment Healthcare Plan Plan description. The City of Flagstaff provides post-retirement healthcare insurance benefits for its retirees as an agent multiple-employer plan which is administered through, Northern Arizona Public Employee Benefit Trust (NAPEBT). NAPEBT provides benefits to eligible retirees through the same plan as active city employees and their beneficiaries up to the age of 65; the implicit rate subsidy exists through the duration of the coverage. Substantially, all of the City’s employees may become eligible for those benefits when they qualify for retirement. To be eligible a retiree must qualify to receive retirement benefits from the Arizona State Retirement System and elect coverage at date of retirement. NAPEBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained on their website: www.napebt.com/community_docs. As of June 30, 2014, there were 76 retirees who elected coverage. Funding Policy. The contribution requirements of plan members and the city are established and may be amended by the NAPEBT board. Eligible retirees up to the age of 65 have the option to participate in the healthcare plan that is currently offered to active employees and must pay 100% of the premium less any reimbursement from the Arizona State Retirement System, currently, a monthly stipend of $150 for single coverage and $260 for family coverage. The city has elected to not fund the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial 88 liabilities over a period not to exceed thirty years. The City’s implicit subsidy rate to covered payroll is actuarially determined at 30.4%. Plan members receiving benefits contribute $93,156 during fiscal year 2014. Annual OPEB Cost and Net OPEB Obligation. For 2014, the city’s annual OPEB cost (expense) of $985,023 was equal to the ARC, as adjusted by any ARC adjustments, and interest on the net OPEB obligation of $163,771. On June 30, 2014, the net increase in NOO for governmental activities was $728,548 and for business-type activities was $163,319. The city’s annual OPEB cost; inclusive of Housing Authority, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2014 and two preceding years were as follows: Funded Status and Funding Progress. As of July 1, 2013, the actuarial accrued liability for benefits was $9,905,500, all of which was unfunded. The covered payroll of active employees covered by the plan is $32,538,077, and the ratio of the unfunded actuarial accrued liability to the covered payroll is 30.4 percent. Following is a table of the last three years funding progress as available, inclusive of Housing Authority unless noted. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents 89 multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2013, actuarial valuation, the entry age normal level dollar actuarial cost method, which uses the member’s hire date as the entry age, represents the actuarial cost method used. The actuarial assumptions included a 4.5 percent investment rate of return with no inflation rate factor and no projected salary increases factor, due to level dollar valuation used. Healthcare cost trend rate of 7.5 percent initially, reduced by decrements to an ultimate rate of five percent over five years. The remaining amortization period at July 1, 2013, was 30 years, open, level dollar amount. The City has elected to perform biennial actuary valuations. E. Landfill closure and postclosure care cost State and federal laws and regulations require the City to place a final cover on its Cinderlake landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for thirty years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are being recognized based on the future closure and postclosure care costs that will be incurred near or after the date the landfill no longer accepts waste. The City reports a portion of these closures and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The estimated liability for landfill closure and postclosure care costs has a balance of $7,649,302 as of June 30, 2014, which is based on 74.59 percent usage of the landfill. The remaining $2,606,054 will be accrued over the remaining life of the landfill, which is currently estimated to be 12 years. The accrual for the closure and postclosure care costs for fiscal year 2014 is $238,906. Based on current estimates for landfill closure and postclosure care costs, the City is setting aside legally restricted funds to ensure sufficient funds will be available to meet these requirements. The City makes annual contributions to finance closure and postclosure care costs; at June 30, 2014 the balance of the investments held for those purposes is $9,919,774. The investments are reported as restricted cash and investments in the City’s Environmental Service Fund, and are held by the State of Arizona Local Government Investment Pool. The estimated total current cost of the landfill closure and postclosure care, $10,255,356, is based on the amount that would be paid if all equipment, facilities, and services required to care, monitor and maintain the landfill were acquired as of June 30, 2014. However, the actual cost of closure and postclosure care may be higher or lower due to other factors such as; inflation, changes in technology, or changes in landfill laws and regulations. According to state and federal laws and regulations, the City must comply with the local government financial test requirements that assure the City can meet the cost of landfill closure, post-closure and corrective action when needed. The City, which has pledged its full faith and credit to meet state financial responsibility requirements, is in compliance with these requirements. In March of 1999, the City purchased 343.9 acres of land from the U.S. Forest Service. This land is adjacent to the existing landfill and will be used to open additional cells as needed. As these cells are utilized, additional liabilities for closure and postclosure care requirements will be accrued. 90 The City applied existing policy to the Environmental services fund increasing its’ expenditures as City residential and commercial collection programs are now charged for landfill fees. F. Subsequent Events On October 3, 2014, the City completed the sale of three parcels to Evergreen-Trax LLC for the amount of $3.1 million. Two of these properties are located on the corner of Route 66 and Fourth Street while the third property is located on the corner of Huntington Drive and Fourth Street. These properties were held for resale upon completion of the Fourth Street Overpass. The proceeds from the sale of the properties will balance out the Fourth Street Overpass Fund. On October 30, 2014 the City redeemed $1,655,000 of its’ Aspen Place at the Sawmill Improvement District Bonds as part of as refunding defeasance related to the early pay off of debt by the developer. On October 28, 2014, Council approved a settlement agreement and mutual release related to a filed notice of claim by Capital Improvements, LLC related to the West/Arrowhead capital project. The City made a $550,000 payment as part of the terms and was able to fund this out of the capital project budget. On November 4, 2014, on the general election ballot, voters approved an increase to the general sales tax earmarked for the City’s Road Repair and Street Safety. An additional .033 rate increase will be used for road repairs, ongoing pavement preservation, bike and pedestrian safety improvements and repairs to underlying water and sewer utility infrastructure. The City also received authority to issue up to $20 million in debt to be paid back with the new tax revenues. 91 92 NON-MAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues derived from specific taxes or other earmarked revenue sources. activities. They are usually required by statute, charter provision or ordinance to finance particular functions or Library Fund The City Library is financed through City sales tax allocations, State and County grants and individual contributions. Funds provided must be used for library activities such as cultural and educational programs and technical services. Bed, Board and Beverage Tax Fund This fund accounts for the Bed, Board and Beverage tax revenues as approved by voters in the 2010 general election and related expenditures. These resources are restricted for use in the areas of Beautification, Economic Development, Tourism, Arts & Science, and Recreation. Community Redevelopment This fund was established in fiscal year 1997 to account for the funding received for the Community Development Block Grant program and affordable housing activities. Metropolitan Planning Organization This fund was established in fiscal year 1997 to account for funding derived from the City’s status as a Metropolitan Planning Organization. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and the payment of, general longterm debt principal, interest and related costs. General Obligation Bond Fund This fund accounts for the accumulation of resources for, and the payments of, general long-term obligation principal and interest. Secondary Property Tax Revenue Fund This fund is used to account for secondary property tax revenues. Monies received by this fund are legally restricted to payment of general obligation debt. Permanent Fund Permanent funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs. Perpetual Care This fund accounts for the perpetual care of the City’s cemetery. 93 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2014 Special Revenue Funds Library Fund Community Redevelopment Fund BBB Fund Metropolitan Planning Organization Fund ASSETS Cash and investments $ 1,519,507 Accounts receivable, net Interest receivable Intergovernmental receivables Inventory Restricted cash and investments Total assets $ 7,008,964 $ 987,121 $ 1,690 97,299 870,843 148 - 6,185 12,787 1,835 - 60 24,718 184,814 165,887 - 50,795 - - 2,591,822 1,207,087 - - $ 4,214,873 $ 9,175,194 $ 1,173,918 $ 167,577 $ $ 294,877 $ 83,028 $ 7,267 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 540,484 57,655 23,450 1,602 4,933 Current bonds payable - - - - Interest payable - - - - Interfund payable - - - 110,000 72,162 1,590 - - 670,301 319,917 84,630 122,200 Perpetual care - - - - Inventory - 50,795 - - 952,750 - - - Advanced revenue Total liabilities Fund balances: Nonspendable: Restricted for: Library services Library branch services 1,027,965 - - - Library programs board directed 1,563,857 - - - Debt service - - - - Economic development - 1,343,780 - - Arts and science - 502,423 - - Culture and recreation - 3,450,364 - - Other capital projects - 3,507,915 1,089,288 - Regional planning - - - 45,377 Perpetual care Total fund balances Total liabilities and fund balances - - - - 3,544,572 8,855,277 1,089,288 45,377 $ 4,214,873 94 $ 9,175,194 $ 1,173,918 $ 167,577 Permanent Fund Debt Service Funds Secondary Property Tax Revenue Fund General Obligation Bond Fund $ 750 $ Total Other Governmental Funds Perpetual Care 13,802,880 $ 18,056 $ 23,338,968 - - 230 968,520 - 19,354 398 40,559 - - - 375,479 - - - 50,795 - - 220,682 4,019,591 $ 750 $ 13,822,234 $ 239,366 $ 28,793,912 $ 750 $ - $ - $ 926,406 - - - 87,640 - - - - - - - - - - 110,000 - - - 73,752 750 - - 1,197,798 - - 220,682 220,682 - - - 50,795 - - - 952,750 - - - 1,027,965 - - - 1,563,857 - 13,822,234 - 13,822,234 - - - 1,343,780 - - - 502,423 - - - 3,450,364 - - - 4,597,203 - - - 45,377 - $ ` - - 18,684 18,684 - 13,822,234 239,366 27,596,114 750 $ 13,822,234 95 $ 239,366 $ 28,793,912 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2014 Special Revenue Funds Library Fund Metropolitan Planning Organization Fund Community Redevelopment Fund BBB Fund REVENUES: Taxes $ Intergovernmental - $ 6,309,745 $ - $ - 3,063,343 - - 5,000 46,436 69,650 593,058 372,373 - Grants and entitlements Rents - 40,020 4,080 Investment earnings 28,243 59,542 7,544 - Contributions 63,460 12,000 - 820 Miscellaneous Total revenues 45,008 115,875 390,591 - 3,246,490 6,606,832 995,273 378,193 - 2,540,202 854,884 376,223 4,603,626 595,366 - - - 97,202 - - - 120,000 - - EXPENDITURES: Current: Economic and physical development Culture and recreation Highways and streets Debt service: Principal retirement Interest and other charges - 128,704 - - 279,135 - - 4,603,626 3,760,609 854,884 376,223 (1,357,136) 2,846,223 140,389 1,970 Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES): Refunding bonds issued - - - - Payment to bond refunding escrow agent - - - - Issuance of capital debt - 1,100,000 - - Bond premium - 19,791 - 830 - - - 1,224,451 261,000 - 22,500 (4,735,198) - - (3,354,407) - 22,500 (508,184) 140,389 24,470 948,899 20,907 Sale of capital assets Transfers in Transfers out (78,391) Total other financing sources (uses) 1,146,890 Net change in fund balances (210,246) Fund balances, beginning of year as restated Fund balances, end of year 3,754,818 $ 3,544,572 96 9,363,461 $ 8,855,277 $ 1,089,288 $ 45,377 Permanent Fund Debt Service Funds General Obligation Bond Fund $ Secondary Property Tax Revenue Fund - 5,559,957 Perpetual Care $ - $ 11,869,702 - - - 3,068,343 - - - 1,081,517 - - - 44,100 - 77,592 1,670 174,591 - - 18,700 94,980 - - - 551,474 - 5,637,549 20,370 16,884,707 - - - 3,771,309 - - - 5,198,992 - - - 97,202 2,873,508 - - 2,993,508 1,428,318 - - 1,557,022 - - - 279,135 4,301,826 - - 13,897,168 5,637,549 20,370 2,987,539 8,270,000 - - 8,270,000 (9,382,710) - - (9,382,710) - - - 1,100,000 1,198,922 - - 1,218,713 - - - 830 636,572 - - 2,144,523 (4,301,826) $ $ Total Other Governmental Funds - (636,572) - (5,450,161) 722,784 (636,572) - (2,098,805) (3,579,042) 5,000,977 20,370 888,734 3,579,042 8,821,257 218,996 26,707,380 - $ 13,822,234 97 $ 239,366 $ 27,596,114 NON-MAJOR FUNDS OTHER PROPRIETARY FUNDS Enterprise Fund Enterprise Funds are used to account for operations that provide services to the general public for a fee. Housing Authority This fund accounts for low income rental assistance along with federal housing programs such as low income public housing and voucher programs that enhance this funds ability to provide services. 98 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Net Position Non-Major Proprietary Fund June 30, 2014 Business-type Activities - Enterprise Fund ASSETS Current assets: Cash and investments Receivable, net Prepaid items Inventory Total current assets Noncurrent assets: Capital assets, non-depreciable Capital assets, depreciable, net Total non-current assets Total assets Housing Authority $ LIABILITIES Current liabilities: Accounts payable Accrued payroll and compensated absences Advanced revenue Deposits payable Total current liabilities Noncurrent liabilities: Compensated absences Net OPEB obligation Total noncurrent liabilities Total liabilities 818,645 47,117 33,751 899,513 Total Other Proprietary Fund $ 818,645 47,117 33,751 899,513 1,458,456 3,552,905 5,011,361 5,910,874 1,458,456 3,552,905 5,011,361 5,910,874 115,426 52,125 132,110 5,171 304,832 115,426 52,125 132,110 5,171 304,832 207,322 73,039 280,361 585,193 207,322 73,039 280,361 585,193 5,011,361 5,011,361 4,053 310,267 5,325,681 4,053 310,267 5,325,681 NET POSITION Net investment in capital assets Restricted: Grant and contributions purposes Unrestricted Total net position $ 99 $ CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Non-Major Proprietary Fund Year Ended June 30, 2014 Business-type Activities - Enterprise Fund Housing Authority OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ 974,184 157,534 1,131,718 OPERATING EXPENSES: Personal services Contractual services, materials and supplies Insurance claims and expenses Depreciation and amortization Total operating expenses Operating income (loss) NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements Gain (loss) on disposal of capital asset Passenger facility charges Interest expense Total non-operating revenues (expenses) Total Other Proprietary Fund $ 974,184 157,534 1,131,718 1,001,862 4,684,161 404,767 6,090,790 1,001,862 4,684,161 404,767 6,090,790 (4,959,072) (4,959,072) 4,051,138 4,051,138 4,051,138 4,051,138 Income (loss) before capital contributions and transfers (907,934) (907,934) Capital contributions related to grants Capital contributions from external sources Capital contributions from internal sources Transfers in Transfers out Change in net position 252,529 (655,405) 252,529 (655,405) Total net position, beginning of year Total net position, end of year 5,981,086 $ 5,325,681 100 5,981,086 $ 5,325,681 City of Flagstaff, Arizona Combining Statement of Cash Flows Non-Major Proprietary Fund Year Ended June 30, 2014 Business-type Activities - Enterprise Fund Total Other Housing Authority Proprietary Fund Cash flows from operating activities: Receipts from customers Interfund services provided Other receipts Payments to suppliers Interfund services used Interfund reimbursement used Payments to employees Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Transfer from other funds Transfer to other funds Interfund loans provided Interfund loans received Net cash provided (used) by noncapital financing activities 1,115,878 157,534 (4,436,886) (238,901) (976,173) (4,378,548) $ - Cash flows from capital and related financing activities: Receipts from grantors Capital contributions Acquisition and construction of capital assets Principal payments on capital debt Interest paid on capital debt Proceeds from capital debt Proceeds from sales of capital assets Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest received on investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ Classified as: Cash, cash equivalents, and investments Restricted cash and cash equivalents $ Totals $ - 4,303,667 (194,234) - 4,303,667 (194,234) - 4,109,433 4,109,433 - - (269,115) 1,087,760 818,645 $ 818,645 818,645 $ $ (continued) 101 1,115,878 157,534 (4,436,886) (238,901) (976,173) (4,378,548) (269,115) 1,087,760 818,645 818,645 818,645 Combining Statement of Cash Flows Non-Major Proprietary Fund Year Ended June 30, 2014 Business-type Activities - Enterprise Fund Total Other Proprietary Fund Housing Authority Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ (4,959,072) $ (4,959,072) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 404,767 404,767 92,480 92,480 (Increase) decrease in assets: - Accounts receivable Allowance for doubtful accounts Prepaid items - - 49,264 49,264 (40,890) (40,890) Increase (decrease) in liabilities: - Accounts payable Accrued payroll, compensated absences OPEB Deposits payable 8,874 16,815 (65,646) Advanced revenue Total adjustments Net cash provided (used) by operating activities 8,874 16,815 $ (65,646) 114,860 114,860 580,524 580,524 (4,378,548) $ (4,378,548) Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers $ - Trade-in of capital asset - Capital assets transferred from governmental activities transfer - Total noncash investing, capital and financing activities $ - $ $ (concluded) 102 - - Other Supplementary Information Page Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity Schedule of Changes By Function and Activity 104 106 Budgetary Comparison Schedules - Other Major Governmental Funds Special Assessment Bond Fund Capital Projects Bond Construction 107 108 Budgetary Comparison Schedules - Non-Major Governmental Funds 109 Library Fund BBB Fund 110 Community Redevelopment Fund 111 Metropolitan Planning Organization Fund 112 Secondary Property Tax Revenue Fund 114 General Obligation Bond Fund 113 Financial Data Submission Schedules Net Position Accounts 115 Revenue, Expenses, and Changes in Fund Net Position Accounts 117 Revenue, Expenses, and Changes in Fund Net Position AccountsPublic Housing-Consolidated 120 103 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2014 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Land $ Subtotal Less: accumulated depreciation Total governmental funds capital assets Buildings 2,645,130 4,096,419 22,606,610 38,593,297 $ 67,941,456 $ 67,941,456 104 $ 13,692,410 27,079,396 5,343,042 7,541,573 22,281,151 102,309 Improvements $ 2,975,157 113,946 185,712 95,128 15,334,827 2,279,434 76,039,881 20,984,204 (19,966,252) (13,711,328) 56,073,629 $ 7,272,876 Machinery and Equipment $ 1,579,682 16,595,520 1,389,465 886,589 3,765,122 8,832,012 Construction In Progress $ 33,048,390 10,309,564 251,570 494,673 846,433 5,611,282 $ 7,203,958 (22,738,826) $ Infrastructure $ 7,203,958 105 $ 1,117,226 652,947 9,390,307 285,138,620 Total $ 21,143,949 47,885,281 8,035,445 9,670,910 74,224,450 340,556,954 296,299,100 501,516,989 (137,161,508) (193,577,914) 159,137,592 $ 307,939,075 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2014 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total Balance July 1, 2013 Additions Retirements Transfers In (out) Balance June 30, 2014 20,234,436 48,281,005 8,047,083 9,222,994 62,207,920 333,312,811 1,055,970 326,025 7,408 494,673 12,615,011 10,924,971 (168,279) (699,927) (45,041) (20,763) (584,041) (343,153) 21,822 (21,822) 25,994 (25,994) (14,440) (3,337,674) 21,143,949 47,885,281 8,035,444 9,670,910 74,224,450 340,556,955 481,306,249 25,424,058 (1,861,204) (3,352,114) 501,516,989 106 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Special assessments $ Investment earnings 902,000 $ 902,000 $ 2,894,898 $ 1,992,898 3,100 3,100 1,909 905,100 905,100 2,896,807 1,991,707 Principal retirement 360,000 360,000 2,415,000 (2,055,000) Interest and other charges 545,600 545,600 566,183 (20,583) Total expenditures 905,600 905,600 2,981,183 (2,075,583) Total revenues (1,191) EXPENDITURES: Debt service: Excess (deficiency) of revenues over (under) expenditures (500) (500) (84,376) (83,876) Net change in fund balances (500) (500) (84,376) (83,876) Budgetary fund balances, beginning of year Budgetary fund balances, end of year 414,729 $ 414,729 414,229 $ 107 414,229 414,729 $ 330,353 $ (83,876) CITY OF FLAGSTAFF, ARIZONA Capital Projects Bond Construction Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original REVENUES: Grants and entitlements $ Miscellaneous $ 17,735,092 Investment earnings Total revenues Actual Amounts Budgetary Basis Final 10,600,000 Variance with Final Budget Positive (Negative) 10,600,000 $ 17,735,092 6,231,476 $ - (4,368,524) (17,735,092) 10,355 10,355 14,738 4,383 28,345,447 28,345,447 6,246,214 (22,099,233) EXPENDITURES: Current: Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 62,277,283 62,277,283 17,590,185 44,687,098 62,277,283 62,277,283 17,590,185 44,687,098 (33,931,836) (33,931,836) (11,343,971) 22,587,865 OTHER FINANCING SOURCES (USES): Bonds issued 25,200,000 25,200,000 5,500,000 Bond premium - - 98,954 98,954 Sale of capital assets - - 91,106 91,106 Transfers in Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ (19,700,000) 6,326,000 6,326,000 19,829 (6,306,171) 31,526,000 31,526,000 5,709,889 (25,816,111) (2,405,836) (2,405,836) (5,634,082) 9,255,448 9,255,448 9,255,448 6,849,612 $ 108 6,849,612 $ 3,621,366 (3,228,246) $ (3,228,246) CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Actual Amounts Budgetary Basis 3,943,537 $ Variance with Final Budget Positive (Negative) REVENUES: Intergovernmental $ 3,943,537 $ 3,063,343 Grants and entitlements 25,000 25,000 46,436 Investment earnings 37,437 37,437 28,243 Miscellaneous Total revenues $ (880,194) 21,436 (9,194) 2,193,861 2,193,861 45,838 (2,148,023) 6,199,835 6,199,835 3,183,860 (3,015,975) 7,300,401 7,300,401 4,603,626 2,696,775 59,195 59,195 - 59,195 EXPENDITURES: Current: Culture and recreation Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 222,000 222,000 - 222,000 7,581,596 7,581,596 4,603,626 2,977,970 (1,381,761) (1,381,761) (1,419,766) 1,224,451 1,224,451 1,224,451 (38,005) OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ (328,391) (328,391) 896,060 896,060 (485,701) (485,701) (273,706) 873,900 873,900 873,900 388,199 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 388,199 $ 600,194 $ (273,706) modified accrual basis. 