A ON FF, ARIZ FLAGSTA taff City of Flags & et Annual Budg Plan Financial 2005 -2006 More than 2007 NA ARIZO TAFF, FL AGS 2009 Protec ting the Future of Flagstaff through ety Public Saf TA FLAGS 2010 staf f Cit y of Flag et Annu al Budg Plan ncia l and Fina ff Flagsta City of Budget Annual lan ancial P and Fin 007 20 0 6 –2 200 9–2 010 08 2013 2011 TA F F, F L A G S g Strengthenin Flagstaff’s Future Economic ainable With Sust es Technologi N A A R I Z O NA F F, A R I ZO ONA F, AF A an Flagstaf f Urb em: Trails Syst Pathways ting por Sup Flagstaf f’s Life Quality of 2014 ARIZ 2012 ON F F, A R I Z F Securing Flagstaff’s ply Water Sup Through Pipeline Restoration staf f Cit y of Flag et Annu al Budg Plan ncia l and Fina staf f Cit y of Flag et Annu al Budg Plan ncia l and Fina 2011 –201 2012 –201 of Recognition 2015 circa ST F L A G S TA 10 staf f Cit y of Flag et Annu al Budg Plan ncia l and Fina 200 8–2 009 staf f Cit y of Flag et Annu al Budg ncial Plan and Fina 2 0 0 7– 2 0 IZONA F F, A R G Investi ng ality in the Qu ff’s of Flag sta Futu re Expanding Flagstaf f’s Horizons with Access ld to the Wor Years 20GFOA Flagstaf f’s Honoring Past, remarkable its Present and Future Promising 1900 f The Flagstaf Watershed Protection Project: Conserving Flagstaff’s Most Critical Resource 1910 circa 1900 taff City of Flags et and Annu al Budg Plan Finan cial 2014 -2015 F L AG STA 2008 Enhancing Flagstaff’s of Life Quality Thr ough Recreation LA F , S T A F F L A G izona aff, Ar Flagst O N A A R I Z 1904 staf f ncia l Plan City of Flag get and Fina Ann ual Bud 4 2013 -201 F l a g s ta zon F F, a r i a 3 2 staf f Cit y of Flag et Annu al Budg Plan ncia l and Fina A I Z O N R A , F S T A F G A L F 1 2010 –201 2015 City of Flagstaff Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2015 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2015 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, 2015 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal................................................................................................................................................. iii GFOA Certificate of Achievement ............................................................................................................................. xii Organizational Chart ...............................................................................................................................................xiii List of Elected and Appointed Officials..................................................................................................................... xiv 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 Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability………………………………………………………104 Schedule of Changes in Net Pension Liability and Related Ratios…………………………………………………105 Schedule of the City’s Pension Contributions………………………………………………………………………….107 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds ............................................................................................... 109 Combining Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds .................................................................... 110 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds .............................................................................. 112 Non-Major Funds – Proprietary Funds…………………………………………………………………………………..114 Combining Statements and Schedules: i Combining of Net Position – Non-major Proprietary Funds ....................................................................... 115 Combining Statement of Revenues, Expenditures and Changes in Net Position – Non-major Proprietary Funds ...................................................................................... 116 Combining Statement of Cash Flows – Non-major Proprietary Funds ........................................................ 117 SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: Schedule By Function and Activity ............................................................................................................ 120 Schedule of Changes By Function and Activity .......................................................................................... 122 Budgetary Comparison Schedules – Other Major Governmental Funds Special Assessment Bond Fund................................................................................................................. 123 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ............................................................................................................................................ 124 BBB Fund.................................................................................................................................................. 125 Community Redevelopment Fund ............................................................................................................. 126 EDA Revolving Loan Fund…………………………………………………………………………………………….127 Metropolitan Planning Organization Fund................................................................................................. 128 General Obligation Bond Fund .................................................................................................................. 129 Secondary Property Tax Revenue Fund ..................................................................................................... 130 Capital Projects Bond Construction…………………………………………………………………………………131 Financial Data Submission Schedules Net Position Accounts .............................................................................................................................. 132 Revenue, Expenses, and Changes in Fund Net Position Accounts .............................................................. 133 Revenue, Expenses, and Changes in Fund Net Position Accounts-Public Housing-Consolidated ............... 137 STATISTICAL SECTION Net Position by Component ............................................................................................................................ 142 Changes in Net Position .................................................................................................................................. 144 Fund Balances, Governmental Funds ............................................................................................................... 146 Changes in Fund Balances, Governmental Funds ............................................................................................. 147 Tax Revenue by Source, Governmental Funds ................................................................................................. 148 Intergovernmental Revenue by Source, Governmental Funds ........................................................................... 149 Full Cash Value of Taxable Property ................................................................................................................ 150 City Tax Revenue for Major Categories............................................................................................................ 151 Direct and Overlapping Property Tax Rates ..................................................................................................... 152 Principal Property Tax Payers .......................................................................................................................... 153 Property Tax Levies and Collections ................................................................................................................ 154 Direct and Overlapping Sales Tax Rates .......................................................................................................... 155 Ratios of Outstanding Debt by Type ................................................................................................................ 156 Ratios of General Bonded Debt Outstanding.................................................................................................... 157 Direct and Overlapping Governmental Activities Debt ..................................................................................... 158 Legal Debt Margin Information ....................................................................................................................... 160 Pledged Revenue Coverage ............................................................................................................................. 162 Demographic and Economic Statistics ............................................................................................................. 167 Principal Employers ........................................................................................................................................ 168 Full-time Equivalent City Government by Function/Program............................................................................ 169 Operating Indicators by Function/Program...................................................................................................... 170 Capital Asset Statistics by Function/Program .................................................................................................. 171 Insurance Summary ........................................................................................................................................ 173 ii City of Flagstaff December 30, 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, 2015, as required by Article VI, Section 5 of the City Charter. The report was prepared by the City’s Finance 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 representations 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 representations, 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 reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. 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 year ended June 30, 2015, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Flagstaff’s financial statements for the fiscal year ended June 30, 2015, 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 Aspen Avenue, Flagstaff, Arizona 86001 Main & 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 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 four-year terms. 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 Wastewater Sewer, Housing Authority, and Stormwater services. 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. Two public hearings are 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 continues to experience positive economic growth in our community. Since September 2010, the City’s sales tax collections have increased 45 out of 53 months when compared to the prior year, same month. In Fiscal Year 2014-2015, all sales tax categories except one increased when compared to the prior year. The City also enacted a new sales tax category in FY 2015 for Use Tax which collected $263,312. The following chart summarizes the categorical changes from the prior fiscal year: Ca te gory Utilities Telecommunication FY 2 0 1 4 1,038,953 FY 2 0 1 5 1,095,776 % Cha nge 5.47% 2,187,904 73,331 933,249 2,435,598 76,022 956,828 11.32% 3.67% 2.53% 317,222 Restaurants/Bars Amusements Commercial Property Rental Personal Property Rentals Construction Contracting Retail 497,313 1,699,327 8,017,986 Hotels/Motels 952,628 Use Tax Other Total 179,982 15,897,895 360,236 568,935 1,912,967 8,526,964 1,089,126 263,312 171,446 17,457,210 13.56% 14.40% 12.57% 6.35% 14.33% n/a -4.74% 9.81% (Note: This table reflects an activity based reporting and will vary from the City Sales Tax amount reflected in Schedule 5 of the Statistical Section.) The City collects four 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 four years in a row. Per Schedule 5 in the Statistical Section, the 1% general city sales tax receipts have increased 4.7% 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. While construction is showing growth for the third 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 and auto sales related sales tax revenues to ongoing budgetary needs. Retail sales posted the highest incremental gain at $508,978, with auto sales making up 19.1% 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. The four components of this tax include Safety Improvements, Street Improvements, 4th Street Overpass, and Transit. The transportation tax components expire in 2020. As the use of this funding shifts 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. v 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 the City’s local economy. Overall sales decreased in FY2009 when gas prices were peaking but have since rebounded and have set record highs for five years in a row, now at $7.0 million dollars. The fourth tax is a 0.33% sales tax on the same types of general sales. This tax was adopted on November 4, 2014 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. The City receives taxes from state shared revenues: 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 town’s 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%. With recent revenue growth experienced, the City’s portion of the State shared sales Tax still exceeded the previous peak revenue year (FY 2007) by 3.5%. State shared sales tax revenues have increased for the fifth year in a row at 5.0% for FY 2015. However the state shared income tax is under FY 2009 peak revenues by 12.8%. State income tax revenues increased by 8.6%. The State continues to implement reductions in corporate income tax liabilities which are expected to have a neutral impact on these revenues through increased economic development. Highway user revenue (gas tax) funds (HURF) increased by 11.6% in FY 2015. While this is a considerable increase, it is still 13.3% below FY 2006, the peak revenue year. These revenues are distributed based on 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. Recently we have seen lower gas prices which increases the revenues collected. Additional decreases were due to the State shifting revenues ‘off the top’ to fund other public safety and motor vehicle department needs. In FY 2015 the motor vehicle funding was removed which is part of the increase. 