63,460 $ 109 250,000 1,146,060 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis - (78,391) (210,246) 250,000 211,995 $ 211,995 CITY OF FLAGSTAFF, ARIZONA BBB Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Actual Amounts Budgetary Basis 5,932,025 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Grants and entitlements 5,932,025 $ 6,311,295 $ 379,270 320,000 320,000 69,650 (250,350) Rents 54,040 54,040 40,020 (14,020) Investment earnings 26,270 26,270 59,542 33,272 Contributions - - 10,479 10,479 Miscellaneous 75,620 75,620 115,875 40,255 6,407,955 6,407,955 6,606,861 198,906 2,812,990 2,812,990 2,540,745 272,245 584,115 584,115 593,723 (9,608) - - 97,202 (97,202) Principal retirement 125,000 125,000 120,000 Interest and other charges 130,553 130,553 128,704 1,849 3,952,760 3,952,760 279,135 3,673,625 Total revenues EXPENDITURES: Current: Economic and physical development Culture and recreation Highways and streets Debt service: Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 5,000 115,000 115,000 1,100 113,900 7,720,418 7,720,418 3,760,609 3,959,809 (1,312,463) (1,312,463) 2,846,252 4,158,715 1,100,000 1,100,000 1,100,000 - OTHER FINANCING SOURCES (USES): Bonds issued Bond premium Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ - - 19,791 19,791 261,000 261,000 261,000 - (4,641,593) (4,641,593) (4,735,198) (93,605) (3,280,593) (3,280,593) (3,354,407) (73,814) (4,593,056) (4,593,056) (508,155) 7,753,693 7,753,693 3,160,637 $ Adjustment from budgetary basis to GAAP basis net change in fund balances 3,160,637 7,753,693 $ $ 7,245,538 (508,155) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (29) Adjusted net change in fund balance - GAAP basis $ 110 4,084,901 (508,184) $ 4,084,901 CITY OF FLAGSTAFF, ARIZONA Community Redevelopment Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Actual Amounts Budgetary Basis 1,572,174 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ Investment earnings 1,572,174 $ - 593,058 $ (979,116) - 7,544 650,000 650,000 394,671 (255,329) 2,222,174 2,222,174 995,273 (1,226,901) Economic and physical development 2,778,741 2,778,741 854,884 1,923,857 Total expenditures 2,778,741 2,778,741 854,884 1,923,857 Miscellaneous Total revenues 7,544 EXPENDITURES: Current: Excess (deficiency) of revenues over (under) expenditures (556,567) (556,567) 140,389 696,956 Net change in fund balances (556,567) (556,567) 140,389 696,956 796,818 796,818 796,818 - Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 240,251 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 240,251 $ 937,207 $ 140,389 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. - Adjusted net change in fund balance - GAAP basis $ 111 140,389 $ 696,956 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Intergovernmental Total revenues 910,071 $ 910,071 $ 372,373 $ (537,698) 5,000 5,000 5,000 915,071 915,071 377,373 (537,698) - 687,571 687,571 376,223 311,348 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 250,000 250,000 - 250,000 937,571 937,571 376,223 561,348 1,150 23,650 (22,500) (22,500) 22,500 22,500 22,500 - 22,500 22,500 22,500 - Net change in fund balances - - 23,650 23,650 Budgetary fund balances, beginning of year - - - - OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Budgetary fund balances, end of year $ - $ Adjustment of budgetary basis to GAAP basis net change in fund balances - $ 23,650 $ 23,650 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 820 Adjusted net change in fund balance - GAAP basis $ 112 24,470 $ 23,650 CITY OF FLAGSTAFF, ARIZONA General Obligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Actual Amounts Budgetary Basis 5,075,273 $ Variance with Final Budget Positive (Negative) EXPENDITURES: Debt service: Principal retirement $ 5,075,273 $ 2,873,508 $ 2,201,765 Interest and other charges 2,384,852 2,384,852 1,428,318 956,534 Total expenditures 7,460,125 7,460,125 4,301,826 3,158,299 (7,460,125) (7,460,125) (4,301,826) 3,158,299 (8,270,000) Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES): Refunding bonds issued - - 8,270,000 Payment to bond refunding escrow agent - - (9,382,710) 9,382,710 Bond premium - - 1,198,922 (1,198,922) Transfers in Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 7,460,125 7,460,125 636,572 (6,823,553) 7,460,125 7,460,125 722,784 (6,909,765) - - 348,355 348,355 348,355 $ 113 348,355 (3,579,042) (3,751,466) 348,355 $ (3,230,687) $ (3,751,466) CITY OF FLAGSTAFF, ARIZONA Secondary Property Tax Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2014 Budget Original Final Actual Amounts Budgetary Basis 5,530,453 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Investment earnings Total revenues 5,530,453 $ 5,559,957 $ 29,504 59,700 59,700 77,592 17,892 5,590,153 5,590,153 5,637,549 47,396 (7,460,125) (7,460,125) (636,572) 6,823,553 (7,460,125) (7,460,125) (636,572) 6,823,553 (1,869,972) (1,869,972) 5,000,977 6,870,949 8,471,639 8,471,639 8,471,639 - OTHER FINANCING SOURCES (USES): Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 6,601,667 $ Adjustment from budgetary basis to GAAP basis net change in fund balances 6,601,667 $ 13,472,616 $ 5,000,977 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. - Adjusted net change in fund balance - GAAP basis $ 114 5,000,977 $ 6,870,949 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2014 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Resident Opportunity and Supportive Services 14.870 Moderate Rehabilitation 14.856 Elimination Total Assets: Current Assets: Cash: Cash - Unrestricted Cash - Other Restricted Cash - Tenant Security Deposits Total Cash Accounts Receivables: Accounts Receivable - PHA Projects Accounts Receivable - HUD Other Projects Accounts Receivable - Other Government Accounts Receivable - Miscellaneous Accounts Receivable - Tenants Allowance for Doubtful Accounts -Tenants Allowance for Doubtful Accounts - Other Fraud Recovery Allowance for Doubtful Accounts - Fraud Accrued Interest Receivable Total Receivables, Net Current investments Investments - Unrestricted Investments - Restricted Prepaid Expenses and Other Assets Inventories Allowance for Obsolete Inventories Inter Program Due From Assets Held for Sale Total Current Assets $ 639,166 $ 79,472 $ 70,546 $ 11,812 $ 215,946 215,946 70,817 709,983 86,878 - 800,996 70,817 295,418 70,546 - - - - 2,066 66,548 - 3,552 11,812 3,063 - - - - - - - - 1,087,759 93,493 68,614 7,416 - - - - - 7,416 (2,622) - - - - - (2,622) (27,304) - - - - - - 532 - - - - 532 - (532) - - - - (532) - - 91,672 2,066 (27,304) 39,244 3,552 3,063 - - - - - - - - - - - - - - - - 58,806 3,872 20,337 - - - - - - - - - - - - - - - - 2,038 862,499 301,356 130,127 3,552 14,875 (2,038) (2,038) 139,597 83,015 1,310,371 Noncurrent Assets: Capital Assets: 1,446,035 - - - - - 1,446,035 8,349,012 - - - - - 8,349,012 Furniture, Equipment & Machinery - Dwellings 887,236 - - - - - 887,236 Furniture, Equipment & Machinery - Administration 567,014 610,503 Land Buildings Leasehold Improvements Accumulated Depreciation Construction in Progress Total Capital Assets, Net Notes receivable - Noncurrent Other Assets Total Non-Current Assets Total Assets (6,027,402) - 43,489 (43,489) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,221,895 5,221,895 6,084,394 301,356 130,127 (continued) 115 3,552 14,875 (2,038) (6,070,891) 5,221,895 5,221,895 6,532,266 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2014 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Resident Opportunity and Supportive Services 14.870 Moderate Rehabilitation 14.856 Elimination Total Liabilities and Net Position: Liabilities: Current Liabilities: Bank Overdraft Accounts Payable <= 90 Days Accrued Wage/Payroll Taxes Payable Accrued Compensated Absences Accrued Interest Payable Accounts Payable - HUD PHA Programs Account Payable - PHA Projects Accounts Payable - Other Government Tenant Security Deposits Deferred Revenues Current Portion of L-T Debt - Capital Current Portion of L-T Debt - Operating Other Current Liabilities Accrued Liabilities - Other Inter Program - Due To Total Current Liabilities Noncurrent Liabilities Long-term Debt, Net of Current - Capital Long-term Debt, Net of Current - Operating Non-current Liabilities - Other Accrued Compensated Absences Accrued Pension and OPEB Liabilities Total Non-Current Liabilities Total Liabilities Net Position: Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Equity/Net Position Total Liabilities and Equity/Net Position - - 55,165 - 3,857 - 28,179 402 1,112 - - 2,116 - 89,719 20,779 4,460 432 - - 26,783 17,537 17,174 503 - - - 35,214 - - - - - - - - - - - - - - - - - - - - - - - - - 66,597 66,597 70,817 - 10,814 6,436 - - - - - 70,817 - - - - 17,250 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 241,709 31,927 2,038 29,114 - 3,552 (2,038) 2,116 (2,038) 306,380 - - - - - - - - - - - - - - - - - - - - 157,829 26,219 4,529 - - - 188,577 46,785 6,809 2,630 - - - 56,224 204,614 33,028 7,159 - - - 244,801 446,323 64,955 36,273 5,221,895 - - 212,657 3,552 2,116 (2,038) 551,181 - - - - - - - - 5,221,895 212,657 416,176 23,744 93,854 - 12,759 - 546,533 5,638,071 236,401 93,854 - 12,759 - 5,981,085 $ 6,084,394 $ 301,356 $ 130,127 $ (concluded) 116 3,552 $ 14,875 $ (2,038) $ 6,532,266 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2014 Housing Choice Vouchers 14.871 Public Housing 14.850 & 14.872 Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants Capital Grants Management Fee Asset Management Fee Bookkeeping Fee Front Line Service Fee Other Fees Other Government Grants Investment Income - Unrestricted Mortgage Interest Income Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue $ 969,709 $ - Business Activities $ - Resident Opportunity and Supportive Services 14.870 $ - Moderate Rehabilitation 14.856 $ - Elimination $ - Total $ 969,709 24,414 - - - - - 24,414 994,123 - - - - - 994,123 858,964 - 4,299,385 - - - - - 112,154 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,598 191,371 112,154 14,252 (8,258) - 3,298,076 - 7,598 137,525 39,594 56,048 86,297 - - - - - - - - - - - - - 1,971,235 3,443,199 39,594 471,569 173,728 