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. Overall these three state shared revenues grew by 8.5% in FY2015 and the State of Arizona projects continued growth. Other revenue factors for the City: Excluding new construction, total assessed valuations have increased 0.13% for tax year 2014, fiscal year 2015. Next tax year, the City will see a 2.23% increase in total assessed valuations. Even though the City is statutorily allowed to set a primary property tax rate that would allow for 2% annual growth in revenue plus vi 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 four years, the City now has future authority to take a 10% levy increase for FY 2017). The millage rate for the primary property tax is adjusted annually to generate a levy equal to the prior year, plus new construction. While revenues fluctuations continue in some areas, the City increased General Fund budgeted revenue in FY 2016 (excluding grants and miscellaneous revenue) by 4.4 % which reflects increases in local and state revenues. The City of Flagstaff increased its overall staffing count by 12.76 full time equivalencies for the upcoming fiscal year. This is the second year the City has increased its position count since 2009. Prior to this, the City experienced staffing reductions totaling 130 full time equivalencies. Our community partners in the public, private, and governmental sectors are also experiencing growth. The Flagstaff Unified School District continues to realize increases in enrollment for the fourth year in a row in the 2015-16 school year. Northern Arizona University continues to grow and is expected to increase enrollment this school year by 3%. This strong growth is a factor of having three student housing projects being considered in the next year. Development within the City is very strong in every sector; single family, multifamily, commercial and mixed use. With our strong tourism sector, we currently have 6 hotels that are in construction or planning construction in the coming year. The City is currently working to bring a second airline to the community next year. The housing market continues to strengthen as we have seen average housing prices increase 14% to $337,000 in July 2015. While revenue growth is occurring, there continues to be limited resources 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 expect slow and steady growth and add caution of a possible recession in the next three years. The City will plan accordingly to ensure its financial position remains strong should a recession occur. 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. conditions change. The City continues to plan in a five to ten year horizon as economic 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. vii 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. 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. The City made a decision at the beginning of the recession in 2009 to allow the General Fund balance to reduce to 12% through FY 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. The City restored the 15% fund balance in FY 2013 and made a commitment to increase the fund balance to 20% over the next few years. The goal was met in FY 2014 and is planned to be maintained over the next five years. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2015, City Council discussed updating the City Council goals. This work was completed in November 2014. The City Council adopted a budget for FY 2016 aligned with these goals. City staff has worked diligently over the last year to advance the goals. The following are the Council’s eleven goals and associated accomplishments. Invest in our employees and implement retention and attraction strategies  2% market increase for employees and market-based pay for sworn police  Funded dispatcher retention and attraction pay strategies  Implemented an Employer Assisted Housing program for officers and dispatch employees  Provided an additional $146,000 for employee training citywide viii Ensure Flagstaff has a long-term water supply for current and future needs  Water rate study is in process with potential rate increases in FY 2016  Completed a groundwater level monitoring study for all City-owned water supply wells  Received a grant for a study of the Red Gap Ranch area water resources  Implemented phase 2 of the water loss/leak detection survey  Funded two seasonal Water Conservation Officers and continue to provide water conservation education Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics  Received $120,000 in grant funding to improve open space public facilities  Purchased GPS routing software program for trash/recycle collections programs  Completed an Airport Sustainability Master Plan  Completed the roof replacement at the main library  Increased Library’s internet speed to 70Mbps and upgraded Wi-Fi access  Continue to complete the Clay Avenue Wash Detention Basin  Completed new Bushmaster Park improvements  Completed annexation, Regional Plan amendment and rezone for Core Services Maintenance Facility  Research and development of street lighting for dark skies communities  Implemented the road repair and street safety improvements related to a voter approve sales tax Explore and adopt policies to lower the costs associated with housing to the end user  Continue the merger of the City’s housing related functions with the Flagstaff Housing Authority  Provided Do It Yourself home energy efficiency kits and training  Provided high efficiency appliance incentives  Created an Employer Assisted Housing program for Officers and Dispatch employees Develop and implement guiding principles that address public safety service levels through appropriate staffing levels  Reduced crime in Flagstaff 11% year to date  Continued 3 federally-funded officers on the Southside  Improved employee retention: +7% Dispatch and +13% Patrol  Added a legal advisor position for the Police Department  Strengthened Crime Free Multi-Housing partnerships Relieve traffic congestion throughout Flagstaff  Conducting a Milton Road study  Reviewing bicycle system modeling  Review of City’s Transportation Impact Analysis procedures and FMPO regional travel model  Working on the I-40W, I-40E and I-17 Corridor Profiles  Created a Regional Transportation Plan Steering Committee Address key issues and processes related to the implementation of the Regional Plan  Provided an update on the Regional Plan 2030 with an Annual Report  Participated in Student Housing Action Plan with the external working group  Conducted parking study and extensive public outreach on parking solutions  Participated in a citizens committee on Dark Skies ix Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services  Implemented Peak Democracy, an online civic engagement forum  Continue work on zoning code amendments to public notifications and neighborhood meeting requirements  Provided extensive outreach on the proposed charter amendments  Body camera program completed for all uniformed officers and supervisors  Provided an online display of grants awarded to the City Foster relationships and maintain economic development commitment to partners  Presented revisions to animal keeping chapter of the City Code  Working in partnership with the State to bring a skilled nursing facility for veterans to Flagstaff  Continue to marketing Flagstaff as a premier travel destination  Partnered with Nestle Purina to extend the Government Property Lease Excise Tax (GPLET)  Opened the Business Accelerator Decrease the number of working poor  Completed legal research on a local livable wage authority  Managed the sale of auto park Lot 11 – job creation  Providing computer training to the un/under employed  Providing high efficiency incentives to home owners and renters  Providing job training, one-on-one tutoring and resume/application trainings Ensure that we are as prepared as possible for extreme weather events  Purchased an emergency backup generator at the landfill  Built an alternate Emergency Operations Center in conjunction with the Business Accelerator  Upper Lake Mary watershed monitoring  Implemented a Monsoon Awareness Program  Continue the Flagstaff Watershed Protection Project  Updating the Continuity of Operations Planning AWARDS AND ACKNOWLEGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Flagstaff for its comprehensive annual financial report for the fiscal year ended June 30, 2014. This was the 21th consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to GFOA to determine its eligibility. x xi xii 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 xiii Legal City of Flagstaff, Arizona List of Elected and Appointed Officials June 30, 2015 Elected Officials Mayor Gerald (Jerry) W. Nabours Vice Mayor Celia Barotz Councilmember Coral Evans Councilmember Karla Brewster Councilmember Jeff Oravits Councilmember Scott Overton Councilmember Eva Putzova Appointed Officials City Manager Josh Copley City Attorney Michelle D’Andrea City Treasurer Rick Tadder City Clerk Elizabeth Burke 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, 2015, 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, 2015, 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 Emphasis of Matters Adoption of New Accounting Standard As described in Note 1 to the financial statements, the City adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, which has resulted in a restatement of the net position as of July 1, 2014. 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, schedules of the City’s proportionate share of net pension liabilities, schedules of changes in net pension liabilities and related ratios, and the schedule of the City’s pension contributions 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 December 30, 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 December 30, 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, 2015. 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 –xi of this report. FINANCIAL HIGHLIGHTS  The City has one item that required a Restatement of Financial Statements for the Fiscal Year beginning July 1, 2014. The restatement was related to implementation of GASB Statement 68, Accounting and Financial Reporting for Pensions, which now shows deferred outflows, inflows of resources and net pension obligation and is presented retroactively. The overall impact of prior period adjustment for GASB 68 to the City’s net position as of July 1, 2014 is a decrease of $105.5 million.  The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $551.3 million (net position). Of this amount, $5.8 million (unrestricted) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net position increased by $4.4 million during the fiscal year. This is a result of an increase in net position in the governmental activities of $1.0 million and an increase in net position in the business type activities of $3.4 million.  As of June 30, 2015, the City’s governmental funds reported combined ending fund balances of $84.6 million, an increase of $4.3 million in comparison to the prior fiscal year. Approximately 27.0% of this total amount ($22.9 million) is unassigned fund balance available for spending at the government’s discretion.  As of June 30, 2015, total unassigned fund balance for the general fund was $32.2 million, or 45.9% of total general fund expenditures ($50.5 million).  As of June 30, 2015, the City’s proprietary funds reported combined total net position of $333.0 million, and total unrestricted of $18.4 million. The largest unrestricted component of net position is in the Water and Wastewater Fund ($14.7 million) and in the Environmental Services Fund ($6.4 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 Supplemental 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, which equal 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 the 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 sections are demonstrated in the table below. Business-type Activities Government Activities Beautification Human Resources Airport Cemetery Information Services Environmental Services City Attorney Library Housing Authority City Council Municipal Courts Stormwater Operations City Manager Parks Wastewater Community Development Police Water Economic Development Recreation Facilities Maintenance Risk Management Financial Services Streets and Transportation Fire Tourism Fleet Management 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 21 - 23 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. 6 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 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, and Special Assessment Bond Fund which are all considered 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 on pages 109-112. 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 22-34 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 36-43 of this report. 7 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 44-103 of this report. Combining statements The Combining Statements referred to earlier in connection with non-major governmental funds are presented on pages 108-117. Other information In addition to the Basic Financial Statements and accompanying Notes to the Financial Statement, this report also presents certain other Supplemental Information concerning the City’s capital asset activity, budgetary comparison of other major and non-major governmental funds, and financial data submission schedules. Other Supplemental Information can be found on pages 118-138 of this report. 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 $551.3 million as of June 30, 2015. Of the City’s Net Position, 98.1% reflects its investment of $542.6 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. 8 Net Po s itio n Ju n e 30, 2015 an d 2014 ( in tho u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2015 Current and other assets $ 106,317 Capital assets Total assets Bu s in es s -ty pe A c tiv ities 2014 * $ 2015 102,325 $ 49,150 To tal 2014 * $ 2015 46,690 $ 155,467 2014 * $ 149,015 305,103 307,939 352,650 354,714 657,753 662,653 411,420 410,264 401,800 401,404 813,220 811,668 23,713 1,139 2,206 25,919 1,139 187,552 85,361 61,399 49,614 248,951 134,975 21,063 17,757 7,184 7,616 28,247 25,373 208,615 103,118 68,583 57,230 277,198 160,348 Total deferred outflows of resources Long-term liabilities Other liabilities Total liabilities - Total deferred inflows of resources 8,197 Net investment in capital assets Restricted Unrestricted Total net position - 2,405 - 10,602 - 230,658 227,347 311,963 310,553 542,621 537,900 259 43,762 2,664 2,493 2,923 46,255 37,176 18,391 31,128 5,795 308,285 $ 333,018 (12,596) $ 218,321 $ $ 344,174 $ 551,339 68,304 $ 652,459 * 2014 not restated for implementation of GASB 68 and 71 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 increased primarily due to an increase in the net pension obligation offset by decreases in bonds notes, debt and lease payables. A portion of the City’s net position, $2.9 million (0.5%), represents resources that are subject to external restriction on how they may be used. The remaining balance of the unrestricted component of net position, $5.8 million (1.1%), may be used to meet the government’s ongoing obligations to citizens and creditors. 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. However, the governmental activities are reporting a negative unrestricted net position due to the implementation of new pension reporting standard and recording of the City’s net pension obligation. Current assets for governmental activities have increased by 3.9% ($4.0 million). The largest increase was in cash and investments ($6.8 million) while the largest decreases are in restricted cash and investments ($3.4 million) and special assessments receivable ($1.9 million). Deferred outflows of resources for the governmental activities have increased $22.6 million and are related to the implementation of the new pension reporting standards. Capital assets of the governmental activities, funded through operations, debt proceeds, grants, and contributions, decreased by 0.9% ($2.8 million) due to depreciation and deletions in excess of current year capital outlays. Major capital outlays include the Innovation Mesa Accelerator Building ($6.3 million), Annual Road Repair & Street Safety Improvement Program ($3.5 million), and Street/Utility Bond Construction ($1.5 million). 9 Governmental activities long-term liabilities increased by 119.7% ($102.2 million) due the reporting of the net pension obligation of $111.5 million as required by the implementation of the new pension reporting standards offset by $10.1 million decrease in long term portion of special assessment debt, bonds, notes and lease payables. Other liabilities increased by 18.6% ($3.3 million) primarily due to the increase in the current portion of bonds, notes, leases payable ($1.6 million) and deposits payable ($0.5 million). Deferred inflows of resources for governmental activities increased $8.2 million related to pensions and the implementation of the new pension reporting standards. Total assets for business-type activities have increased by 0.1% ($0.4 million). The largest increase was for cash and cash equivalents ($5.2 million). The largest decrease was for intergovernmental receivables ($2.3 million). Total liabilities for business type activities increased by 19.8% ($11.4 million). Major changes include the addition of the net pension obligation of $14.3 million as required by the implementation of the new pension reporting standard offset with decreases in bonds, notes and leases payable ($3.1 million). Overall, the business-type net position has decreased by 3.2% ($11.2 million) due to decreases in unrestricted net position ($12.7 million) related mainly to implementation of the new pension reporting standards and in net investment in capital assets ($1.4 million). The changes are primarily in the Water and Wastewater Fund, Environmental Services fund and Airport Fund. 10 Analysis of Change in Net Position The City’s overall net position has increased by $4.4 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 the Y ear s En ded Ju n e 30, 2015 an d 2014 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2015 Bu s in es s -ty pe A c tiv ities 2014 * 2015 To tal 2014 * 2015 2014 * Rev en u es Program Revenues: Charges for services Operating grants and contributions Capital grants and contributions $ 7,906 $ 7,758 $ 39,620 $ 39,867 $ 47,526 $ 47,625 6,671 7,072 4,743 4,051 11,414 11,123 13,008 14,604 4,749 7,836 17,757 22,440 General Revenues: Property taxes 11,211 11,045 - - 11,211 11,045 Sales taxes 42,539 37,676 - - 42,539 37,676 State shared taxes 16,684 15,667 - - 16,684 15,667 1,179 749 304 213 1,483 962 728 2,072 1,613 641 2,341 2,713 99,926 96,643 51,029 52,608 150,955 149,251 Investment earnings Other Total revenues Ex pen s es General government 17,626 9,798 - - 17,626 9,798 Public safety 35,254 28,730 - - 35,254 28,730 Public works 1,664 1,322 - - 1,664 1,322 Economic and physical development 9,343 8,434 - - 9,343 8,434 Culture and recreation 12,511 13,370 - - 12,511 13,370 Highways and streets 18,175 19,018 - - 18,175 19,018 2,944 2,947 - - 2,944 2,947 Water - - 14,308 14,011 14,308 14,011 Interest on long-term debt Wastewater - - 10,880 10,355 10,880 10,355 Environmental - - 12,072 11,638 12,072 11,638 Airport - - 4,540 4,118 4,540 4,118 Housing Authority - - 6,084 6,091 6,084 6,091 Stormwater - - 1,184 1,577 1,184 1,577 97,517 83,619 49,068 47,790 146,585 131,409 2,409 13,024 1,961 4,818 4,370 17,842 (2,909) 1,408 2,909 - - 10,115 3,369 7,727 4,370 17,842 Total expenses Increase in net position before transfers Transfers Change in net position Net position at beginning of year, as restated Net position at end of year (1,408) 1,001 217,322 $ 218,323 $ 298,170 329,649 308,285 $ 333,018 $ 336,447 546,971 344,174 $ 551,341 634,617 $ 652,459 * 2014 not restated for implementation of GASB 68 and 71 Governmental activities Governmental activities increased the City’s net position by $1.0 million. The key factors for this increase are as follows:  Revenues exceeded expenses by $2.4 million as compared to last years’ of $13.0 million.  Net transfers decreased to a negative $1.4 million versus last years’ of negative $2.9 million.  Capital grants and contributions had the largest decrease by dollars at $1.6 million (10.9%). Economic and physical development increased by $3.8 million related to the Business Accelerator Project. Culture and recreation decreased $5.0 million related to last year’s state grant to purchase the Observatory Mesa property.  City sales tax revenues increased by 12.9% ($4.7 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 $1.6 million, $3.7 million, and $712,521 respectively. The major increase in the transportation tax is related to a new voter approved sales tax for the Street Safety and Road Repair Initiative. The city has seen positive sales tax growth in the last four years. 11  State shared taxes had an increase of 6.5% ($1.0 million). Most of the growth was related to anticipated increases in state shared income tax as these revenues are based on calendar year 2013 returns. There was also a 6.3% increase to state shared sales taxes.  Property tax had a 1.5% increase primarily due to new construction on the tax records.  Expenses have increased by $13.9 million (16.6%) as the economy continues to show moderate growth over the last few years and the City is completing more projects and funding additional operational expenses. There were increases in general government ($6.7 million), public safety ($6.5 million), public works ($0.1 million), economic and physical development ($0.5 million), and highways and streets ($.05 million). Decreases were in culture and recreation ($0.4 million). Many of the expenses are considered onetime funding as the organization is managing the commitments to its ongoing expenses. Business-type activities Business type activity had a net position decrease of $11 million. The key factors for this decrease include:  The implementation of the pension liability required by new accounting standards caused a decrease in the net position by $14.3 million.  Charges for service have decreased slightly by 0.5% ($214,978). Funds with increases were Environmental Services ($156,382), Airport ($23,499), Stormwater ($825), and Housing Authority ($85,532). The funds with decreased charges for services this year were Water ($49,877) and Wastewater ($431,339).  Operating grants and contributions increased $691,342.  Capital grants and contributions have decreased by 39.9% ($3.1 million) due to decreased grant funded construction at the Airport and decreased developer contribution utility infrastructure.   Investment earnings are up slightly ($90,528) and other revenues increased by $941,147. Expenses have increased over the prior year by 2.6% ($1.3 million). There were increases in the Water Fund ($296,575) and Wastewater Fund ($524,793), Environmental Services Fund ($433,943), and Airport Fund ($421,928). There were decreases in the Housing Authority Fund ($19,727) and Stormwater Fund ($392,401). 12 The follow wing two cha arts illustrate the City's governmental g expenses byy function an nd its revenu ues by source. Expenses and Program Revenues – Governmental G Activities $40,000,000 Expenses $35,000,000 Program Revenues R $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 General government Pu ublic safety Public works w Econ & phys s developmen nt Culture & recreation Highways & streets Interest on long-tterm debt Revenues by Source – Governmental G Activities As shown, Public Safety y is the larges st function as s measured byy expense ($3 35.2 million, 36.2%) follow wed by Highways & Streets ($19.5 million, 20.0%), 2 and Ge eneral Govern nment ($16.5 million, 17.0 0%). 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 largest single e source of fu nds ($42.5 m million, 42.6%)), followed by y state shared tax ($16.7 million, 16.7%) and a capital grants g and co ontributions (($13.0 million n, 13.0%). Th he top three reve enues make up 72.3% of to otal revenues compared to last year’s to op three of 70 0.3%. Last yea ar was the same ranking of rev venues. 13 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 $20,0 000,000 Expenses s Program Revenues $15,0 000,000 $10,0 000,000 $5,0 000,000 $0 W Water Was te wate r Environ nme ntal Airp port Housi ng Stormwa ater Authority Revenues by Source – Business-type B e activities Investment Operating grrants earningss and contribu utions 0.6% 9.3% Capital gran nts and contributtions 9.3% Other Charg ges for 3.2% serv vices 77..6% As shown, Water has ex xpenses of $1 14.3 million for the fiscal yyear, followed d by Environm mental Services with $12.1 million, Wastewa ater with $10 0.9 million, Housing Autho ority with $6.1 million, the e Airport with h $4.5 million an nd Stormwater with $1.2 million. m For th he fiscal year, program revvenue exceede ed expense fo or the Water and d Wastewater Fund, Environmental Services Fund, an nd Stormwate r Fund. The Housing Authority and Airpo ort Funds pro ogram expenses exceeded d revenues m mainly due to o depreciation n of capital a assets Water, Wa astewater, Env vironmental Services, S and Stormwater FFunds receive d the majoritty of their pro ogram revenues through cha arges for serv vices (82.7%, 97.9%, 100 .0%, and 98..3% respectiv vely). The Ho ousing Authority Fund receive es the majoritty of its program revenue through ope rating grants s and contribu utions (79.6%) while w the Airpo ort Fund rece eived the majjority of its p program reve nue through capital grantts and 14 contributions (52.6%). Charges for services provided the largest share of revenues (80.7%) for all of the business-type activities, followed by capital grants and contributions (9.7%). The last three years the ranking was the same. The expenses for the business type activities increased (2.6%, $1.3 million) as there were increases in Water (2.1%, 297,000) and Wastewater (5.1%, $525,000), Environmental Services (3.2%, $434,000), and Airport (10.2%, $421,000) offset by decreases in Housing Authority (.3%, $20,000) and Stormwater (24.9%, $392,000). Water and wastewater increased user fees rates in fiscal year 2015. Environmental Services, Airport, Stormwater and Housing Authority Funds increased charges for service revenue at 1.3%, 1.6%, 8.8% and 0.1%, respectively. Water and Wastewater saw decreases in charges for services of 0.4% and 4.6%, respectively. 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 $84.6 million, an increase of $4.2 million in comparison with the prior year. Approximately $22.9 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 ($617,030) for inventory and perpetual care, (2) restricted ($53 million) for special revenue funds, debt service, development fee projects, court improvements and operations, grant purposes, perpetual care, and capital projects, and (3) assigned ($8.2 million) for court services, capital reserves, and real estate. Revenues for governmental functions overall totaled $99.7 million in the fiscal year ended June 30, 2015 which represents an increase of 2.3% or $2.2 million from the prior fiscal year. Five revenue categories show increases over prior year. These include taxes (10.1%, $4.9 million), intergovernmental (4.9%, $1 million), charges for services (9.2%, $252,000), rents (0.6%, $10,000), and investment earnings (58.5%, $422,000). The increase in taxes is due to the new Road Repair and Street Safety sales taxes approved by voters in November 2014 and steady growth in our local economy. All other revenue categories experienced decreases, including: grants and entitlements (12.0%, $1.8 million), special assessments (35.8%, $1.0 million), licenses and permits (4.4%, 86,000), fines and forfeitures (2.7%, $39,000), contributions (32.0%, $173,000), and miscellaneous revenues (64.4%, $1.2 million). Grants and entitlement decrease is related to an unusually large grant in the prior year. Miscellaneous revenue decreased due to several sales of property held for resale in the prior fiscal year. 15 Expenditures for governmental functions ($99.4 million) decreased by 2.9% ($3.0 million) from the prior fiscal year. Most of the decrease in expenditures is related to capital project expenditures (29.5%, $7.1 million). Major capital projects have been discussed in prior sections. However, operation expenditures offset the capital expenditures decrease with an increase (6.6%, $4.4 million) which is related to general government and public safety. In the fiscal year ended June 30, 2015 revenues for governmental functions exceeded expenditures by approximately $276,000. 