17,152 8,346 2,908 1,019 56,048 86,297 - (8,258) - - 5,596,373 Expenses: Administrative Administrative Salaries Auditing Fees Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Other Total Administrative Tenant Services Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities - - 662,449 - 727 - 13,000 9,859 - 9,859 - - - - - - - - - - - 416 277 - 30 - - 723 - - 199,965 1,175 - - 97,504 - - 17,767 140,116 51,493 8,356 73,076 22,631 622 14,339 3,428 37,706 6,562 3,074 11,199 7,518 989 756,767 268,545 31,212 - - - - - - - - - - 31,443 - 31,443 - 110,404 - - 17,863 - - 138,679 - - 58,121 1,801 3,006 39,518 - - 49,143 - - 19,706 - 1,070,116 39,518 10,586 - - - - 13,027 - - 13,027 - 40 - - 31,483 - 52,585 - - 84,028 - - - 110,404 - - - 17,863 - - - 138,679 58,121 - - - - - - - - - - - - - - - - - - - - - - - 325,067 (continued) 117 - 325,067 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2014 Labor Materials and Other Employee Benefit Contributions Garbage & Trash Removal Contacts Heating & Cooling Contracts Landscape & Grounds Contracts Unit Turnaround Contracts Electrical Contracts Plumbing Contracts Extermination Contracts Janitorial Contracts Routine Maintenance Contracts Contracts-Other Total Maintenance Protective Services Protective Services - Other Total Protective Services General Expense Property Insurance Liability Insurance Workmen's Compensation All Other Insurance Other General Expenses Compensated Absences Payments in Lieu of Taxes Bad debt - Tenant Rents Bad debt - Other Total General Expenses Financial Expenses Interest Expense - Mortgage Payable Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses Moderate Rehabilitation 14.856 Housing Choice Vouchers 14.871 Business Activities 343,727 - - - - - 343,727 35,420 - - - - - 35,420 99,707 - - - - - 99,707 48,599 - - - - - 48,599 4,126 - - - - - 4,126 - - - - - - - - - - - - - 75 - - - - - 75 2,485 - - - - - 2,485 3,356 - - - - - 3,356 19,890 - - - - - 19,890 Public Housing 14.850 & 14.872 Ordinary Maintenance and Operations Resident Opportunity and Supportive Services 14.870 - Elimination - - - - - 18,220 - - - - - 575,605 - - - - - Total - 18,220 575,605 . - - - - - - - - - 44,519 - - - - - - - 16,356 3,413 - - - - 44,519 19,769 19,546 3,916 396 372 - - 24,230 12,824 1,554 402 85 - - 27,054 11,825 19,128 158 - - - 31,111 12,120 1,430 445 - - - 13,995 - - - - 66,597 - 66,597 - 1,287 - - - - 1,287 11,508 75 13,654 - - - 25,237 196,583 29,516 15,055 457 - - 241,611 - - - - - - - - - - - - - - - - - - - - - 1,885,465 298,061 85,770 3,145,138 46,267 (6,673) 56,048 (continued) 118 10,586 - 2,296,427 75,711 - 3,299,946 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2014 Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Total Other Expense Total Expenses Other Financing Sources (Uses) Transfer of Funds Transfer of Equity Prior Period Adjustments Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Ending Net Position Administrative Fee Equity Housing Assistance Payments Equity Unit Months Available Number of Unit Months Leased Housing Choice Vouchers 14.871 Business Activities - - - - - - - - - - - - - - - 3,081,142 - 120,545 - 403,099 3,201,687 2,288,564 3,499,748 Elimination 75,568 Total - - 3,156,710 - - - - 120,545 - - - - 403,099 - - 75,568 - 3,680,354 86,154 - 5,976,781 46,267 56,048 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 143 - - 12,616 - 6,361,493 $ - $ 5,981,085 (317,329) (56,549) 5,955,400 Beginning Net Position Moderate Rehabilitation 14.856 Public Housing 14.850 & 14.872 403,099 Depreciation Expense Resident Opportunity and Supportive Services 14.870 (6,673) 292,950 236,401 100,527 $ 93,854 $ - $ 12,759 (380,408) $ 5,638,071 $ $ - $ 23,744 $ - $ - $ - $ - $ 96,939 $ - $ 219,852 $ - $ - $ - $ - $ 423,848 3,180 4,296 - - 144 - 7,620 3,136 4,287 - - 139 - 7,563 (concluded) 119 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2014 Operating Fund Program Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants Capital Grants Management Fee Asset Management Fee Bookkeeping Fee Front Line Service Fee Other Fees Other Government Grants Investment Income - Unrestricted Mortgage Interest Income Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue $ 969,709 Capital Fund Grants - $ 24,414 - $ 994,123 - 588,400 - $ Other Project Total 969,709 24,414 994,123 270,564 858,964 112,154 112,154 - - - - - - - - - - - - - - - - - - - - - - - - - - 14,252 - (8,258) - - - 14,252 (8,258) - 1,588,517 382,718 1,971,235 430,067 41,502 471,569 Expenses: Administrative Administrative Salaries Auditing Fees Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Allocated Overhead Other Total Administrative Tenant Services Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities 8,346 - 8,346 - - - - - 416 - 416 128,859 11,257 50,386 22,690 14,339 20,308 17,398 - - 11,199 663,920 92,847 - 140,116 73,076 14,339 37,706 11,199 756,767 - - - - - - - - - 31,443 - 31,443 31,443 - 31,443 110,404 - 110,404 17,863 - 17,863 138,679 - 138,679 - 58,121 58,121 - - - - 325,067 (continued) 120 325,067 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2014 Operating Fund Program Ordinary Maintenance and Operations Labor Materials and Other Employee Benefit Contributions Garbage & Trash Removal Contacts Heating & Cooling Contracts Landscape & Grounds Contracts Unit Turnaround Contracts Electrical Contracts Plumbing Contracts Extermination Contracts Janitorial Contracts Routine Maintenance Contracts Contracts-Other Total Maintenance Protective Services Protective Services - Other Total Protective Services General Expense Property Insurance Liability Insurance Workmen's Compensation All Other Insurance Total insurance Premiums Other General Expenses Compensated Absences Payments in Lieu of Taxes Bad debt - Tenant Rents Bad debt - Other Total General Expenses Financial Expenses Interest Expense - Mortgage Payable Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses Capital Fund Grants Other Project Total 343,727 - 343,727 35,420 - 35,420 99,707 - 99,707 48,599 - 48,599 4,126 - 4,126 - - - - - 75 - 75 2,485 - 2,485 3,356 - 3,356 19,890 - 19,890 - - - - 18,220 - 18,220 575,605 - 575,605 - - - - - - 44,519 - 44,519 16,356 - 16,356 18,802 744 19,546 12,788 36 12,824 92,465 780 93,245 11,826 - 11,825 12,120 - 12,120 66,597 - 66,597 1,287 - 1,287 11,508 - 11,508 195,803 780 196,583 - - - - - - - - - 1,791,838 (203,321) 93,627 1,885,465 289,091 85,770 (continued) 121 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2014 Operating Fund Program Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense Total Other Expense Total Expenses Transfer of Funds Transfer of Equity Prior Period Adjustments Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Capital Fund Grants Other Project Total - - - - - - - - - - - - 403,099 - 403,099 403,099 - 403,099 2,194,937 93,627 176,937 (176,937) 112,154 (112,154) 2,333,082 - - - - - - - (317,329) - (361,847) Beginning Net Position 5,955,400 - 5,955,400 Ending Net Position 5,638,071 - 5,638,071 (concluded) 122 Statistical Section This part of the City of Flagstaff's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city's overall financial health. Contents Page Financial Trends 124 These schedules contain trend information to help the reader understand how the city's financial performance and well-being have changed over time. Revenue Capacity 133 These schedules contain information to help the reader assess the city's most significant local revenue source, sales tax. Debt Capacity 138 These schedules present information to help the reader assess the affordability of the city's current levels of outstanding debt and the city's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place. 149 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the city's financial report relates to the services the City's provides and the activities it performs. 151 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in 2003; schedules presenting government-wide information include information beginning in that year. 123 124 324,621,844 57,587,021 40,504,599 226,530,224 214,117,224 24,092,049 5,161,363 184,863,812 110,504,620 33,494,972 35,343,236 41,666,412 2004 56,392,865 20,670,257 46,759,889 $ 352,523,597 81,341,713 23,870,778 $ 247,311,106 $ 228,700,586 24,948,848 3,200,521 $ 200,551,217 $ 123,823,011 $ 2005 $ 540,979,392 55,782,138 16,220,550 $ 468,976,704 $ 286,073,806 19,267,461 2,424,615 $ 264,381,730 $ 254,905,586 36,514,677 13,795,935 $ 204,594,974 2007 (4) FY 2009 restated for change due to accounting error (3) FY 2008 change in calculations within categories due to calculation error. No net change to total net position. (2) FY 2007 restated for retroactive reporting due to an accounting error $ $ $ $ $ $ (1) FY 2007 restated for retroactive reporting of infrastructure Total primary government net position Unrestricted Restricted Net investment in capital assets Primary government Total business-type activities and net position Unrestricted Restricted Net investment in capital assets Business-type activities Total governmental activities net position Unrestricted Restricted Net investment in capital assets Governmental activities (accrual basis of accounting) Last Ten Fiscal Years Net Position by Component City of Flagstaff Schedule 1 (2) $ 563,019,965 55,498,587 16,469,767 $ 491,051,611 $ 294,627,514 16,250,436 1,593,915 $ 276,783,163 $ 268,392,451 39,248,151 14,875,852 (1) $ 214,268,448 2008 $ 563,264,321 46,314,394 9,569,184 $ 507,380,743 $ 304,849,517 11,547,792 1,593,915 $ 291,707,810 (3) $ 258,414,804 34,766,602 7,975,269 $ 215,672,933 2009 Fiscal Year (4) $ $ $ $ $ $ 597,329,620 60,359,442 20,423,156 516,547,022 315,889,334 10,895,855 2,209,327 302,784,152 281,440,286 49,463,587 18,213,829 213,762,870 2010 $ $ $ $ $ $ 608,022,270 60,053,883 26,974,999 520,993,388 323,306,722 17,190,191 3,003,129 303,113,402 284,715,548 42,863,692 23,971,870 217,879,986 2011 $ $ $ $ $ $ 622,293,907 61,278,603 37,484,442 523,530,862 331,192,298 23,968,903 2,805,002 304,418,393 291,101,609 37,309,699 34,679,441 219,112,469 2012 $ $ $ $ $ $ 43,761,156 2,492,562 $ 652,458,620 68,304,802 61,483,885 635,286,273 $ 537,900,100 46,253,718 $ 344,173,830 31,128,319 $ 310,552,949 $ 308,284,790 37,176,483 $ 227,347,151 2014 527,251,882 46,550,506 336,451,012 29,195,853 2,694,262 304,560,897 298,835,261 32,288,032 43,856,244 222,690,985 2013 125 126 Interest on long-term debt 1,923,325 19,860,371 11,757,330 Total governmental activities program revenues Capital grants and contributions 2,678,653 - 722,236 16,164 976,793 451,802 3,257,393 Operating grants and contributions Highways and streets Culture and recreation Economic and physical development Public works Public safety General government Charges for services: Governmental activities: $ 80,241,288 Total primary government expense Program Revenues 28,401,426 460,936 $ 498,506 25,654,682 15,180,401 4,147,529 - 680,755 321,915 1,213,714 3,611,862 86,143,316 30,075,101 479,700 - 3,749,669 - 3,370,447 8,548,715 56,068,215 2,042,555 10,011,231 9,426,600 6,807,311 1,320,459 5,441,945 21,018,114 17,297,017 $ $ 2005 17,250,441 7,319,602 51,839,862 Total business-type activities expense Stormwater Houising Authority Airport Environmental Water and wastewater Business-type activities: Total governmental activities expense 8,693,714 8,886,947 Culture and