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 $23.2 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 45.9% of General Fund expenditures. The total fund balance in the City’s General Fund increased by $1.8 million during the fiscal year as revenue increased 2.4% and expenditures increased 1.8%. Overall, the General Fund’s performance resulted in revenues in excess of expenditures in the fiscal year ended June 30, 2015 of $3.1million. This is an increase of approximately $0.4 million over the comparable figure from the prior year which resulted in expenditures in excess of revenues of $2.7 million. The Highway User Revenue Fund balance has increased by $295,953. Revenues decreased $240,865 primarily due the sale of property in the prior fiscal year. Expenditures decreased by $312,454 or 2.9% overall with small decreases in both operation and capital expenditures. Debt service payments remained level this year. Net transfers-in decrease by $530,633 due to a onetime transfer in the prior year and the corresponding decrease in capital expenditures. Transportation Fund balances increased by $5.7 million due the sale of the 4th Street property. Revenues increased $3.5 million due to the new Road Repair and Street Safety (RR & SS) sales tax approved by voters in November 2014. Expenditures increased 2.7 million again due to the capital expenditures related to RR & SS sales tax. The Special Assessment Bond Fund balance has decreased by $92,878. This is due to normal pay down of debt. Revenues and expenditure changes are related to the prior year early retirement of 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 an unrestricted net position of $4.2 million. Revenues exceeded expenditures in the proprietary funds by $3.4 million for the fiscal year ended June 30, 2015. All funds, except the Airport Fund, had positive growth in their net position for the fiscal year ended June 30, 2015. The Airport Fund decrease of $0.7 million was due to depreciation exceeding grant and other funding for capital replacements. The major part of the increase was related to capital contributions ($4.7 million). 16 Budget Highlights The City’s final budget matches the original budget which was approved by Council in June, 2014. The City looks at the budget to actual at the division level and no division exceeded its appropriation. There were four revenue transfers that were not budgeted. One transfer was made from the Capital Projects fund to the Housing and Community Services fund ($102,000) to reimburse the costs of land related to a land swap needed for the FUTS trails. There are two transfers from the BBB Fund and Capital Project Fund to the Debt Service Fund totaling $8,760 and a transfer from the Capital Project Fund to the Secondary Property Tax Fund ($427,224) to move unspent proceeds to pay for debt service expenditures. The General Fund was less than 2% ($989,342) over the final budgeted total revenues primarily due to taxes, which exceeded budget by $1.3 million and was offset by grants and entitlements under budget by $1.1 million. Some of the reasons for grants and entitlements being under budget are due to the City not receiving several larger grants for Fire and Police including the Assistance to Firefighters ($279,000) grants, Homeland Security grants and Gang Task Force grants along with only spending $114,333 of the $281,500 budget for the Brownfields Assessments grant project . Expenditures are under budget in all divisions due to controlled spending and carryover of some capital projects. 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 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 $3.5 million for the Rio de Flag Flood Control Project, of which only $100,544 actually transferred at year end. The other significant transfer under budget by $807,000 is related to the funding of airport capital projects and operational needs which was not needed in fiscal year 2015. 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, 2015 amount to $657.8 million. Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. decrease in the City’s capital assets for the current year was 0.7% ($4.9 million). reflects the capital assets at the end of the fiscal year: The total The following table Capital Assets, Net of Depreciation June 30, 2015 and 2014 (in thousands of dollars) Governmental Activities 2015 Land and other non-depreciable assets $ 64,845 Buildings 54,416 Business-Type Activities 2014 $ 2015 67,941 $ 14,120 Total 2014 $ 13,966 2015 $ 78,965 2014 $ 81,907 56,074 50,459 53,081 104,875 109,155 250,761 Improvements 6,623 7,273 248,997 243,488 255,620 Machinery and equipment 9,347 10,310 20,466 21,795 29,813 32,105 156,062 159,137 - - 156,062 159,137 Infrastructure Construction in progress Total 13,810 7,204 18,608 22,384 32,418 29,588 $ 305,103 $ 307,939 $ 352,650 $ 354,714 $ 657,753 $ 662,653 17 Construction-in-progress had a net increase of 9.6% ($2.8 million). Major completed construction-in- progress includes the completion of the Airport Taxiway Westplex ($4.7 million), Street and Utility Bond Projects ($4.1 million), Switzer Canyon Waterline Replacement ($2.6 million) and Solids Dewatering System ($740,000). Major construction in progress at June 30 includes the Rio de Flag Drainage Project ($14.2 million), Innovation Mesa Accelerator Building ($6.8 million), West/Arrowhead Phase 2 ($3.2 million), Red Gap Pipeline ($1.7 million), and Industrial Drive ($1.0 million). related to the sale of the 4th The decrease to land ($2.9 million) is Street property and offset partially by donated assets for right-of-way and easements, and purchase of land for the FUTS trails. The decrease to buildings ($4.3 million) is related to depreciation. The increase in improvements ($4.9 million) is related to the completion of the Airport Taxiway Westplex ($4.7 million), Switzer Canyon Waterline ($2.6 million) and Drainage Improvements and Contributed Capital less depreciation. Machinery and equipment decreased by $2.3 million mainly due to depreciation. Major additions include ten vehicles and heavy equipment replacements ($1.2 million), Wastewater Bar Screens ($402,474). 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 At the end of the current fiscal year, the City had total long-term debt outstanding of $115.4 million. Of this amount, $50.3 million is general obligation bonds backed by the full faith and credit of the City, $6.7 million is improvement district bonds, $18.0 million is revenue bonds, $860,000 is for the Municipal Facility Corporation, $2.7 million is for certificates of participation, and $36.8 million are outstanding leases or loans for the airport, water and wastewater, and city-wide energy conservation improvements. Outstanding Debt June 30, 2015 and 2014 (in thousands of dollars) Governmental Activities 2015 General obligation bonds $ Special assessment bonds Revenue bonds Other debt Lease/Loans Total debt payable $ 48,920 Business-type Activities 2014 $ 53,341 6,705 8,605 14,675 15,495 2015 $ 1,441 $ 2015 1,752 - - 3,285 3,635 3,530 4,415 - - 946 1,234 35,880 38,304 74,776 $ 83,090 $ Total 2014 40,606 $ 43,691 $ $ 50,361 2014 $ 55,093 6,705 8,605 17,960 19,130 3,530 4,415 36,826 39,538 115,382 $ 126,781 During fiscal year 2015, the City’s total bonded debt decreased by $11.4 million. The City did not issue any new debt during the year. The special assessment debt decreased due to early pay off of debt from a developer ($1.9 million) and the all remaining debt decreases are due to annual schedule debt service 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, 2015 is $42.8 million in the 6% category and $92.1 million in the 20% capacity. The allowable debt increased from prior year due to higher assessed valuations and decreasing debt balances. Additional information on the Debt Limitations and Capacities may be found in Schedule 16 in the Statistical Section of this report. 18 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, 2 015 Mo o dy ' s In v es to r s Stan dar 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 2015/2016 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, except for public safety pension funding discussed below.  Unrestricted fund balance in the General Fund continues to be above the fiscal policy of 15% of operating revenues. It is currently projected to be 25%.General sales tax revenues exceeded budget by $1.5 million in FY 2015 and are expected to be flat in FY 2016 due to the uncertainty of revenues caused by the Arizona Department of Revenue starting to collect the city sales taxes on the City’s behalf in FY 2016.  Building permits exceeded budget by $380,000. However, we remain conservative in our projections for FY 2016 as we rely on these types of revenues as a one-time impact rather than an ongoing source of funding.  The focus of the FY 2016 budget was for Council Priorities related to employee investment, staffing and technology. o In the General Fund the City was able to fund $1.6 million for compensation, $276,000 for staffing and $1.6 million for technology. This was done with a combination of ongoing and onetime funding sources. o Other funds made similar funding decisions. Some of the larger items are $6.1 million for RR & SS pavement preservation and $1.9 million programmed for the Leroux Waterline and Sewerline replacement.  The total authorized positions increased by 12.76 positions. While 14.76 FTEs were added, there were offsetting decreases of 2.0 positions that were either onetime funded or reduced to fund some of the new positions.  Public Safety pension (PSPRS) funding continues to be major funding issue. Public Safety pension required contributions to be increased over $1.5 million (32%) in FY2016 due to pension contribution rate increases. Fifty percent (50%) of this increase was funding with ongoing dollars and the other half with one time capacity with sufficient continued onetime funding available into the future.  The City continues to monitor the State legislature to be aware of potential budget impacts on cities including monitoring the outstanding PSPRS lawsuit that could substantially increase required employer contribution rates.  Property assessments continue to increase at a slow, steady rate. Primary assessed values increased by an average of 2.2%. The City adjusted the tax rate on primary property tax to maintain revenue levels. The secondary property tax rates remain flat.  The City continues to pursue federal and state grant dollars to enhance the local economy. 19  The City continues implementation of the electronic information sharing technology to facilitate transparency in service provision.  The City will continue to work on the development of the 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.   An updated Utilities Rate Study is expected to be completed in FY 2016. User fee studies relating to the services provided by Community Development, Recreation and Fire are expected to be completed in FY 2016. 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 20 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position June 30, 2015 Primary Government Governmental Activities Business-type Activities Total ASSETS Cash, investments and equivalents Accounts receivable, net $ 80,743,702 $ 31,172,441 $ 111,916,143 9,016,935 5,044,432 14,061,367 Intergovernmental receivable 3,385,644 606,888 3,992,532 Special assessments receivable 6,703,577 - 6,703,577 Internal balance 485,640 Deposits 112,900 Inventory 379,527 - 379,527 91,800 59,636 151,436 Prepaid items (485,640) - 8,763 121,663 Restricted cash and investments 5,397,599 12,743,241 18,140,840 Capital assets, non-depreciable 78,655,299 32,727,441 111,382,740 Capital assets, depreciable, net 226,447,493 319,922,894 546,370,387 411,420,116 401,800,096 813,220,212 22,735,716 2,206,162 24,941,878 977,211 - 977,211 23,712,927 2,206,162 25,919,089 Accounts payable 5,078,270 1,431,172 6,509,442 Accrued payroll 1,322,779 282,391 1,605,170 Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pensions Deferred charge on debt refundings Total deferred outflows of resources LIABILITIES Construction retainage payable Interest payable Advanced revenue 863,526 80,567 944,093 1,322,202 648,688 1,970,890 501,294 902,942 1,404,236 1,630,360 533,309 2,163,669 Compensated absences 1,668,418 363,773 2,032,191 Claims and judgements 111,580 - 111,580 Deposits payable Noncurrent liabilities: Due within one year: Special assessment debt, government commitment 261,868 - 261,868 8,302,304 2,941,735 11,244,039 Compensated absences 2,201,648 476,239 2,677,887 Claims and judgements 166,240 - 166,240 - 7,895,618 7,895,618 Bonds, notes and leases payable, net Due in more than one year: Landfill closure and postclosure care costs Net OPEB obligation 4,344,203 979,004 5,323,207 Net pension liability 111,543,325 14,383,459 125,926,784 Special assessment debt, government commitment Bonds, notes and leases payable, net Total liabilities 6,474,893 - 6,474,893 62,821,901 37,664,600 100,486,501 208,614,811 68,583,497 277,198,308 8,197,451 2,404,550 10,602,001 230,658,509 311,963,433 542,621,942 - 2,664,263 2,664,263 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions NET POSITION Net investment in capital assets Restricted for: Capital projects Perpetual care: Expendable Nonexpendable Unrestricted Total net position 34,304 - 34,304 224,116 - 224,116 (12,596,148) $ 218,320,781 The notes to the financial statements are an integral part of this statement 21 18,390,515 $ 333,018,211 5,794,367 $ 551,338,992 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2015 Program Revenues Indirect Expense Allocation Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions $ $ Primary government Governmental activities: General government Public safety $ 17,625,846 $ (1,086,016) 35,255,450 $ - 3,091,342 879,755 447,864 1,802,017 833,624 168,956 Public works 1,664,308 (257,048) 520 - - Economic and physical development 9,343,417 (446,804) 2,329,258 1,321,026 