recreation Highways and streets 1,178,137 5,891,617 18,792,832 6,473,290 $ $ 2004 Economic and physical development Public works Public safety General government Governmental activities: Expenses (accrual basis of accounting) Last Ten Fiscal Years Changes in Net Position City of Flagstaff Schedule 2 $ $ $ 815,167 33,255,955 21,566,549 3,791,526 - 683,906 332,356 1,180,097 4,886,354 93,681,732 31,860,328 791,791 - 3,519,749 9,096,420 18,452,368 61,821,404 2,167,626 12,043,242 8,328,945 7,842,985 1,454,731 7,458,583 22,525,292 2006 39,612,372 1,160,604 - 3,608,322 11,423,164 23,420,282 80,790,765 2,916,380 15,515,643 11,607,116 10,556,175 1,894,089 11,271,031 27,030,331 $ 27,181,541 16,324,928 3,320,597 - 762,410 315,462 1,483,275 1,227,979 3,746,890 $ 120,403,137 $ 2008 39,985,739 1,203,436 - 4,197,447 11,782,540 22,802,316 88,726,876 3,651,521 19,297,615 13,120,917 10,346,982 2,109,221 10,913,187 29,287,433 $ 23,703,243 9,880,762 5,990,756 - 1,559,617 369,987 1,350,832 1,451,405 3,099,884 $ 128,712,615 $ 2009 Fiscal Year 38,354,045 1,258,072 - 4,273,609 11,091,078 21,731,286 79,443,260 3,918,110 17,856,121 12,507,679 8,827,578 1,502,626 8,238,178 26,592,968 $ 51,356,453 36,949,681 6,654,978 - 1,420,094 291,211 1,471,550 1,283,697 3,285,242 $ 117,797,305 $ 2010 44,619,819 1,121,555 5,811,922 4,584,733 11,610,370 21,491,239 79,568,079 3,370,918 19,275,381 12,854,824 8,474,776 1,754,033 7,850,954 25,987,193 $ 24,126,116 9,226,778 7,965,474 - 1,442,901 162,715 1,537,188 1,144,636 2,646,424 $ 124,187,898 $ 2011 42,332,291 1,361,658 6,165,612 4,268,099 7,828,286 22,708,636 79,544,593 2,944,057 16,328,771 12,434,695 9,639,003 1,615,941 9,406,406 27,175,720 $ 27,651,557 12,200,969 7,414,767 - 1,455,067 53,747 1,551,419 1,611,109 3,364,479 $ 121,876,884 $ 2012 46,650,101 1,196,589 5,986,508 5,226,977 11,671,366 22,568,661 80,318,169 2,902,196 15,431,985 13,342,588 9,210,500 1,718,767 10,442,808 27,269,325 $ 26,296,855 11,318,522 6,866,279 - 1,507,855 52,386 1,611,306 1,491,842 3,448,665 $ 126,968,270 $ 2013 47,789,629 1,576,865 6,090,790 4,118,280 11,637,566 24,366,128 83,619,164 2,946,685 17,698,346 12,919,475 9,018,496 1,573,541 10,732,510 28,730,111 $ 29,432,776 14,603,667 7,071,557 - 1,656,628 903,233 1,215 628,038 4,568,438 $ 131,408,793 $ 2014 127 Total primary government Business-type activities Governmental activities Change in Net Position Total primary government Total business-type activities Transers in (out) $ $ - Gain on sale of capital assets 9,846,479 25,818,897 15,972,418 49,057,592 1,105,683 369,358 17,302 Miscellaneous Investment earnings - 719,023 47,951,909 (369,358) Grants and contributions not restricted to specific programs Business-type activties: Total governmental activities Transers in (out) 14,717 634,411 218,520 905,717 Contributions to permanent fund Gain on sale of capital assets Investment earnings Miscellaneous 12,122,563 7,931,626 25,682,974 (23,238,695) 8,740,796 (31,979,491) 57,002,593 810,739 $ $ $ $ $ 37,142,222 10,482,991 286,919 546,807 - 944,983 8,201,566 16,678,956 Grants and contributions not restricted to specific programs State shared sales taxes - unrestricted Sales taxes Property taxes Taxes Governmental activities: General Revenues and Other Changes in Net Position Total primary government net expense Business-type activities Governmental activities Net (Expense)/Revenue Total primary government program revenues Total business-type activities program revenues Capital grants and contributions Operating grants and contributions Stormwater Housing Authority Airport Environmental Water and wastewater Charges for services: Business-type activities: (accrual basis of accounting) Last Ten Fiscal Years Changes in Net Position City of Flagstaff Schedule 2 (continued) $ $ $ $ 27,901,753 14,583,362 13,318,391 52,186,000 8,454,076 7,004,365 513,738 - - 935,973 43,731,924 (7,004,365) 17,765 382,387 277,972 1,703,861 - 12,837,838 8,462,302 27,054,164 $ (24,284,247) 6,129,286 61,859,069 $ (30,413,533) $ 36,204,387 8,164,775 574,376 694,161 - 1,176,866 9,370,561 16,223,648 $ $ $ $ $ 49,673,379 24,030,865 25,642,514 57,984,779 3,776,816 2,267,551 326,540 - 889 1,181,836 54,207,963 (2,267,551) 24,630 33,417 204,678 2,385,099 377,502 14,384,055 9,051,158 30,014,975 (8,311,400) 20,254,049 85,370,332 $ (28,565,449) $ 52,114,377 23,449,969 369 630,962 - 1,261,594 9,723,652 17,047,831 $ $ $ $ $ $ $ 8,563,922 22,050,787 13,486,865 71,856,150 4,760,061 3,590,153 78,248 127,423 - 964,237 67,096,089 (3,590,153) 16,200 2,160,339 819,325 3,903,839 - 16,992,017 13,664,791 33,129,731 (49,805,363) 3,803,861 (53,609,224) 70,597,774 43,416,233 12,242,567 67,651 1,137,402 - 1,207,831 10,813,177 17,947,605 $ (2,281,206) 10,222,003 62,663,602 10,143,178 9,651,500 119,366 166,158 - 206,154 52,520,424 (9,651,500) 13,325 - 381,984 1,465,731 - 16,628,652 12,262,185 31,420,047 $ (12,503,209) $ $ $ (64,944,808) 78,825 63,767,807 $ (65,023,633) $ 40,064,564 8,744,216 10,966 1,247,878 - 1,187,105 11,545,472 17,328,927 $ $ $ $ $ $ $ 34,079,067 23,025,482 11,053,585 62,022,480 10,910,191 10,524,926 79,467 194,547 - 111,251 51,112,289 (10,524,926) 19,136 2,831,308 228,969 449,394 - 14,880,073 12,798,495 30,429,840 (27,943,413) 143,394 (28,086,807) 89,853,892 38,497,439 6,790,709 120,054 1,358,438 - 1,359,029 11,329,336 17,539,873 $ $ $ $ $ $ $ 4,537,196 3,275,262 1,261,934 60,212,679 1,495,454 1,189,964 47,818 150,129 - 107,543 58,717,225 (1,189,964) 24,950 744,957 1,741,338 246,093 - 13,148,252 12,645,717 31,355,882 (55,675,483) (233,520) (55,441,963) 68,512,415 44,386,299 4,220,708 5,090,475 1,456,894 1,437,841 1,388,076 12,010,554 18,781,751 $ $ $ $ $ $ $ 7,885,576 14,271,637 6,386,061 59,705,039 1,425,942 1,134,382 - 173,313 - 118,247 58,279,097 (1,134,382) 15,474 - 510,695 322,126 - 13,189,822 11,974,341 33,401,021 (45,433,402) 6,459,634 (51,893,036) 76,443,482 48,791,925 7,960,357 4,624,234 1,446,602 1,299,987 1,492,559 12,030,990 19,937,196 $ $ $ $ $ $ $ 5,258,714 12,992,366 7,733,652 63,591,748 1,836,782 817,761 243,700 581,015 - 194,306 61,754,966 (817,761) 23,935 18,173 1,285,289 (396,124) - 14,630,891 11,821,650 35,188,913 (50,599,382) 3,421,932 (54,021,314) 76,368,888 50,072,033 6,622,143 4,884,129 1,455,405 994,123 1,486,247 12,000,124 22,629,862 $ $ $ $ $ $ $ 3,963,935 7,726,965 17,841,433 10,114,468 68,063,886 3,763,030 2,908,700 73,916 567,079 - 213,335 64,300,856 (2,908,700) 18,700 241,231 1,813,164 749,038 - 15,666,968 11,044,817 37,675,638 (50,222,453) (54,186,388) 81,186,340 51,753,564 7,835,529 4,051,236 1,465,522 974,184 1,504,703 12,490,237 23,432,153 128 Unassigned $ $ $ - - - 34,599,132 - 53,004,789 63,689,857 * FY2010: Implementation of GASB-54 Fund Balance Classification - - - - - - - - - - 6,567 - 16,332,830 47,350,460 - $ $ 31,220,471 - - - - - 1,260,236 29,960,235 - - 22,893,640 30,107,878 28,807,045 (1) $ $ 3,271 $ $ $ - - - - 232,190 28,574,855 2007 1,426 - 33,041,256 1,556,450 29,325,196 $ 2006 (1) FY2007 : as restated for accounting error related to the accural of state shared revenues. Total all other governmental funds Unassigned Assigned Committed Restricted Nonspendable Permanent fund Capital project funds Special revenue funds Unreserved, reported in: Reserved All Other Governmental Funds Total general fund - - - Assigned Restricted Committed 200,401 29,124,795 - $ 2005 Nonspendable Unreserved Reserved General Fund (modified accrual basis of accounting) Last Ten Fiscal Years Fund Balances, Governmental Funds City of Flagstaff Schedule 3 $ $ $ $ 36,355,874 - - - - - 9,916 (763,744) 16,498,123 20,611,579 27,801,832 - - - - - 308,979 27,492,853 2008 $ $ $ $ - - 13,471,434 - 8,955,106 - 4,299,450 216,878 - - - - 22,590,284 22,203,764 - - 106,144 280,376 2009 Fiscal Year $ $ $ $ 22,807,012 - 651,650 2,228,605 19,720,079 206,678 - - - 23,256,335 13,412,219 8,595,100 86,568 785,720 376,728 - - 2010* $ $ $ $ - - 20,363,506 (2,863,781) - - 23,012,954 214,333 - - - 23,352,187 15,160,509 6,882,947 85,119 796,345 427,267 2011 $ $ $ $ - 33,962,655 - - - 33,743,091 219,564 - - - 25,680,223 17,203,207 7,075,902 282,888 758,303 359,923 2012 $ $ $ $ - 42,714,228 - - - 42,466,792 247,436 - - - 28,324,180 19,410,597 7,335,230 386,518 800,953 390,882 2013 $ $ $ $ - 48,591,801 - - - 48,320,324 271,477 - - - 31,762,789 21,559,814 8,063,998 - 1,698,333 440,644 2014 129 8,003,110 non capital expenditures Debt service as a percentage of Net change in fund balances Total other financing sources (uses) Transfers out Transfers in Sale of capital assets Insurance recoveries Bond premium Lease issued Payment to bond refunding escrow agent Loan issued Issuance of capital debt Proceeds of refunding bonds OTHER FINANCING SOURCES (USES): Excess of revenues over (under) expenditures Total expenditures Capital outlay Interest and other charges Principal retirement Debt service: 13.19% 17,469,212 26,326,147 (13,365,892) 12,996,534 634,411 - 1,059,221 - (718,127) - 720,000 25,000,000 (8,856,935) 72,726,564 19,348,708 4,614,000 2,428,026 7,724,481 Highways and streets $ 1,005,745 12.32% 1,657,424 4,645,277 (16,582,052) 15,312,931 2,114,398 - - - - 3,800,000 - - (2,987,853) 74,103,302 17,053,841 4,880,000 2,148,734 8,951,097 8,341,105 6,424,057 966,546 19,140,415 71,115,449 277,972 22,229 1,589,293 1,220,007 1,250,494 2,063,718 218,500 1,834,067 9,564,110 17,545,686 35,529,373 6,158,308 6,289,966 Culture and recreation $ 2005 5,335,890 18,015,837 Economic and physical development Public works Public safety General governmental EXPENDITURES: 63,869,629 21,917 905,717 Total revenues Contributions Miscellaneous 985,907 1,144,562 2,111,033 291,684 1,459,837 10,940,934 12,156,451 33,736,154 115,433 $ $ 2004 Investment earnings Rents Fines and forfeitures Licenses and permits Special assessments Charges for services Grants and entitlements Intergovernmental Taxes REVENUES: (modified accrual basis of accounting) Last Ten Fiscal Years Changes in Fund Balances, Governmental Funds City of Flagstaff Schedule 4 $ $ 12.69% 13,098,494 17,642,417 (19,488,466) 17,756,847 252,329 - 46,707 - - - - 19,075,000 (4,543,923) 93,583,397 26,403,203 5,313,222 3,210,879 7,859,004 8,648,628 9,344,676 1,615,049 8,194,214 22,994,522 89,039,474 1,377,552 2,981,982 3,920,473 1,480,686 1,290,667 2,438,599 2,927 2,605,880 12,185,406 18,779,168 41,976,134 2007 $ $ 10.80% (30,752,621) (727,425) (20,085,809) 17,181,576 2,176,808 - - - - - - - (30,025,196) 121,185,508 46,465,549 5,046,398 3,020,927 8,505,722 10,267,649 10,335,964 1,617,311 10,229,814 25,696,174 91,160,312 819,325 1,308,938 3,731,116 1,496,858 1,336,146 1,815,062 2,449 2,704,333 13,556,680 20,425,088 43,964,317 2008 $ $ 10.85% (28,095,989) (1,560,019) (23,359,573) 21,626,308 63,894 - - 109,352 - - - (26,535,970) 111,787,174 30,796,072 5,034,991 3,750,657 11,187,402 12,158,087 9,991,927 1,645,703 9,848,252 27,374,083 85,251,204 381,984 1,328,524 1,366,931 1,421,772 1,517,558 1,377,580 2,382 3,324,838 9,609,508 21,364,739 43,555,388 2009 Fiscal Year $ $ 13.78% 6,849,473 8,091,724 (18,525,100) 15,224,243 1,084,211 1,920,000 58,370 - - - - 8,330,000 (1,242,251) 85,486,435 12,446,280 3,996,963 6,065,522 9,313,158 10,615,754 8,601,808 1,360,447 7,926,726 25,159,777 84,244,184 228,969 544,393 413,594 1,588,214 1,636,157 1,441,874 1,510,217 3,057,423 11,172,862 19,450,213 43,200,268 2010 $ $ 14.05% (2,347,654) 498,218 (14,268,052) 13,661,630 45,655 