4,035,158 Culture and recreation 12,511,424 470,178 1,605,120 3,086,915 1,032,456 Highways and streets 18,174,944 1,319,690 - 12,856 6,938,435 2,944,000 - - - - 97,519,389 - 7,905,995 6,670,678 13,008,629 Interest on long-term debt Total governmental activities Business-type activities: Water 14,307,902 14,043,177 114,174 2,824,177 Wastewater 10,879,594 8,907,760 183,927 9,175 Environmental 12,071,509 12,646,619 - - Airport 4,540,208 1,528,202 159,932 1,879,860 Housing authority 6,084,019 1,027,945 4,259,652 35,946 Stormwater 1,184,464 1,466,347 25,000 - 49,067,696 39,620,050 4,742,685 4,749,158 Total business-type activities Total primary government $ 146,587,085 $ 47,526,045 $ 11,413,363 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 $ 17,757,787 Net (Expenses) Revenues and Changes in Net Position Primary Government Governmental Activities $ $ Business-type Activities (12,167,000) - $ (12,167,000) (32,404,722) - (32,404,722) (1,406,740) - (1,406,740) (1,211,171) - (1,211,171) (7,257,111) - (7,257,111) (12,543,343) - (12,543,343) (2,944,000) - (2,944,000) (69,934,087) - (69,934,087) - 2,673,626 2,673,626 - (1,778,732) (1,778,732) - 575,110 575,110 - (972,214) (972,214) - (760,476) (760,476) - 306,883 306,883 - 44,197 (69,934,087) $ 44,197 44,197 $ (69,889,890) 5,625,096 - 5,585,942 - 5,585,942 42,539,371 - 42,539,371 16,683,665 - 16,683,665 1,179,131 303,863 1,482,994 645,571 1,119,502 1,765,073 65,201 493,358 558,559 16,821 - 16,821 (1,407,710) 70,933,088 $ $ Total 5,625,096 1,407,710 - 3,324,433 74,257,521 999,001 3,368,630 4,367,631 217,321,780 329,649,581 546,971,361 218,320,781 $ 333,018,211 $ 551,338,992 23 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2015 Highway User Revenue Fund General Fund Transportation Fund ASSETS Cash and investments $ Accounts receivable, net 30,538,088 $ 4,602,704 Interest receivable Intergovernmental receivable Interfund receivable 4,371,961 $ 798,684 15,207,773 2,156,632 62,223 8,256 31,894 353,141 26,893 783,441 3,120,000 - - Special assessments receivable - - - Deposits - - 112,900 Inventory 323,792 - - Restricted cash and investments Total assets $ 38,999,948 $ 5,205,794 $ 18,292,640 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCE Liabilities: Accounts payable $ Accrued payroll and compensated absences 2,107,883 $ 1,171,681 Interfund payable Advanced revenue Guaranty and other deposits Total liabilities 601,962 $ 42,301 656,508 - - - - 236,311 - 163,000 1,630,360 - - 5,146,235 644,263 819,508 232,623 - - - - - 232,623 - - Deferred inflows of resources: Unavailable revenue - property taxes Unavailable revenue - special assessments Total deferred inflows of resources Fund balances: Nonspendable Restricted Assigned Unassigned (deficit) Total fund balances Total liabilities, deferred inflows and fund balances 323,792 - - 1,951,220 4,561,531 17,473,132 8,192,178 - - 23,153,900 - - 33,621,090 $ 38,999,948 The notes to the financial statements are an integral part of this statement 24 4,561,531 $ 5,205,794 17,473,132 $ 18,292,640 $ 332,199 $ - $ $ 76,097,151 8,504,465 270 49,065 151,708 - 2,222,169 3,385,644 - - 3,120,000 6,703,577 - 6,703,577 - - 112,900 - 55,735 379,527 7,036,046 - $ $ 5,397,599 5,397,599 34,318,143 $ 103,852,571 2,340,823 $ 5,707,176 - 108,797 1,322,779 - 3,120,000 3,120,000 - 101,395 500,706 - - 1,630,360 - 5,671,015 12,281,021 - - 232,623 6,703,153 - 6,703,153 6,703,153 - 6,935,776 - 293,238 617,030 332,893 28,636,068 52,954,844 - - - (282,178) 332,893 $ 25,647,130 946,445 $ Total Governmental Funds Other Governmental Funds Special Assessment Bond Fund 7,036,046 $ 8,192,178 22,871,722 28,647,128 84,635,774 34,318,143 $ 103,852,571 25 CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES JUNE 30, 2015 Fund balances - total governmental funds balance sheet $ 84,635,774 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 509,253,452 (204,150,660) 305,102,792 Other assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Fines and forfeitures 302,292 302,292 Deferred outflows and inflows of resources related to pensions and deferred charges on debt refundings are applicable to future reporting periods and, therefore, are not reported in the governmental funds. Deferred outflows related to pensions Deferred outflows related to debt refunding Deferred inflows related to pensions 22,735,716 977,211 (8,197,451) 15,515,476 Long-term receivable agreement related to future expenditures are not recognized during the current period and, therefore, are not reported in the governmental funds. Promissory note forgivable 91,800 91,800 For purposes of measuring the net pension liability, the long-term liabilities are not due and payable in the current period and, therefore, are not reported as a liability in the funds. ASRS pension benefits PSPRS pension benefits EORP pension benefits (31,898,470) (77,968,252) (1,676,603) (111,543,325) (74,776,208) (1,322,202) (3,084,757) (4,344,203) (3,870,066) (87,397,436) 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 bond and lease payable Governmental interest payable Bond premium Other postemployment benefits Compensated absences 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 232,622 232,622 6,703,153 6,703,153 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 fund that are reported with governmental activities. 4,677,633 Net position of governmental activities - statement of net position $ 218,320,781 The notes to the financial statements are an integral part of this statement 26 27 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2015 Highway User Revenue Fund General Fund Transportation Fund REVENUES: Taxes $ Intergovernmental Grants and entitlements 25,908,705 $ - $ 15,208,003 17,574,331 - 92,456 1,294,384 6,887,029 Special assessments - - - Charges for services 2,986,151 - - Licenses and permits 1,866,792 - - Fines and forfeitures 1,389,663 - - Rents 1,603,322 - - 374,174 33,720 143,881 Contributions 262,095 1,130 5,000 Miscellaneous 305,932 - - 53,565,549 6,921,879 15,449,340 Investment earnings Total revenues EXPENDITURES: Current: General government 9,809,718 - 4,813,830 Public safety 27,583,880 - - Public works 1,081,157 - - Economic and physical development 4,682,707 - - Culture and recreation 5,750,634 - - - 7,574,823 362,781 721,549 450,776 695,000 93,304 96,146 471,750 771,773 2,494,798 3,790,207 50,494,722 10,616,543 10,133,568 Highways and streets Debt service: Principal retirement Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 3,070,827 (3,694,664) 5,315,772 72,051 - 2,941,000 2,848,218 4,011,318 OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out (4,132,795) Total other financing sources (uses) (1,212,526) Net change in fund balances Fund balances, beginning of year Fund balances, end of year $ 550,000 (20,701) (3,116,934) 3,990,617 374,066 1,858,301 295,953 5,689,838 31,762,789 4,265,578 11,783,294 33,621,090 The notes to the financial statements are an integral part of this statement 28 $ 4,561,531 $ 17,473,132 Special Assessment Bond Fund $ Other Governmental Funds - $ $ 53,725,196 - 2,974,669 20,549,000 - 5,209,735 13,483,604 1,857,884 - 1,857,884 - - 2,986,151 - - 1,866,792 - - 1,389,663 - 57,313 1,660,635 366,217 227,694 1,145,686 - 99,832 368,057 - 339,639 645,571 2,224,101 21,517,370 99,678,239 - 351,144 14,974,692 - - 27,583,880 - 134,926 1,216,083 - 3,824,087 8,506,794 - 5,279,198 11,029,832 - 97,617 8,035,221 1,900,000 4,545,973 8,313,298 416,979 1,720,003 2,798,182 - 9,887,876 16,944,654 2,316,979 25,840,824 99,402,636 (92,878) (4,323,454) 275,603 - - 3,013,051 - 9,967,277 17,376,813 - (9,113,853) (16,384,283) - 853,424 (92,878) 332,893 4,005,581 (3,470,030) 425,771 $ 12,608,488 Total Governmental Funds 4,281,184 32,117,158 $ 28,647,128 80,354,590 $ 84,635,774 29 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, 2015 Net change in fund balances - total governmental funds $ 4,281,184 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 16,944,654 (13,180,130) 3,764,524 (127,068) (5,458,967) (608,389) 152,374 1,823,902 (139,741) (639,961) 8,313,298 2,753 (145,818) (161,308) 298,579 3,309,654 Some items reported in the governmental funds are not sources and uses of current financial resources and therefore are not reported as revenues or expenses in the statement of activities. These items include: Net pension expense related to ASRS Net pension expense related to PSPRS Net pension expense related to EORP Pension contribution for EORP Donated capital Compensated absences Other postemployment benefits Principal payments on debt Fines and forfeitures Interest accural on debt 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. Available portion of promissory note (10,200) (10,200) 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 Transfer of capital assets from business-type activities The notes to the financial statements are an integral part of this statement 30 (6,024,469) (2,404,563) 4,323 (8,424,709) (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, 2015 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 (1,857,884) 28,069 (1,829,815) (125,082) 33,445 (91,637) 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 Change in net position of governmental activities - statement of activities $ The notes to the financial statements are an integral part of this statement (concluded) 31 999,001 CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis Variance with Final Budget REVENUES: Taxes $ Intergovernmental Grants and entitlements 24,374,019 $ 24,374,019 $ 25,718,617 17,135,425 17,135,425 17,574,331 2,382,157 2,382,157 1,294,384 $ 1,344,598 438,906 (1,087,773) Charges for services 2,867,630 2,867,630 2,986,151 118,521 Licenses and permits 1,473,005 1,473,005 1,866,792 393,787 Fines and forfeitures 2,283,752 2,283,752 1,389,663 (894,089) Rents 1,216,739 1,216,739 1,603,322 386,583 216,000 216,000 291,595 75,595 10,000 10,000 262,095 252,095 Investment earnings Contributions Miscellaneous 344,813 344,813 305,932 52,303,540 52,303,540 53,292,882 989,342 General administration 9,115,681 9,115,681 8,492,611 623,070 Management services 3,357,893 3,357,893 3,330,337 27,556 Fire 10,740,696 10,740,696 10,738,857 1,839 Police 18,378,086 18,378,086 17,484,382 893,704 Total revenues (38,881) EXPENDITURES: Current: Community development Public works Economic vitality 4,350,389 4,350,389 4,017,631 332,758 11,344,740 11,344,740 7,856,449 3,488,291 464,303 Non-departmental 464,303 (1,748,869) Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 366,048 (1,748,869) 98,255 (1,793,593) 44,724 1,475,000 1,475,000 - 1,475,000 57,477,919 57,477,919 50,492,722 6,985,197 2,800,160 7,974,539 (5,174,379) (5,174,379) 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 $ 20,000 20,000 72,051 3,524,656 3,524,656 2,848,218 52,051 (676,438) (9,798,047) (9,798,047) (4,132,795) 5,665,252 (6,253,391) (6,253,391) (1,212,526) 5,040,865 (11,427,770) (11,427,770) 22,596,412 22,596,412 11,168,642 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 11,168,642 1,587,634 13,015,404 22,596,412 - $ 24,184,046 $ 1,587,634 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 272,667 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis (2,000) Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 32 1,858,301 $ 13,015,404 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis 6,577,742 $ Variance with Final Budget REVENUES: Grants and entitlements $ Investment earnings Total revenues 6,577,742 $ 6,887,029 $ 309,287 6,000 6,000 33,720 27,720 6,583,742 6,583,742 6,920,749 337,007 151,660 151,660 151,660 - 91,171 91,171 91,171 - EXPENDITURES: Current: General administration Management services Community development Public works Economic vitality Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 7,929,401 7,929,401 2,390,486 5,538,915 10,639,677 10,639,677 7,852,173 2,787,504 14,496 14,496 14,496 - 116,557 116,557 116,557 - 100,000 100,000 - 100,000 19,042,962 19,042,962 10,616,543 8,426,419 (12,459,220) (12,459,220) (3,695,794) 8,763,426 OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out 442,500 - (442,500) 9,630,626 9,630,626 4,011,318 (5,619,308) (20,701) Total other financing sources (uses) (20,701) 10,052,425 Net change in fund balances budgetary basis Budgetary fund balances, beginning of year Budgetary fund balances, end of year 442,500 $ 10,052,425 (2,406,795) (2,406,795) 3,453,850 3,453,850 1,047,055 (20,701) $ 1,047,055 3,990,617 2,701,618 3,453,850 - $ 3,748,673 $ 294,823 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 1,130 Adjusted net change in fund balance - GAAP basis $ 33 (6,061,808) 294,823 The notes to the financial statements are an integral part of this statement Adjustment of budgetary basis to GAAP basis net change in fund balances - 295,953 $ 2,701,618 CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Actual Amounts Budgetary Basis Final Variance with Final Budget REVENUES: Taxes $ Grants and entitlements Investment earnings Contributions Total revenues 11,459,192 $ 11,459,192 $ 14,492,042 129,419 129,419 92,456 59,640 59,640 143,880 $ 3,032,850 (36,963) 84,240 - - 5,000 5,000 11,648,251 11,648,251 14,733,378 3,085,127 39,239 39,239 39,239 - EXPENDITURES: Current: General administration Management services Community development Public works Economic vitality Non-departmental Total expenditures Excess (deficiency) of revenues over (under) expenditures 265,318 265,318 265,318 - 4,871,134 4,871,134 344,008 4,527,126 12,822 12,822 3,600,701 (3,587,879) 2,952 2,952 2,952 5,738,735 5,738,735 5,871,350 - 10,930,200 10,930,200 10,123,568 806,632 718,051 718,051 4,609,810 3,891,759 (132,615) OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 2,000,000 2,000,000 2,941,000 (8,109,285) (8,109,285) (2,566,934) (6,109,285) (6,109,285) 374,066 6,483,351 (5,391,234) (5,391,234) 4,983,876 10,375,110 4,397,568 4,397,568 4,397,568 - (993,666) $ Adjustment of budgetary basis to GAAP basis net change in fund balances (993,666) $ $ 9,381,444 4,983,876 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 715,962 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis (10,000) Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 34 5,689,838 941,000 5,542,351 $ 10,375,110 35 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position