1,058,985 - - - - - (2,845,872) 84,484,834 11,785,480 3,451,706 6,761,179 10,612,033 10,782,848 8,202,024 1,299,027 7,113,922 24,476,615 81,638,962 1,719,608 166,417 224,363 1,617,912 1,673,306 739,040 701,447 2,926,237 10,583,483 17,488,021 43,799,128 2011 $ $ 21.34% 15,927,185 17,433,348 (15,074,950) 14,872,935 43,890 - 2,264,386 - (15,394,336) - 13,924,136 16,797,287 (1,506,163) 91,609,695 11,951,834 3,346,253 13,654,681 9,593,074 10,576,877 8,584,826 1,146,692 7,453,963 25,301,495 90,103,532 492,971 390,253 296,241 1,605,166 1,601,044 1,681,874 8,286,453 3,220,137 9,721,569 17,230,696 45,577,128 2012 $ $ 12.52% 11,395,530 13,479,037 (12,458,747) 12,870,788 49,750 - 542,689 - - - - 12,474,557 (2,083,507) 89,160,366 16,656,392 2,902,196 6,175,303 9,039,032 11,292,517 8,296,367 1,219,324 8,480,086 25,099,149 87,076,859 1,261,507 252,377 (429,656) 1,667,562 1,540,989 1,656,135 722,733 3,237,728 11,369,392 18,713,646 47,084,446 2013 $ $ 19,584,399 3,126,469 14.57% 3,021,505 7,976,367 (11,659,441) 12,102,855 727,996 - 1,317,667 - (9,382,710) - 8,270,000 6,600,000 (4,954,862) 102,398,300 24,062,755 8,287,457 10,621,311 11,446,096 8,212,772 1,031,983 9,041,946 26,567,511 97,443,438 1,813,164 541,340 722,878 1,651,032 1,428,401 1,952,731 2,734,095 2,894,898 15,313,742 48,806,758 2014 130 4,453 4,616 4,882 5,150 5,259 5,473 5,472 5,571 2007 2008 2009 2010 2011 2012 2013 2014 2004-2013 53.94% 4,209 2006 Change 3,619 Property Tax General 2005 Year Fiscal (modified accrual basis of accounting) (dollars in thousands) Last Ten Fiscal Years 14.50% 5,560 6,423 6,703 7,184 7,620 7,254 6,219 5,188 4,881 4,856 Property Tax Secondary Tax Revenue by Source, Governmental Funds City of Flagstaff Schedule 5 28.00% 2,487 2,303 2,348 2,339 2,133 2,246 2,189 1,838 2,083 1,943 Other Taxes Franchise and 29.62% 17,042 15,760 14,900 13,893 13,595 14,384 16,150 16,071 14,707 13,148 Sales Tax City 45.69% 6,310 5,911 5,626 5,259 5,074 5,052 5,187 4,992 4,623 4,331 Tax and Booze Bed, Board 9,605 9,434 8,602 7,632 55.10% 11,837 11,215 10,527 9,865 9,628 10,035 Tax Transportation 37.37% 48,807 47,084 45,577 43,799 43,200 43,853 43,966 41,976 39,105 35,529 Total 131 4,900,117 5,652,335 5,815,473 5,623,144 4,868,072 4,490,087 4,711,821 2006 2007 2008 2009 2010 2011 5,391,580 5,733,507 2013 2014 7,342,048 6,728,479 5,559,476 5,955,305 7,899,626 9,149,290 8,610,567 6,946,680 5,655,641 4,918,476 Income Tax State 2,591,413 2,510,832 2,483,245 2,481,126 2,490,360 2,611,289 2,758,307 2,792,404 2,655,653 2,461,425 In-Lieu Tax County Auto * - As restated due to change in accounting error identified in FY2010 5,147,101 2012 Sales Tax 2005 Year State Fiscal (modified accrual basis of accounting) Last Ten Fiscal Years Intergovernmental Revenue by Source, Governmental Funds City of Flagstaff Schedule 6 - - 6,007,741 6,168,102 - - 156,218 251,536 225,965 293,502 304,341 313,843 Assistance Local Transportation 5,576,167 6,300,885 6,429,355 6,412,329 7,422,359 7,855,427 7,942,771 7,171,383 User Tax Highway - - - - - - 58,782 - 55,665 - State HB 2565 2,281,211 2,105,827 3,544,253 3,181,076 3,885,697 1,711,609 4,868,431 2,822,315 2,386,011 1,772,181 Grants Federal 6,864,429 3,255,824 601,149 1,101,522 701,592 1,234,065 981,142 1,214,162 940,441 2,868,033 State Grants & Other State 793,898 791,906 759,606 744,070 757,241 897,337 668,153 721,797 420,426 628,198 County LEAF IGA 3,063,343 3,214,133 3,163,052 3,531,607 3,762,831 4,125,223 3,559,362 2,559,375 2,241,811 2,068,947 County Library District Funding * 60,190 76,716 118,216 34,898,141 30,083,038 26,952,265 28,071,504 30,623,075 50,068 64,092 31,293,545 34,776,212 31,021,135 28,255,095 27,142,243 Total 32,795 - - - 39,640 Other 132 28,051,846 28,940,765 27,478,520 25,750,042 26,651,155 28,837,059 28,918,422 2008 2009 2010 2011 2012 2013 2014 $ 215,081,441 255,823,684 265,230,915 274,992,074 286,101,952 281,348,845 261,009,908 237,795,313 221,179,062 211,870,593 Property Commercial $ 123,988,197 124,373,673 133,909,755 146,079,309 151,630,088 140,117,313 125,377,258 100,985,606 82,683,618 65,128,715 Property and Government Vacant, Agricultural, $ 670,692,616 87,055,619 389,760,175 765,266,937 values are equal to actual value. Tax rates are per $100 of assessed value. Note: A portion of city property is reassessed every year. Property is assessed at actual value, therefore, the assessed 791,368,451 864,039,469 916,341,717 878,781,823 750,538,367 624,199,899 556,680,587 501,655,440 80,555,433 $ 436,787,954 85,132,993 78,819,714 71,775,990 62,684,483 57,296,001 50,697,830 46,939,696 Value Assessed Total Taxable 81,844,375 $ Property Less: Tax-exempt 447,421,001 502,351,037 529,950,871 500,150,890 398,783,838 315,182,546 276,187,028 242,190,760 Property Residential Source: State of Arizona Department of Revenue, State and County Abstract of the Assessment Roll 27,532,435 2007 29,405,068 27,328,709 $ Property Valued 2006 2005 Year Fiscal Centrally (modified accrual basis of accounting) Last Ten Fiscal Years Full Cash Value of Taxable Property City of Flagstaff Schedule 7 1.6795 1.5497 1.5283 1.4845 1.4913 1.5519 1.5519 1.5929 1.6627 1.7127 Tax Rate Total Direct 133 Other 1,270,570 199 134,824 $ $ 1,414,626 4,892 144,635 586,841 - 232,359 129,671 82,481 233,747 2006 $ $ 1,582,291 68,840 154,183 637,225 - 248,819 133,497 79,703 260,024 2007 $ $ 1,567,306 71,299 163,463 619,805 - 255,578 118,282 75,493 263,386 2008 $ $ 1,383,657 69,175 155,193 582,029 - 250,555 78,819 66,641 c) Prior to FY13, Hotel/Motel was included with Restaurant and Bars b) Prior to FY13, Auto Sales included Auto Services which is now included in Retail a) Building Materials is no longer tracked individually, now is tracked as part of Retail $ $ Fiscal Year 181,245 2009 *NOTES: FY13 reflects a change in tax categories reported to proactively reflect possible New State Sales Tax Codes TOTAL Utilities - 556,165 Hotel/Motel Retail 127,760 72,152 163,846 215,624 $ $ 2005 Restaurants and Bars Auto Sales Building Materials Construction (dollars in thousands) Last Ten Fiscal Years City Taxable Revenue for Major Categories City of Flagstaff Schedule 8 1,312,658 66,392 152,042 546,765 - 251,271 85,806 60,143 150,239 2010 $ $ 1,349,446 63,784 151,461 544,356 - 261,384 99,786 61,781 166,894 2011 $ $ 1,440,928 116,273 154,497 557,375 - 277,954 121,296 62,665 150,868 2012 $ $ - 1,529,123 92,968 196,534 630,898 88,924 206,617 148,211 164,971 2013* $ $ - 1,589,789 103,895 200,109 638,142 95,263 218,790 163,657 169,933 2014 134 0.4865 4.7713 1.5519 2008 0.4643 4.8334 1.5519 2009 Fiscal Year 0.4267 3.8860 1.4913 2010 0.4308 4.6772 1.4845 2011 0.4734 4.9458 1.5283 2012 0.0459 3.6182 4.8712 0.8366 1.5497 0.7131 2013 7.5685 0.7588 7.6099 0.7603 6.5284 0.7244 7.3170 0.7245 7.7131 0.7656 0.2367 0.7847 0.4480 Note: Tax rates are per $100 assessed valuation. 7.6983 8.7728 0.7521 Total 9.4948 1.2010 0.1000 9.2235 1.2212 0.1052 0.3875 0.4927 0.1833 Fire District Assistance Library District General Fund County Bond Maintenance Community College Capital Override 0.4112 0.5269 5.9009 1.5929 2007 Class B Bond 0.5525 6.0786 1.6627 2006 0.6126 0.5660 5.7236 1.7127 2005 15% M&O Override Adjacent Ways Maintenance School District Secondary Primary Total City (rate per $100 of assessed value) Last Ten Fiscal Years Direct and Overlapping Property Tax Rates, City of Flagstaff Schedule 9 8.3635 0.1000 0.2556 0.9022 0.5466 0.1243 0.4636 0.5879 0.4979 0.0000 0.7061 0.0096 3.9803 5.1939 0.8366 1.6795 0.8429 2014 135 - Flagstaff Medical Center Cone Company George & Thomas DBA SACO Management Inc. Source: Coconino County Assessor Office 54,515,243 - Ralston Purina Total Principal Taxpayers - Little America Refining Co 2,354,755 Walgreens Arizona Drug Co - 2,215,553 Ridge at Clear Creek LLC Tucson Electric and Power Co. (T&D) 2,559,062 BNSF Railway Company 2,959,068 Flagstaff Mall Associated Ltd. Partnership 2,433,440 3,569,153 Wal-Mart Stores Unisource Energy Corporation 3,479,770 Qwest Corporation 13,395,589 16,979,201 4,569,652 $ $ Value Total Assessed Nestle Purina PetCare Company W L Gore & Associates Arizona Public Service Company Taxpayer * Current Year and Ten Years Ago Principal Property Tax Payers City of Flagstaff Schedule 10 9 10 7 8 6 4 5 3 2 1 Rank 2014 7.68% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.33% 0.38% 0.36% 0.00% 0.53% 0.52% 0.68% 2.00% 2.53% Assessed Valuation Secondary As a Percentage of the City Total $ $ 55,329,954 2,369,850 3,155,380 2,292,480 3,840,863 4,218,039 6,487,177 3,250,000 9,633,860 9,724,306 10,357,999 Value Total Assessed 9 8 10 6 5 4 7 3 2 1 Rank 2004 11.03% 0.47% 0.63% 0.46% 0.77% 0.84% 1.29% 0.65% 1.92% 1.94% 2.06% Assessed Valuation Secondary As a Percentage of the City Total 136 12,497,535 12,015,988 11,828,399 11,050,626 2011 2012 2013 2014 * Percentage of Levy is estimated 12,750,836 10,935,835 2008 2010 9,615,015 2007 12,253,760 9,075,322 2006 2009 8,494,694 Fiscal Year for the Taxes Levied 2005 June 30, Ended Year Fiscal Last Ten Fiscal Years Property Tax Levies and Collections City of Flagstaff Schedule 11 10,778,695 11,553,471 11,635,211 12,113,128 12,477,413 11,934,997 10,728,465 9,495,935 8,958,733 8,330,157 Amount 97.5% 97.7% 96.8% 96.9% 97.9% 97.4% 98.1% 98.8% 98.7% 98.1% of Levy Percentage Collected within the Fiscal Year of the Levy 169,762 332,418 540,896 330,118 293,015 200,344 106,120 145,415 131,194 145,051 Years Collections in Subsequent 10,948,457 11,885,889 12,176,107 12,443,246 12,770,429 12,135,341 10,834,585 9,641,350 9,089,927 8,475,208 Amount 97.5% 97.7% 96.8% 96.9% 100.0% 99.3% 99.5% 99.8%* 99.5%* 99.7%* of Levy Percentage Total Collections to Date 137 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% & Beverage City Bed, Board (Sales Tax/Business Licenses Division) www.flagstaff.az.gov 1.0000% 2014 City of Flagstaff 1.0000% 2013 Source: 1.0000% 2012 1.0000% 2009 1.0000% 1.0000% 2008 2011 1.0000% 2007 1.0000% 1.0000% 2006 2010 1.0000% Sales Tax General 2005 Year Fiscal Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates City of Flagstaff Schedule 12 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.6010% 0.6010% 0.6010% 0.6010% Transportation 5.6000% 6.6000% 6.6000% 6.6000% 6.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% State of Arizona 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 0.9250% 0.9250% County Coconino 10.4460% 11.4460% 11.4460% 11.4460% 11.4460% 10.4460% 10.3260% 10.3260% 10.1260% 10.1260% Total 138 General 24,015 2011 Special 8,639 11,055 11,365 18,130 18,615 19,169 19,257 19,339 340 415 Bonds Assessment 16,211 16,328 15,615 4,930 6,665 4,865 6,325 7,725 9,665 11,555 Bonds Revenue Governmental Activities Facility 1,260 1,260 3,205 18,095 19,890 21,625 23,000 24,315 25,610 26,895 Bonds Corporation Municipal 4,400 5,335 5,200 1,542 6,964 2,430 2,728 3,097 3,455 3,800 Leases COP Capital These amounts are presented on the accrual basis of accounting. See Schedule 18 for personal income and population data. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 54,824 25,865 2010 2014 27,645 2009 48,134 29,350 2008 2013 31,230 2007 38,449 32,875 2006 2012 4,285 Bonds Obligation 2005 Year Fiscal (dollars in thousands, except per capita) Last Ten Fiscal Years Ratios of Outstanding Debt by Type City of Flagstaff Schedule 13 1,752 1,748 3,125 3,830 5,690 7,460 10,515 13,310 16,294 18,880 Bonds General Obligation 3,635 3,634 3,972 4,299 4,614 4,918 5,212 5,496 5,770 6,035 Bonds Revenue 33,873 33,873 35,689 37,491 36,257 37,006 32,275 32,957 2,671 3,031 Payable Term Loan Business-Type Activities 4,431 4,686 3,075 3,384 3,679 3,960 4,227 4,482 2,652 2,732 Leases Capital 129,025 126,053 119,695 115,716 128,239 129,078 132,889 141,951 99,332 77,628 Government Total Primary 2.6% 2.7% 2.7% 3.1% 3.4% 3.4% 3.5% 3.8% 2.6% 2.2% Income Percentage of Personal 1,911.42 1,867.40 1,817.14 1,756.73 1,946.85 1,969.99 2,054.15 2,194.23 1,547.23 1,251.46 Per Capita 139 32,875 31,230 29,350 27,645 25,865 24,015 38,449 38,214 47,781 2006 2007 2008 2009 2010 2011 2012 2013 2014 1,752 1,752 3,125 3,830 5,690 7,460 10,515 13,310 16,294 18,880 Bonds Obligation 49,533 39,966 41,574 27,845 31,555 35,105 39,865 44,540 49,169 23,165 Total 7.4% 5.2% 5.3% 3.2% 3.4% 4.0% 5.3% 7.1% 8.8% 4.6% Property Value of Taxable of Actual Percentage (a) 751.98 606.74 631.15 422.73 481.59 542.64 620.95 718.04 792.66 378.61 Per Capita These amounts are presented on the accrual basis of accounting. b: Population data can be found in Schedule 18 a: See Schedule 7 for property value data Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 4,285 Bonds Obligation 2005 Year Fiscal General General Activities Business-Type Activities Governmental General Bonded Debt Outstanding (dollars in thousands, except per capita) Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding City of Flagstaff Schedule 14 (b) 140 $ - 25,218 110,552 * For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. This approach was also used for Coconino County's revenue bonds and certificates of participation. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Flagstaff. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Sources: Assessed value data used to estimate applicable percentages provided by the Coconino Finance Department. Debt oustanding data provided by each governmental unit. Total direct and overlapping debt 85,334 0.00% 64.41% $ Debt Overlapping City direct debt 450 39,150 Percentage Applicable* Share of Estimated 25,218 $ Debt Outstanding Estimated Subtotal, overlapping debt Coconino County Special Assessments Other debt Flagstaff Unified School District Debt repaid with property taxes Governmental Unit (dollars in thousands, except per capita) Direct and Overlapping Governmental Activities Debt City of Flagstaff Schedule 15 141 142 as a percentage of debt limit Total net debt applicable to the 6% limit Legal debt margin (Available borrowing capacity) Total net debt applicable to 6% limit Debt limit equal to 6% of assessed valuation 6% Debt Limit as a percentage of debt limit Total net debt applicable to the 20% limit $ $ $ 3.81% 32,176 $ 1,225 33,401 2005 24.13% 89,692 $ $ $ Legal debt margin (Available borrowing capacity) 111,336 21,644 $ 2005 Total net debt applicable to 20% limit Debt limit equal to 20% of assessed valuation 20% Debt Limit (dollars in thousands) Last Ten Fiscal Years Legal Debt Margin Information City of Flagstaff Schedule 16 $ $ 61.08% 23,250 $ 14,202 37,452 2006 39.31% 89,613 $ 35,227 124,840 2006 $ $ 1.53% 44,352 $ 680 45,032 2007 41.28% 106,248 $ 43,860 150,108 2007 $ $ 0.67% 52,376 $ 351 52,727 2008 29.00% 136,242 $ 39,514 175,756 2008 $ $ 0.00% 54,981 $ - 54,981 2009 Fiscal Year 23.69% 148,163 $ 35,105 183,268 2009 Fiscal Year $ $ 0.00% 51,842 $ - 51,842 2010 25.49% 137,703 $ 35,105 172,808 2010 $ $ 0.00% 47,482 $ - 47,482 2011 21.35% 130,429 $ 27,845 158,274 2011 $ $ 0.00% 45,917 $ - 45,917 2012 37.62% 111,214 $ 41,841 153,055 2012 0.00% 39,664 $ - 39,664 $ 2013 58.48% 83,425 $ 48,788 132,213 2013 0.00% 40,242 - 40,242 2014 70.33% 78,751 55,388 134,139 2014 143 $ Debt Limit of 20% of Assessed Value Legal 6% debt margin (Available borrowing capacity) General Obligation Bonds Debt applicable to limit: $ $ Debt Limit of 6% of Assessed Value 6% Limitation $ Legal 20% debt margin (Available borrowing capacity) General Obligation Bonds Debt applicable to limit: 20% Limitation $ Net Secondary Assessed Value as of June 30, 2014 Legal Debt Margin Calculation for Fiscal Year 2014 Legal Debt Margin Information City of Flagstaff Schedule 16 (continued) 40,241,557 - 40,241,557 78,750,936 55,387,587 134,138,523 670,692,616 144 18,824,260 19,996,116 22,846,487 23,642,792 2011 2012 2013 2014 14,739,788 12,810,177 12,655,773 11,663,208 11,758,135 14,633,986 16,229,816 12,892,795 11,791,895 10,693,901 Expenses (2) 8,903,004 10,036,310 7,340,343 7,161,052 5,827,063 2,825,119 2,150,535 5,342,376 5,963,143 6,158,055 Service for Debt Available Revenue Net 2,252,132 2,252,132 2,540,658 2,443,196 2,356,705 2,130,093 283,832 274,108 264,717 255,648 Principal (3) 3,037,699 3,059,388 3,990,500 3,918,523 3,839,777 3,417,662 478,801 478,801 478,801 478,801 Total bond issuance costs that are included in interest expense on the statement of revenues, expenses, and changes in net position. (4) Bond interest payments only. Does not include amortization of loss on refunding, capitalized interest, agent fees or amortization of (3) Includes principal for water and sewer revenue bonds, water infrastructure finance authority (WIFA). (2) Includes total operating expenses of the water and wastewater fund less depreciation. 785,567 807,256 1,449,842 1,475,327 1,483,072 1,287,569 194,969 204,693 214,084 223,153 Interest (4) Debt Service Requirements Water and Sewer Revenue Bonds (1) Includes total operating revenues and investment income of the water and wastewaste fund. 17,585,198 18,380,351 2008 2010 18,235,171 2007 17,459,105 17,755,038 2006 2009 16,851,956 Revenues (1) Gross 2005 Year Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 2.93 3.28 1.84 1.83 1.52 0.83 4.49 11.16 12.45 12.86 Coverage 145 Highway 6,007,741 6,168,102 2013 2014 - - 1,725,000 1,620,000 1,520,000 1,460,000 1,400,000 1,940,000 1,890,000 1,825,000 Principal (1) - - 94,875 190,455 280,135 344,010 411,385 469,585 526,285 571,910 Interest (2) Debt Service Requirements - - 1,819,875 1,810,455 1,800,135 1,804,010 1,811,385 2,409,585 2,416,285 2,396,910 Total Highway User Revenue Bonds - - 3.06 3.48 3.57 3.55 4.10 3.26 3.12 2.99 Coverage and changes in fund balances. (2) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, (1) Includes 1992 Jr. Lien and Series 2003 Refunding. 5,576,167 2012 6,412,329 2009 6,300,885 7,422,359 2008 2011 7,855,427 2007 6,429,355 7,540,081 2006 2010 7,171,383 Revenue User Tax 2005 Year Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 146 10,206,755 10,247,131 11,657,403 12,621,802 2011 2012 2013 2014 385,000 385,000 365,000 350,000 335,000 320,000 310,000 295,000 285,000 275,000 Principal (2) 68,753 77,656 94,446 110,371 125,614 139,534 152,398 164,198 175,598 186,598 Interest (3) Debt Service Requirements 453,753 462,656 459,446 460,371 460,614 459,534 462,398 459,198 460,598 461,598 Total MFC Debt other than Transportation Municipal Facility Corporation Bonds and changes in fund balances. (3) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, (2) MFC 1992 Refunding series 12 2001 - USGS projects. 27.82 25.20 22.30 22.17 25.90 29.50 29.78 26.79 23.55 20.27 Coverage (1) State sales tax, state income tax less debt service requirements for MFC debt other than transportation. 11,929,099 13,771,313 2008 2010 12,302,955 2007 13,557,828 10,847,378 2006 2009 9,356,995 Revenue (1) 2005 Year Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 147 35,725,917 39,681,382 41,483,415 38,586,144 35,708,503 33,777,368 36,547,598 37,962,078 42,048,872 2006 2007 2008 2009 2010 2011 2012 2013 2014 1,560,000 1,560,000 1,500,000 1,445,000 1,400,000 1,055,000 1,005,000 1,000,000 1,000,000 1,000,000 Principal (3) 2,071,375 2,102,575 2,074,838 2,259,700 2,260,200 1,946,850 1,947,100 1,964,600 1,987,100 2,037,100 Total 20.30 18.06 17.61 14.95 15.80 19.82 21.31 20.20 17.98 15.26 Coverage (3) MFC revenue bond series 2004 Fourth Street, partial advance refunding pledged revenue series 2012 requirements for transportation MFC bonds. licenses and permits, charges for services, fine and forfeits, other revenue, state sales tax, and state revenue sharing. Less the debt service (2) Pledged revenues on the Municipal Facility Corporation Bonds include the city base rate sales tax, transportation sales tax, francise sales tax, 511,375 542,575 574,838 814,700 860,200 891,850 942,100 964,600 987,100 1,037,100 Interest Debt Service Requirements Transportation MFC Debt Municipal Facility Corporation Bonds As Parital Refunded with Pledged Revenue Bonds (1) Trend information not available prior to fiscal year 2004. 31,085,459 Revenue (2) 2005 Year (1) Fiscal Last Nine Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 148 9,340,790 10,302,188 2013 2014 $ 120,000 120,000 120,000 115,000 50,000 Principal (3) $ 128,237 130,037 133,638 135,938 56,297 Interest (3) GADA infrastructure revenue bond series 2010A state revenue sharing. Less the debt service . (2) Pledges revenues on the Greater Arizona Development Authority Bonds include the $ Debt Service Requirements 248,237 250,037 253,638 250,938 106,297 Total Revenue Bonds Greater Arizona Development Authority (1) New Issue no trend information available, prior to fiscal year 2010 7,657,621 2012 9,031,670 7,169,310 $ Revenue (2) 2011 2010 Year (1) Fiscal Last Three Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 41.50 37.36 30.19 28.57 84.97 Coverage 149 65,522 65,870 2011 4,906,294 4,620,811 4,481,137 4,481,137 3,767,194 3,767,194 3,767,194 3,472,652 3,472,652 3,472,652 26.6 26.6 26.6 26.6 26.8 26.8 26.8 26.8 26.8 26.8 Age Median 90.6% 90.4% 90.6% 90.0% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% Grad or Higher High School Education Level - Percent 41.8% 42.0% 39.9% 39.2% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% or Higher Bachelor's Degree Education Level - Percent Unemployment - Arizona Department of Administration - Office of Employment and Population Statistics School Enrollment - Arizona Department of Education and National Center for Education Statistics Education Level - 2010 US Census Median Age - 2010 US Census Per Capita Income - 2010-2014 AZ Dept of Administration-Office of Employment and Population Statistics Per Capita Income - 2005 - 2009 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 Personal Income - 2008 - 2014 AZ Dept of Administration-Office of Employment and Population Statistics Personal Income - 2005 - 2007 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 35,933 34,353 34,999 34,510 29,879 29,879 29,879 28,045 28,045 28,045 Income Personal of dollars) (thousands Capita Per Income Personal Population - Arizona Department of Administration Sources: 67,502 64,693 2009 2010 2014 64,200 65,870 62,030 2007 2008 65,870 62,030 2006 2012 61,185 2005 2013 Population Year Last Ten Fiscal Years Demographic and Economic Statistics City of Flagstaff Schedule 18 10,623 10,623 10,623 11,839 12,600 12,910 13,040 13,453 13,171 13,389 School Enrollment Rate 6.90% 8.10% 9.20% 8.90% 7.70% 7.50% 4.60% 3.40% 5.00% 5.10% Unemployment 150 55,170 2010 U.S. Census Labor Force Source: (1) Arizona Department of Economic Security This is the most historical information available (2) Flagstaff Chamber of Commerce as of March 2013 11,485 2,571 2,200 1,950 1,375 1,200 657 630 407 255 240 Employees Total Northern Arizona University Flagstaff Medical Center W.L. Gore & Associates Flagstaff United School District Coconino County City of Flagstaff Coconino Community College Walmart Walgreens & Distribution Center Grand Canyon Railway SCA Tissue Nestle Purina Employer Current Year and Six Years Ago Principal Employers City of Flagstaff Schedule 19 9 10 7 8 1 2 3 4 5 6 Rank 2013 (2) 20.82% 4.66% 3.99% 3.53% 2.49% 2.18% 1.19% 0.00% 1.14% 0.74% 0.00% 0.46% 0.44% Percentage of Total City Employment 55,170 12,545 3,778 1,985 1,300 1,560 1,205 901 580 400 434 402 - Employees 1 2 4 3 5 6 7 10 8 9 Rank 2007 (1) 40.70% 12.26% 6.44% 4.22% 5.06% 3.91% 2.92% 1.88% 1.30% 1.41% 1.30% 0.00% 0.00% Percentage of Total City Employment 151 Police 36.25 743.45 - 5.00 9.50 52.25 768.03 - 6.50 9.50 54.00 76.50 36.25 74.50 40.00 67.53 13.75 49.25 15.25 26.00 97.75 160.00 40.00 63.95 13.75 43.00 17.25 25.00 96.75 26.50 13.50 75.75 2006 811.69 - 6.50 10.00 62.60 37.25 79.00 43.13 876.18 - 6.50 10.50 61.60 40.56 80.25 47.14 98.23 16.75 15.75 68.82 58.50 20.88 31.00 174.00 101.75 27.63 13.50 87.39 906.52 - 6.50 10.50 68.10 41.06 81.75 53.77 99.69 16.75 24.88 57.50 31.00 181.00 101.75 29.63 13.50 89.14 827.48 - 6.00 9.50 65.58 36.31 64.50 50.77 87.86 15.75 24.38 47.20 29.00 99.00 168.00 25.88 11.00 86.75 825.33 23.50 6.00 9.50 63.58 36.31 62.50 50.77 86.86 13.25 22.88 41.00 26.50 92.00 168.00 25.18 11.00 86.50 Full-time Equivalent Employees as of June 30 2010 (1) 2011 (2) 2008 2009 52.25 21.75 27.00 164.00 100.75 26.50 13.50 82.89 2007 (2) In fiscal year 2011, the city began reporting the Housing Authority in the financial statements. (1) City-wide reorganization affected distribution of employees. Customer Service moved from Water/Wastewater to Management Services. Total Flagstaff Housing Authority Stormwater Airport Environmental services Water and wastewater Highways and Streets Parks, recreation, and beautificatioin Library Culture and recreation Tourism Planning Building Economic and physical development Public Works Fire 151.00 26.50 City Court Public Safety 74.25 14.50 Management services 2005 Capital management General Government Function/Program Last Ten Fiscal Years Full-time Equivalent City Government by Function/Program City of Flagstaff Schedule 20 812.42 23.50 6.00 9.50 59.60 36.31 61.50 51.40 88.81 12.49 22.88 39.20 26.50 85.00 172.00 25.18 8.00 84.55 2012 802.50 24.00 6.00 9.50 58.50 34.97 61.50 51.40 84.88 12.49 21.88 39.20 26.00 85.00 171.00 24.18 7.00 85.00 2013 85.00 20.88 799.04 22.00 5.50 9.50 55.43 35.52 62.00 51.40 86.03 12.93 41.50 25.00 169.00 24.35 7.00 86.00 2014 152 Plan Reviews Inspections assigned 3,616 Calls dispatched to Police/Sheriff Calls dispatched to Medical Calls dispatched to Fire 9,435 73,559 11,266 8,818 Accident reports Non-crime reports 1,464 4,979 12,378 834 792 311 1,065 Domestive violence incidents Misdemeanor reports Felony reports Police Prescription Burn (Acres) Site Thinning (Acres) Site Marking (Acres) Plan Assessment (Acres) 1,348 2,006 1,905 Other calls 228 6,722 Fires response 673 9,227 11,253 2005 Emergency responses Fuel Management Fire Domestic Violence/Other filings Traffic filings Criminal Filings Court Function/Program Last Ten Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 21 9,175 77,239 11,741 3,313 9,136 1,598 5,337 13,381 557 694 662 585 1,280 1,966 1,323 351 7,684 616 9,705 10,575 2006 9,960 75,791 12,364 3,374 8,913 1,625 4,973 13,123 1,210 1,173 - 764 1,314 1,984 1,472 314 8,227 530 8,951 9,553 2007 - 73,364 11,907 3,322 11,043 1,573 3,978 13,413 1,070 902 400 178 1,284 1,981 1,573 267 7,616 744 10,665 11,659 2008 - 70,908 12,527 2,917 10,996 1,470 3,661 12,939 1,190 761 - 224 1,250 1,794 2,151 263 7,550 445 9,330 - 61,175 11,011 2,776 9,480 1,953 3,073 12,293 551 376 - 294 401 572 1,906 247 6,668 468 9,326 13,471 2010 Fiscal Year 10,639 2009 - 57,899 11,130 2,735 9,827 1,923 2,973 342 809 586 11,786 N/A* 528 1,174 2,378 175 7,274 370 8,531 12,010 2011 - 57,188 13,320 2,574 9,886 1,961 2,940 697 197 128 11,253 N/A* 535 1,468 2,226 213 7,438 547 9,217 8,857 2012 - 60,003 11,497 2,568 9,841 2,023 2,910 540 276 284 11,040 N/A* 559 1,411 2,298 185 8,023 477 8,340 8,695 2013 177 - 56,373 11,464 2,180 7,174 1,688 2,564 778 511 541 10,383 N/A* 512 1,340 2,532 8,730 468 7,726 8,375 2014 153 (1) (1) $ 52.90 582,726 776,180 $ 12,324,654 $ 87,180,707 9,816 140,233 42,483 653,743 2,988 2005 $ 61.47 625,103 758,468 $ 26,130,677 $ 97,895,269 9,866 154,321 39,646 705,638 1,962 2006 $ 66.86 643,174 789,621 $ 37,962,373 $ 38,895,496 10,356 153,121 44,598 642,643 2,443 2007 $ 60.52 680,253 782,908 $ 27,199,698 $ 25,278,055 10,472 157,792 44,088 651,814 4,032 2008 $ * Records no longer tracked (2) 2012 data is as of 12/19/2012 and subject to update 43.21 738,603 887,887 $ 18,594,665 $ 31,498,803 9,842 142,409 65,418 627,202 $ $ $ 43.05 743,169 979,962 9,314,074 13,395,325 10,610 121,529 68,296 651,373 3,256 2010 Fiscal Year 4,373 2009 (1) This informaition is gathered and reported on a calendar year basis versus a fiscal year basis for all other measurements Sources: Various city departments Revenue Per Available Room (RevPar) Tourism Circulation Visits Library Commercial Permit Valuation Residential Permit Valuation Community Development Recyclables collected (total tons) Refuse collected (Landfill tonnage) Refuse collection Enplanements Fuel Flowage (Gallons Sold) Airport Potholes repaired Streets Function/Program Last Ten Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 21 (continued) $ $ $ 45.26 763,928 1,029,062 8,472,938 17,703,762 8,869 138,703 63,407 850,327 1,498 2011 $ 48.81 739,706 1,182,956 (1) (1) 8,101 137,815 62,872 526,406 1,877 2012 $ 53.52 715,033 1,164,789 (1) (1) 8,388 145,793 60,190 490,401 2,054 2013 $ 56.10 687,735 1,117,652 (1) (1) 8,343 144,411 61,691 544,028 3,605 2014 154 (2) Database Correction (1) In Fiscal Year 2008, transition made from street miles to lane miles. This will more accurately reflect the level of service required to maintain the surfaces. Open hangars Enclosed hangars Tiedowns Locally based aircraft Fixed base operators Airport Average gallon water usage per household per month Total active water accounts Number of manholes Miles of sewer (2) Water and wastewater Number of street lights Miles of streets, alleys, and sidewalks (1) Highways and Streets Recreational Buildings Flagstaff Urban Trail System - Miles Park acreage Number of undeveloped parks Number of developed parks Culture and recreation Numer of fire stations Number of fire hydrants Police patrol units (Includes Motorcycle units) Public Safety Function/Program Last Ten Fiscal Years Capital Asset Statistics by Function/Program City of Flagstaff Schedule 22 26 38 42 29 1 130 6,096 18,039 275 6,097 365 2,921 5 32 702 4 27 6 2,478 2005 48 61 18 1 130 5,488 17,872 293 6,496 386 3,037 5 34 702 4 27 6 26 2,598 2006 48 61 11 1 134 5,600 18,758 309 6,906 403 3,107 5 34 705 4 27 6 31 2,743 2007 48 61 11 1 134 5,456 18,849 265 7,107 690 3,201 6 48 712 4 26 6 34 3,148 2008 48 61 11 1 134 5,010 18,371 270 7,261 695 3,220 6 51 712 4 26 7 34 3,150 48 61 14 1 120 5,123 19,042 270 7,261 813 3,350 6 51 712 4 26 7 35 3,143 2010 Fiscal Year 2009 48 61 11 1 122 5,107 22,092 271 7,308 814 3,466 4 53 735 5 24 7 37 3,176 2011 48 61 11 1 125 5,339 19,020 271 7,308 814 3,466 4 53 680 4 23 7 37 3,179 2012 48 61 11 1 209 6,326 20,107 274 7,403 814 3,466 4 55 710 4 23 6 37 3,242 2013 4 48 61 11 1 134 5,022 19,961 274 7,403 844 3,466 4 55 710 23 6 37 3,242 2014 155 $ (Claims Made Retro Date 6-1-95) $ $ $ $ $ 1,000,000 / aggregate 1,000,000 / aggregate 1,000,000 / each offense 3,000,000 / aggregate 1,000,000 / each employee 5,000,000 / aggregate 5,000,000 / each wrongful act 1,000,000 / aggregate 1,000,000 / each wrongful act 1,000,000 / each accident 1,000,000 / each wrongful act 2,000,000 / aggregate 1,000,000 / per occurrence $ Statutory 1,000,000 / disease policy limit $ 1,000,000 / disease employee 1,000,000 / each accident $ 1,000,000 / each wrongful act 1,000,000 / aggregate $ $ 20,000,000 / each occurrence 20,000,000 / general aggregate $ $ Hangar Keepers Liability Personal Injury, Advertising & Malpractice Products/Completed Operations General Liability Aviation: terrorism, nuclear) (Excluding asbestos, discrimination, $ $ $ $ $ $ $ 40,000,000 / each occurrence 40,000,000 / each aircraft aggregate 40,000,000 / aggregate 40,000,000 40,000,000 / each occurrence 5,000,000 / general aggregate 5,000,000 / each occurrence/ Excess Liability #2 Following Form Over Excess Liability # 1 Supply Services, Mold, Terrorism, Asbestos, Lead, Condemnation, Sexual Abuse) (Excludes Airport, Housing Authority, Employment related practices, Failure to 10,000 retained limit (ded) Public Entity Management, Employee Benefits Umbrella/Excess #1 - GL, Auto, Law Enforcement, Employer's Liability Worker's Compensation Employer's Liability ($5,000 deductible each wrongful act) (Claims Made Retro Date 6-1-09) Public Entity Cyber Liability * Liability Claims are Subject to a $75,000 Self Insurance Retention Limited Abuse or Molestation Liability (Claims Made) Employee Benefits Liability* $ $ Employment Practices Liability* (Claims Made Retro Date 6-1-95) $ $ $ $ $ Limit of Liability Public Entity Management Errors and Omissions* Auto Liability* Law Enforcement Liability* freestyle park, EMT's) (Includes 2 skateboard parks, bike General Liability* Liability Insurance: Coverage In effect July 1, 2013 to June 30, 2014 Insurance Summary City of Flagstaff Schedule 23 Blanket Buildings and Personal Property Contractors Equipment (actual cash value) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (some countries excluded) Kidnap and Extortion Worldwide International Travel - Executive Assistance Credit, Debit or Charge Card forgery Money Orders & Counterfeit, Depositors Forgery or Alteration (Inside and Outside) Theft, Disappearance, & Destruction Computer & Funds Transfer Fraud $ $ $ $ $ $ $ $ Dishonesty Bond Including Faithful Performance of Duty Blanket Public Employees and Treasurer Crime: City Hall, Visitor Center, Airport Terminal Max $25,000 per item 250,000 100,000 Accidental death Each Loss 1,000,000 / Medical Assistance 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 78,700 / $1,000 deductible 500,000 / $1,000 deductible 1,438,500 / $1,000 deductible 35,000 / $5,000 deductible 11,300 / $1,000 deductible 238,582 / $1000 deductible 7,391,884 / $5,000 deductible ($5,000 deductible) 500,000 / contents each 500,000 / each building 242,000 / building 122,700 / contents / $5000/collision deductible 25,367,353 / $1000/comprehensive 7,000,000 / 72 hours 15,000,000 / $25,000 deductible 2,500,000 / $50,000 deductible 10,000,000 / $50,000 deductible 203,538,782 / $25,000 deductible Limit of Liability Fine Arts & exhibition floater - Max $25,000 per it $ Data and Media Computer Equipment and Peripherals Employee Hand Tools Lab Equipment Bookmobile book collection Inland Marine: City Hall, Library Municipal Court Flood Zone A Properties Auto Physical Damage Business Income/Extra Expense Earthquakes Flood Zones B and C Flood Zones high risk Boiler and Machinery included Property Insurance: Coverage 156 1890 circa 1926 HISTORIC PHOTOS COURTESY NORTHERN ARIZONA UNIVERSITY, CLINE LIBRARY SPECIAL COLLECTIONS AND ARCHIVES US FOREST SERVICE, COCONINO NATIONAL FOREST FLAGSTAFF CONVENTION & VISITORS BUREAU Cit y of Flagstaf f 211 West Aspen Avenue Flagstaf f, Arizona 860 01 f lagstaf f. az .gov