Proprietary Funds June 30, 2015 Business-type Activities - Enterprise Funds ASSETS Current assets: Cash and investments Receivable, net Intergovernmental receivable Prepaid items Total current assets Noncurrent assets: Restricted cash and investments Refundable deposits Capital assets, non-depreciable Capital assets, depreciable, net Total non-current assets Total assets Water and Wastewater Fund $ Environmental Services Fund 20,831,909 3,099,920 406,637 24,338,466 $ 1,593,915 8,763 14,505,939 245,668,669 261,777,286 286,115,752 8,047,136 1,368,353 9,415,489 Airport Fund $ 11,149,326 1,890,420 6,705,224 19,744,970 29,160,459 585,659 82,687 85,399 753,745 113,365 39,351,867 39,465,232 40,218,977 Deferred outflows of resources Deferred outflows related to pension Total assets and deferred outflows of resources LIABILITIES Current liabilities: Accounts payable Accrued payroll Construction retainage payable Accrued compensated absences Interest payable Advanced revenue Claims and judgements Deposits payable Bonds and lease payable, net - current Total current liabilities Noncurrent liabilities: Compensated absences Net OPEB obligation Net pension liability Claims and judgements Landfill closure and postclosure care costs Capital lease payable Bonds and notes payable, net Total noncurrent liabilities Total liabilities Deferred inflows related to pension 810,758 612,710 460,297 286,926,510 29,773,169 40,679,274 1,086,880 121,245 74,863 156,021 648,688 784,960 421,831 2,750,877 6,045,365 144,268 93,811 111,122 63,525 23,215 435,941 71,958 18,311 1,050 15,577 42,156 14,863 190,858 354,773 184,112 435,040 5,607,217 1,938,045 34,148,312 42,312,726 48,358,091 106,990 336,459 4,229,186 7,895,618 12,568,253 13,004,194 13,340 56,538 1,991,916 1,551,335 26,908 3,640,037 3,994,810 981,174 Total deferred inflows and liabilities 741,498 123,638 49,339,265 13,745,692 4,118,448 221,262,511 8,595,644 37,695,081 1,593,915 14,730,819 237,587,245 1,070,348 6,361,485 16,027,477 NET POSITION Net investment in capital assets Restricted: Capital projects Unrestricted (deficit) Total net position $ $ The notes to the financial statements are an integral part of this statement 36 $ (1,134,255) 36,560,826 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund Total Other Proprietary Fund $ $ 1,009,795 135,470 25,000 1,170,265 14,556,439 25,015,695 39,572,134 40,742,399 697,942 358,002 89,852 59,636 1,205,432 $ 1,661,278 3,181,439 4,842,717 6,048,149 31,172,441 5,044,432 606,888 59,636 36,883,397 Internal Service Fund $ 12,743,241 8,763 32,727,441 319,922,894 365,402,339 402,285,736 4,646,551 58,470 4,705,021 4,705,021 86,646 235,751 2,206,162 40,829,045 6,283,900 404,491,898 4,705,021 17,775 10,676 4,654 14,642 47,747 110,291 38,348 66,411 12,301 73,400 300,751 1,431,172 282,391 80,567 363,773 648,688 902,942 533,309 2,941,735 7,184,577 234,620 588 111,580 346,788 4,600 46,194 608,184 658,978 706,725 167,197 104,773 1,946,956 2,218,926 2,519,677 476,239 979,004 14,383,459 7,895,618 3,489,380 34,175,220 61,398,920 68,583,497 - 104,858 $ Total 453,382 - 166,240 166,240 513,028 2,404,550 - 811,583 2,973,059 70,988,047 513,028 39,567,480 4,842,717 311,963,433 - 449,982 40,017,462 (1,531,876) 3,310,841 2,664,263 18,876,155 333,503,851 4,191,993 4,191,993 $ $ 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 37 (485,640) 333,018,211 $ CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2015 Business-type Activities - Enterprise Funds Water and Wastewater Fund OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ 22,950,937 305,853 23,256,790 OPERATING EXPENSES: Personnel services Contractual services, materials and supplies Insurance claims and expenses Depreciation and amortization Total operating expenses Environmental Services Fund $ 4,957,306 10,388,198 8,462,715 23,808,219 Operating income (loss) 12,646,619 57,043 12,703,662 Airport Fund $ 4,278,095 6,624,633 1,152,245 12,054,973 (551,429) 1,528,202 42,465 1,570,667 785,137 883,389 2,759,383 4,427,909 648,689 (2,857,242) 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) 196,588 298,103 (1,576) (1,344,788) (851,673) Income (loss) before capital contributions and transfers (1,403,102) 732,639 (2,517,414) 9,173 2,824,177 2,181,870 (501,108) 3,111,010 (293,048) 439,591 1,879,861 (16,784) (654,337) Capital contributions related to grants Capital contributions from external sources Transfers in Transfers out Change in net position Total net position, beginning of year, as restated Total net position, end of year 93,265 (9,315) 83,950 234,476,235 $ 237,587,245 The notes to the financial statements are an integral part of this statement 38 6,839 159,931 279,140 (106,082) 339,828 15,587,886 $ 16,027,477 37,215,163 $ 36,560,826 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund $ 1,466,347 4,450 1,470,797 Total Other Proprietary Fund $ 421,085 251,030 510,730 1,182,845 $ 1,285,543 4,391,064 407,412 6,084,019 287,952 39,620,050 840,362 40,460,412 $ 11,727,166 22,538,314 13,292,485 47,557,965 6,649,513 6,649,513 6,833,456 6,833,456 (4,625,523) (7,097,553) 7,171 25,000 32,171 4,259,652 504,249 4,763,901 303,863 4,742,686 493,358 279,140 (1,450,870) 4,368,177 320,123 138,378 (2,729,376) (150,498) 323,236 (319,656) 323,703 35,946 33,200 207,524 1,924,980 2,824,177 2,538,306 (1,130,596) 3,427,491 (150,498) 39,693,759 $ 1,027,945 430,551 1,458,496 Internal Service Fund Total 40,017,462 $ 3,103,317 330,076,360 3,310,841 $ 333,503,851 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 $ (58,861) 3,368,630 39 (183,943) 33,445 33,445 4,342,491 $ 4,191,993 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2015 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 insurance reimbursements Proceeds from sales of capital assets 23,724,543 252,972 (7,788,376) (42,026) (2,119,644) (4,885,916) 9,141,553 Environmental Services Fund $ 12,429,032 131,038 (5,144,193) (968) (1,182,783) (4,243,986) 1,988,140 Airport Fund $ 1,501,948 321,605 (1,103,758) (30,604) (298,898) (697,757) (307,464) (499,694) 2,015,000 (290,140) - (16,784) (2,015,000) - 1,515,306 (290,140) (2,031,784) 24,142 2,400,809 (5,350,437) (2,904,056) (1,392,232) 16,051 (929,160) 18,685 4,768,081 (1,608,031) (180,604) (106,082) - (7,205,723) (910,475) 2,873,364 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 $ 189,873 189,873 89,318 89,318 6,718 6,718 3,641,009 18,784,815 22,425,824 876,843 18,319,619 19,196,462 540,834 44,825 585,659 20,831,909 1,593,915 22,425,824 The notes to the financial statements are an integral part of this statement 40 $ $ $ 8,047,136 11,149,326 19,196,462 $ $ $ 585,659 585,659 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund $ 1,461,594 32,385 4,450 (240,306) (107,773) (396,673) 753,677 Total Other Proprietary Fund $ $ $ $ 40,063,912 416,395 724,835 (18,447,871) (324,444) (3,709,098) (11,523,409) 7,200,320 Internal Service Fund $ 6,626,075 (6,835,973) (209,898) 100,544 (319,656) - 33,200 - 133,744 (1,126,274) (2,015,000) 2,015,000 - (219,112) 33,200 (992,530) - (324,375) - 4,205,746 (238,768) 254,705 - 8,997,969 2,400,809 (8,450,771) (3,084,660) (1,498,314) 254,705 34,736 - (324,375) 4,221,683 (1,345,526) - 6,805 6,805 $ 946,795 398,780 (4,171,238) (250,846) (1,299,077) (4,375,586) Total 216,995 792,800 1,009,795 1,009,795 1,009,795 - $ $ $ (120,703) 818,645 697,942 697,942 697,942 292,714 292,714 $ $ $ (continued) 41 5,154,978 38,760,704 43,915,682 31,172,441 12,743,241 43,915,682 33,445 33,445 $ $ $ (176,453) 4,823,004 4,646,551 4,646,551 4,646,551 Statement of Cash Flows Proprietary Funds Year Ended June 30, 2015 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) $ (551,429) $ 648,689 $ (2,857,242) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 8,462,715 1,152,245 Landfill closure and postclosure costs - 246,316 2,759,383 - Other receipts - - 279,140 (Increase) decrease in assets: Accounts receivable 609,407 Allowance for doubtful accounts Prepaid items Inventories (153,657) (47,984) 2,000 2,000 20,833 - - 193,801 - - Increase (decrease) in liabilities: Accounts payable 223,518 Accrued payroll, compensated absences 50,373 (549,872) (15,042) (24,237) OPEB 65,864 51,131 8,356 Pension expense (contribution) 20,568 7,215 76,455 Deposits payable 112,424 Advanced revenue Net cash provided (used) by operating activities (6,232) (3,106) Total adjustments 2,569 9,692,982 $ 9,141,553 $ $ 423,368 $ (5,784) 14,297 27,515 1,339,451 2,549,778 1,988,140 $ - $ (307,464) Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers Capital assets transferred to governmental activities (1,415) Capital assets transferred from governmental activities Total noncash investing, capital and financing activities (2,908) 2,181,870 $ 2,603,823 The notes to the financial statements are an integral part of this statement 42 $ (2,908) - $ - Governmental Activities Business-type Activities - Enterprise Funds Total Other Proprietary Fund Stormwater Fund $ 287,952 $ (4,625,523) $ (183,943) 407,412 13,292,485 - - 246,316 - - - 279,140 - (61,341) (5,052) - (97,049) 193,801 (5,135) 7,661 12,509 5,614 31,733 11,137 57,599 168,637 $ - $ (4,375,586) - - - (25,955) $ 7,200,320 $ $ 423,368 $ (4,323) $ - 14,297,873 - 222,693 - (81,103) 249,937 753,677 - 162,698 (119,809) 465,725 (2,517) (16,540) 68,229 - - (378,165) (57,776) - (23,438) 4,000 (25,885) - 222,693 374,057 - - $ (7,097,553) - - $ $ 510,730 27,632 $ Internal Service Fund Total (209,898) - 2,404,563 $ (concluded) 43 2,823,608 $ - CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2015 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, 2015, the City implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions- an Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, and amendment of GASB Statement No. 68. GASB Statement No. 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts that meet certain criteria, otherwise Statements No. 27 and No. 50 remain applicable for pensions that are not covered by the scope of Statement No. 68. The primary objective of this statement is to improve accounting and financial reporting by local governmental employers about financial support for pensions that are provided by other entities, thus providing decision-useful information, supporting assessments of accountability and interperiod equity, while creating additional transparency. Statement No. 71 applies to amounts associated with contributions, if any, made by a local government employer to a defined benefit pension plan after the measurement date of the government’s beginning net pension liability. 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. For financial reporting purposes, transactions of the MFC are included as if it were part of the City’s operations. 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. 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 statements. 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 period 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 occurs when a constraint is placed on its 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. 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 balance, revenues and expenditures/expenses. 46 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. No 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. Resources are generated from ongoing plot sales with a portion allocated to perpetuity. 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 sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, net position, and cash flows. 47 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, management of the City landfill, recycling collection services and 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. Operating statements present increases (i.e., revenues) and decreases (i.e., expenses) in net total position. 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 expenditures, as well as, expenditures related to compensated absences, claims and judgments are recorded only to the extent they have matured. 48 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 No. 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 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 49 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), 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. Levies are due and payable in two installments on September 1 and March 1. 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 2014-2015, primary and secondary property tax collections amounted to $5,565,912 and $5,585,943, respectively. Deferred Outflows of Resources When a consumption of net position/fund balance applies to a future period it should not be recognized as an outflow of resources, expense or expenditure until that time. 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 50 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 recognizes grant 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 advance revenues. Some grants and contributions consist of capital assets or resources that are restricted 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 the governmental fund 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. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, pension expense, information about the pension plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 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 51 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. related asset. Major improvements are capitalized and depreciated over the remaining useful life of the 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, longterm debt and other long-term obligations are reported as liabilities in the applicable statement of net position. 52 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. 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. Change in Accounting Principle – Prior Period Adjustment The implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date is a change in accounting principle, which causes certain prior period net position balances to be restated. This standard requires the liability of employers for defined benefit pension (net pension liability) to be measured as the portion of the present value of projected benefit payments to be provided through the pension plan to current active and inactive employees’ that is attributed to the employees’ past periods of service (total pension liability), less the amount of the pension plan’s fiduciary net position. Actuarial valuations of the total pension liability are required to be performed at least every two years. Projections of benefits payments are required to be based on the benefit terms and legal agreements existing at the measurement date while incorporating the effects of salary changes, cost-of-living adjustments, and ad hoc postemployment benefit changes if substantive. The projected benefit payments are discounted to their actuarial present value using the long-term expected rate of return and to 53 attribute the payments to periods of employee service using the entry age actuarial cost method with each period’s service cost determined as a level of percentage of pay. The following restated net positions are part of the government-wide and proprietary fund financial statements: 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. Reconciliations 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: Long-Term Internal Reclass Statement of Governmental Total 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 76,097,151 $ - $ - $ $ - $ 80,743,702 - 151,708 - 3,385,644 - Special assessments receivable 6,703,577 - - Interfund receivable 3,120,000 - - 379,527 - - - - 379,527 5,397,599 - - - - 5,397,599 - 91,800 - - 91,800 - - - 305,102,792 Interest receivable Intergovernmental receivables Inventory Restricted cash and cash equivalents Refundable deposits 302,292 4,646,551 8,504,465 51,656 - - 6,814 - 158,522 - - - 3,385,644 - 6,703,577 485,640 8,858,413 (3,120,000) 485,640 112,900 Promissory note forgivable 112,900 - Capital assets - 305,102,792 Total assets 103,852,571 305,102,792 394,092 Deferred pension - - 22,735,716 - - Deferred loss on bond refunding - - 977,211 - - 977,211 - - 23,712,927 - - 23,712,927 5,190,661 (3,120,000) 411,420,116 Defer r ed O u tflo ws o f Res o u r c es Total deferred outflows of rescources 22,735,716 To tal A s s ets an d Defer r ed O u tflo ws o f Res o u r c es $ 103,852,571 $ 305,102,792 $ 24,107,019 $ 5,190,661 $ (3,120,000) $ 435,133,043 L iabilities Accounts payable Accrued payroll & compensated absence $ 5,707,176 Advanced revenue Guaranty and other deposits Unamortized bond premium - $ - $ $ - $ 5,941,796 - - - 3,120,000 - - - 500,706 - - 588 - 501,294 - - - 1,630,360 - - 3,084,757 - - 3,870,066 - 277,820 1,630,360 - - Unamortized loss on debt refunding - 234,620 1,322,779 Interest payable Interfund payable $ 1,322,202 3,084,757 - - 1,322,779 - - 1,322,202 (3,120,000) - - Compensated absences - - Claims and judgements - - Other postemployment benefits - - 4,344,203 - - 4,344,203 Net pension liability - - 111,543,325 - - 111,543,325 - Unmatured long-term debt Total liabilities 3,870,066 - - 277,820 - 74,776,209 12,281,021 - 198,940,762 - 232,623 - (232,623) - - - 6,703,153 - (6,703,153) - - - - 8,197,451 - - 8,197,451 - 1,261,675 - - 8,197,451 - 218,320,781 513,028 (3,120,000) 74,776,209 208,614,811 Defer r ed in flo ws o f r es o u r c es Unavailable revenue - property taxes Unavailable revenue - special assessmen Deferred inflow related to pension Total deferred inflows of resources 6,935,776 F u n d Balan c e - Net Po s itio n Fund balance/Net Position Total liabilities, deferred inflows and fund balance-net position 84,635,774 $ 103,852,571 305,102,792 (176,095,418) $ 305,102,792 $ 24,107,019 $ 55 4,677,633 5,190,661 $ (3,120,000) $ 435,133,043 (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 $ $ 509,253,452 (204,150,660) 305,102,792 (2) Certain receivables are not recognized in the governmental funds, but are earned in the statement of net position. Promissory note forgiveable Court receivables $ 91,800 302,292 394,092 Certain defered outflows and inflows of resources are applicable to future periods and, therefore, not recognized in the governmental funds, but are reported in the statement of net positions. Deferred outflows related to pensions Deferred loss on bond refunding Deferred inflows related to pensions $ $ 22,735,716 977,211 (8,197,451) 15,515,476 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 bond and lease payable Governmental interest payable $ Compensated absences 1,322,202 5,538,484 Other postemployment benefits 4,344,203 Net pension liability Unamortized bond premium 111,543,325 3,084,757 Subtotal Less: current portion compensated absences 74,776,208 200,609,179 $ 1,668,418 198,940,761 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 $ $ 6,703,153 232,622 6,935,775 (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) $ 4,677,633 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 3,120,000 (3,120,000) - 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 Funds Related Items (1) Revenues/ Expenses (2) Service Fund (3) and Eliminations (4) Activities Totals - $ 16,683,665 $ 70,436,930 R e ve nue s a nd Othe r Source s Taxes $ 53,725,196 $ - $ 28,069 $ Intergovernmental 20,549,000 - - - (9,799,494) 10,749,506 Grants and entitlements 13,483,604 - - - (6,884,171) 6,599,433 Special assessments 1,857,884 - Charges for services 2,986,151 - Licenses and permits 1,866,792 Fines and forfeitures 1,389,663 Rent Investment earnings - - - - - - - - - 1,866,792 - 2,754 - - 1,392,417 1,660,635 - - - - 1,660,635 1,145,686 - - 33,445 - 1,179,131 - - - 2,191,959 - - - 645,571 33,445 - 99,708,525 Contributions 368,057 Miscellaneous 645,571 Total revenue (1,857,884) 1,823,902 - 99,678,239 1,823,902 (1,827,061) 2,986,151 E xp e nd iture s/E xp e nse s General governmental 14,974,692 623,530 766,699 22,442 Public safety 27,583,880 1,771,824 5,844,895 48,267 17,473,379 - 35,248,866 Public works 1,216,083 225,647 1,931 257,048 Economic and physical development 8,506,794 235,376 142,284 12,177 446,804 11,029,832 1,823,514 110,506 17,769 (470,178) 12,511,443 Highways and streets 8,035,221 8,500,239 (133,301) 22,496 (1,319,690) 15,104,965 Principal retirement 8,313,298 - Interest and other charges 2,798,182 - Culture and recreation Capital outlay Total expenditures/expenses 16,944,654 (16,944,654) 99,402,636 (3,764,524) 3,013,051 (6,024,469) (36,401) 1,086,016 (8,313,298) 145,818 (1,472,798) - - - - - - 125,082 1,664,308 9,343,435 2,944,000 - - 94,290,396 OT H E R FINANCING SOUR CE S (USE S): Sale of capital assets Transfers in 17,376,813 Transfers out Total other financing sources (uses) Net change for the year (16,384,283) $ 4,005,581 4,281,184 $ - - - - - - 4,323 - - - (2,404,563) - - (2,400,240) (6,024,469) (436,043) 57 $ (354,263) $ (91,637) $ (2,400,240) (3,011,418) 17,381,136 (18,788,846) $ (4,419,128) 999,001 (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 16,944,654 (13,180,130) (6,024,469) $ 1,823,902 (436,043) (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 $ (1,857,884) $ (1,827,061) 28,069 2,754 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. Amortization of bond premium Amortization of refunding loss on debt $ $ 298,578 (161,308) 137,270 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 (145,818) Pension contributions Pension benefits earned net of employee contributions Accrual of other postemployment benefits (10,200) (139,741) 16,346,485 (22,388,535) $ (639,961) (6,977,770) 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 $ $ 8,313,298 8,313,298 (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 $ $ 33,445 (125,082) (91,637) (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 business-type activities Transfer of capital assets from business-type activities 58 $ (2,404,563) $ 4,323 (2,400,240) 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 restricted 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. Deficit Fund Balance A deficit unassigned fund balance of $282,178 exists in the capital projects bond fund. The deficit is a result of beginning construction of bonded projects prior to the receipt of proceeds. Bonding, as approved by voters, will be issued in the next reporting period. 59 Governmental fund balances as of June 30, 2015 are as follows: General Fund Special Other Total Highway User Transportatio Assessment Governmental Governmental Revenue Fund n Fund Bond Fund Funds Funds Fund balances: Nonspendable: Perpetual care Inventory $ - $ - 323,792 $ - - $ - - $ - 237,503 55,735 $ 237,503 379,527 Restricted for: Library services - - - - 1,180,808 1,180,808 Library branch services - - - - 1,067,573 1,067,573 Library programs externally directed - - - - 1,163,222 1,163,222 Court improvements and operations 913,849 - - - - 913,849 Debt service - - 1,566,656 332,893 14,090,760 15,990,309 Regional planning - - - - 50,204 50,204 Street improvements - 4,561,531 7,126,682 - - 11,688,213 3,958,022 Transit - - 3,958,022 - - Public art - - - - 511,124 511,124 Parks renovations - - - - 2,430,030 2,430,030 1,539,989 1,539,989 - - - - 20,917 20,917 982,971 - - - - 982,971 54,400 - 4,821,772 - 6,581,441 11,457,613 Capital reserve 7,087,735 - - - - 7,087,735 Real estate 1,104,443 - - - - 1,104,443 23,153,900 - - - (282,178) 22,871,722 $ 33,621,090 $ 4,561,531 $17,473,132 $ 332,893 Parks operations Perpetual care Development fee projects Other capital projects Assigned to: Unassigned: Total fund balances $28,647,128 $84,635,774 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, 2015, the carrying amount of the City’s deposits was $17,498,818 and the bank balance was $21,834,609. The $4,335,791 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2015. 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, 2015. 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, 2015, the City’s investments included the following: Investment Type Federal agency notes Maturity (in years) 2.450 48,899,990 30,348,250 2.710 1.231 208,405 $ 112,558,165 0.050 $ Municipal obligations U.S. treasuries State investment pool Corporate notes Bank notes 1,364,532 6,604,437 1,553,534 Money market Total fair value of investments Portfolio weighted average maturity Weighted Average Fair Value 23,579,017 1.583 3.208 1.583 2.258 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, 2015 is as follows: Investment Type Federal agency notes Municipal obligations U.S. treasuries State investment pool Corporate notes Bank notes Money market Total Fair Value $ 23,579,017 1,364,532 48,899,990 30,348,250 6,604,437 1,553,534 208,405 $ 112,558,165 Moody's Rating Aaa Aa2 / Aaa S&P Rating AA+ AA- / AAA AAA / AA-2 A1 / Aaa A1 N/A AAA f / S1+ AA+ / AAA/ A+ AAN/A Aaa AA+ % of Investments 20.94 1.21 43.44 26.96 5.87 1.38 0.19 100% 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, 2015, 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 $ 112,558,165 Pooled cash, equivalents and investments - unrestricted $ 111,916,143 Carrying amount of cash deposits Total pooled cash and investments 17,498,818 $ 130,056,983 Restricted cash and investments Total pooled cash and investments 18,140,840 $ 130,056,983 Cash and cash equivalents at June 30, 2015 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 94,417,327 17,485,986 12,830 $ 111,916,143 Investment income comprises the following for the year ended June 30, 2015: Net interest and dividends Net increase (decrease) in the fair value of investments Total net investment income per statement of activities $ 1,400,415 $ 1,482,994 82,579 The net increase in the fair value of investments during fiscal year 2014-2015 was $82,579. 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, 2015 was $328,951. 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 not receive a distribution this year 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 $22,706 and the total recovery to date is $100,897. 64 B. Receivables Receivables as of June 30, 2015, including allowances for uncollectible accounts, are as follows: The receivables not expected to be collected within one year include $110,000 of the general fund, $65,000 of the transportation fund, $74,000 of the water fund, $36,000 of the wastewater fund, $39,000 of the environmental services fund, $1,000 of the airport fund, $5,000 of the Stormwater fund, and $28,184 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, 2015 is as follows: 66 Busine ss-typ e a ctivitie s: Non-depreciable assets: Land Construction -in-progress Balance July 1, 2014 $ Total non-depreciable assets $ 153,320 3,552,372 36,350,755 Depreciable assets: Buildings Improvements $ 354,714,068 $ (4,418,346) 89,000 21,270 569,695 679,965 $ (7,329,006) (7,329,006) (615,324) (725,592) (8,115,764) (2,890,988) (13,292,485) Transfers In (out) $ (89,000) (21,268) (2,285,733) (131,776,744) (22,856,850) (202,780,913) - 1,449,290 5,168,447 (48,147,319) Improvements Machinery and equipment Total accumulated depreciation $ 69,921 3,649,236 44,770,861 521,144,226 Accumulated depreciation: Buildings Deletions and Retirements 3,705,692 100,822,223 375,551,142 Machinery and equipment Total depreciable assets Business-type activities capital assets, net 13,966,395 22,384,360 Additions (45,627) 9,689,452 3,826 9,693,278 - 35,968 35,968 $ 2,400,240 Less: associated debt Less: construction retainage Net investment in capital assets Balance June 30, 2015 $ 14,119,715 18,607,726 32,727,441 100,803,144 388,868,562 45,608,653 535,280,359 (50,344,052) (139,871,238) (25,142,175) (215,357,465) 352,650,335 (40,606,335) (80,567) $ 311,963,433 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 623,530 1,771,824 225,647 Economic and physical development 235,376 Culture and recreation 1,823,514 Highway and streets Total depreciation expense - governmental activities 67 $ 8,500,239 13,180,130 D. Interfund Receivables, Payables, and Transfers Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $485,640 are included in the government-wide financial statements at June 30, 2015. The interfund balances at June 30, 2015 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, 2015 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2015: Interfund Receivables Fund G ove rnme nta l Activitie s: General fund Other governmental funds Total governmental activities Busine ss-T yp e Activitie s: Water and wastewater fund Airport fund Total business-type activities Total governmental and business-type activities $ 3,020,000 3,020,000 $ $ 3,020,000 $ 3,020,000 Less: fund eliminations Adjustment for internal service fund elimination (3,020,000) 485,640 Total government-wide statement of net position 68 Interfund Payables $ 485,640 3,020,000 3,020,000 Transfers The net transfers of $1,407,710 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 2015 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, 2015: Fund G ove rnme nta l Activitie s: Transfers out General fund Highway user revenue fund $ Transportation fund 4,132,795 20,701 3,116,934 Transfers In $ 2,848,218 4,011,318 550,000 Other governmental funds Total governmental funds 9,113,853 16,384,283 9,967,277 17,376,813 Total governmental activities Busine ss-T yp e Activitie s: Water fund 16,384,283 17,376,813 501,108 2,181,870 1,130,596 $ 17,514,879 2,538,306 $ 19,915,119 Internal service fund - Environmental services fund Airport fund Stormwater fund 293,048 16,784 319,656 Other business-type fund Total business-type activities Total governmental and business-type activities Less: fund eliminations Add: net capital assets transfer - 323,236 33,200 (18,507,409) 2,400,240 Total government-wide statement of activities $ 1,407,710 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 2015 lease expense for the library was $84,461. The schedule below for future minimum lease expenses reflects the change in the rental rate as of June 30, 2015. The additional non-cancellable lease is with the Chevelon Butte School District #5 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 2015. 69 Year Ending June 30 East Flagstaff Library 2016 $ 2017 Chevelon Butte School Dist.#5 84,461 84,461 2018 2019 $ 84,461 84,461 2020 Total $ - 337,844 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, 2015 were $169,914 (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 2015 was $1,660,635. 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 USGS June 30 2016 2017 2018 Total Building #6 $ $ 801,104 801,104 66,759 1,668,967 In addition, the Airport Fund has several leases under cancellable agreements. The leases are for terminal space, hangars, shades, tie downs, ground leases, rental car agencies and a cafe. Lease revenue in the airport fund for fiscal year 2015 was $1,343,794. 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 funds. Advance Refunding In prior years, the City issued the bonds to advance refund $8,565,000 of the outstanding series 2006A general obligation bonds of projects 2004 bonds. 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 2006A series bonds is considered defeased, and the City has removed the liability from its accounts. The outstanding principal of the defeased bonds at June 30, 2015 is $8,565,000. General obligation bonds outstanding at June 30, 2015: Purpose Governmental activities Governmental activities - advance refunding Business-type activities Total general obligation bonds outstanding $ $ 71 Amount 40,649,658 8,270,000 1,440,999 50,360,657 72 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 Total $ Govermental Activities Principal Interest 5,102,348 1,596,592 5,441,644 1,613,152 4,886,164 1,642,375 4,920,912 978,291 5,030,894 814,420 16,032,696 2,267,778 5,370,000 845,375 2,135,000 220,100 48,919,658 $ 9,978,083 $ Business-type Activities Principal Interest 65,637 43,710 67,675 41,641 69,775 39,508 71,941 37,308 74,174 35,041 406,871 138,645 474,061 70,412 210,865 6,595 1,440,999 $ 412,860 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, 2015 was $86,318,547 and $41,003,761 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 October 30, 2014, $1,655,000 of Aspen Place at the Sawmill Improvement District bonds were defeased as related to the early pay off of debt by the developer. 73 Special assessment bonds payable at June 30, 2015 consist of the following individual issues: Annual debt service requirements to maturity for special assessment bonds are as follows: 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. 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. 74 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. Revenue bonds outstanding at June 30, 2015: Purpose Governmental activities $ Governmental activities - partial advance refunding Business-type activities Total revenue bonds outstanding $ Amount 2,840,000 11,835,000 3,284,743 17,959,743 Revenue bonds at June 30, 2015 consist of the following individual issues: 75 Annual debt service requirements to maturity for revenue bonds are as follows: 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 corporation bonds are comprised of the following issues: Annual debt service requirements to maturity for municipal facility debt are as follows: 76 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, 2015: Purpose Governmental activities $ Amount 2,670,000 Certificates of participation are comprised of the following issues: Annual debt service requirements to maturity for certificates of participation debt are as follows: 77 The following is a summary of debt service requirements, including interest requirements, to maturity for longterm debt at June 30, 2015: Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 General Obligation Bonds 6,808,287 7,164,112 6,637,822 6,008,452 5,954,529 5,749,133 4,262,308 3,986,992 3,302,659 1,544,899 1,546,558 1,543,553 1,541,021 1,546,914 581,803 2031 581,255 2033 469,700 2032 2034 2035 Less interest 580,105 472,300 469,200 (10,390,943) $ 50,360,657 Municipal Special Assessment Bonds 595,250 597,250 598,500 594,000 594,000 593,250 586,750 594,750 596,500 592,250 592,250 596,250 594,000 595,750 591,250 595,750 603,750 Facility Revenue Corporation Bonds 2,949,863 2,947,810 2,938,780 2,926,578 - 244,913 - 246,250 - 246,769 246,825 - 246,418 583,313 - - - - - - - Total 11,390,945 11,745,294 10,754,196 10,124,544 10,070,856 9,268,961 5,569,919 5,300,203 4,144,690 2,385,030 2,383,721 2,386,053 2,381,790 2,389,489 - - 1,419,471 - - - 1,183,855 - - 245,549 - - (3,406,500) 586,500 - 247,881 586,670 585,673 - - 245,531 Participation 582,900 - 720,861 718,462 of - - 2,935,826 - $ 6,705,000 450,875 450,450 2,934,974 - - Bonds Cetificates (3,083,547) $17,959,743 - - $ (41,325) 860,000 - - - - (255,055) $ 2,670,000 1,422,554 469,700 472,300 469,200 (17,177,370) $ 78,555,400 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, 2015, $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, 2015 $.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, 2015 $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 Loan payables at June 30, 2015 consist of the following individual financing options: 79 Annual debt service requirements to maturity for loan payables are as follows: Year Ending June 30 2016 2017 2018 2019 2020 2021-2025 2026-2030 Total $ $ Business-type Activities Principal Interest 2,031,607 $ 1,083,938 2,078,489 1,020,593 2,120,175 947,773 2,195,836 873,001 2,273,638 795,562 12,590,632 2,719,196 8,618,620 549,595 31,908,999 $ 7,989,658 Obligations under Capital Leases The capital lease agreement for renewable energy solar equipment related to governmental activities has assets of $967,169. Capital lease agreements related to business-type activities consist of the construction of a co- generator at the Wildcat Wastewater Treatment Plant, $1,014,527, construction of airport hangars, $489,382, renewable energy solar equipment, $1,709,103. 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 June 30, 2015 2016 2017 2018 Governmental Activities $ 84,778 85,324 85,894 2019 2020 2021-2025 86,487 87,102 441,683 2026-2029 Business Type Activities $ 644,507 645,550 395,680 396,810 397,985 1,885,837 268,300 Total future minimum lease payments Less: imputed interest costs Present value of future minimum lease payments $ 80 1,139,569 (193,020) 946,550 512,086 $ 4,878,455 (906,859) 3,971,596 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 1992-2015. 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, 2015, $35,115,210 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, 2015, net revenue available for service of this debt was $8,107,874. The debt principal, interest and fees paid in fiscal year 2015 equal $3,069,927 (37.86% 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, 2015, $11,835,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2015, net revenues available for service of the debt were $30,348,121. The debt principal and interest paid in fiscal year 2015 was $1,164,750 (3.84% 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. 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, 2015 $860,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2015, net revenues available for service of this debt were $13,543,397. The debt principal and interest paid in fiscal year 2015 was $450,350 (3.33% 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, 2015, $2,840,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2015, net revenues available for the service of this debt were $12,129,085. The debt principal and interest paid in fiscal year 2015 was $249,563 (2.06% 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, 2015 was as follows: 82 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, 2015 have potential exposure to the City of approximately $277,820 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 2012-13 Beginning of Year Liability $ 261,114 Current Year Claims and Changes in Estimates $ 198,203 End of Year Liability Claim Payments $ 145,243 $ 314,074 2013-14 314,074 127,779 222,158 219,695 2014-15 219,695 194,064 135,939 277,820 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, 2015: 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 plans are component units of the State of Arizona. 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 and 2.1. 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 benefit (OPEB) 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 seven-member board, known as The Board of Trustees, and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The 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 benefit (OPEB) plan that covers elected officials and judges of certain state and local governments who were members of the plan on December 31, 2013. This plan was closed to new members as of January 1, 2014. The EORP is governed by Board of Trustees of the PSPRS according to the provisions of A.S.R. Title 38, Chapter 5, and Article 3. 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 3300 N. Central Ave. 3010 E. Camelback Rd., Suite 200 P.O. Box 33910 Phoenix, AZ 85016-4416 Phoenix, AZ 85067-3910 (602) 240-2200/(800) 621-3778 (602) 255-5575 www.azasrs.gov www.psprs.com At June 30, 2015, the City reported the following aggregate amounts related to pensions for all plans to which it contributes: Statement of Net Position and Statement of Activities as of June 30, 2015 The City reported accrued employee benefits of $9,416 for governmental activities and $7,602 for business-type activities as related to outstanding pension contribution amounts payable to all pension plans for the year ended June 30, 2015. ASRS Funding Policy - The Arizona State Legislature establishes and may amend active plan members' and the City's contribution rates. Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefits terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and served credit as follows: 85 Initia l Me mb e rship Da te : Years of service and age required to receive benefit On or a fte r J uly 1 , 2 0 1 1 Be fore J uly 1 , 2 0 1 1 Sum of years and age equals 80 30 years age 55 10 years age 62 25 years age 60 5 years age 50* 10 years age 62 any years age 65 5 years age 50* any years age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic costof-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a members’ death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the members’ account balance that includes the members’ contribution and employer’s contributions, plus interest earned. Contributions - For the year ended June 30, 2015, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.6% (11.48% retirement and 0.12% long-term disability) of the members' annual covered payroll and the City was required by statute to contribute at the actuarially determined rate of 11.6% (10.89% retirement, .59% for health insurance premium, and 0.12% long-term disability) of the active members’ annual covered payroll. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.57% (9.51% for retirement and .06% for long-term disability) of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the ASRS. The City's contributions to ASRS for the years ended June 30, 2015, 2014, and 2013 were $3,229,757, $3,074,097, and $2,999,221 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: 6/30/2015 6/30/2014 6/30/2013 Retirement $ 3,002,707 2,837,013 2,759,607 Health Benefit $ 161,281 173,151 174,999 Long-term Disability $ 65,769 63,933 64,615 During fiscal year 2015, the City paid for ASRS pension and related OPEB contributions (health benefit ) 74.5% from governmental funds and 25.5% from enterprise funds. Pension Liability At June 30, 2015, the City reported a liability of $44,778,290 for its proportionate share of the ASRS net pension liability. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2013, to the measurement date of June 30, 2014. 86 The City’s reported liability at June 30, 2015 decreased by $4,310,049 from the City’s prior year liability of $49,088,339 due to changes in the ASRS net pension liability and the City’s proportionate share of that liability. The ASRS publicly available financial report provided details on the change in the net pension liability. The City’s proportion of the net pension liability was based on the actuarially determined amount provided by the system. The City’s proportion measured as June 30, 2014, was .3026%, which was an increase of .0073% from its proportion measured as of June 30, 2013, 0.2953%. Pension Expense and Deferred Outflows – Inflows of Resources For the year ended June 30, 2015, the City recognized pension expense of $3,315,371. At June 30, 2015, the city reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources: The $3,187,991 reported as deferred outflows of resources related to ASRS pensions resulting from city contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year ending June 30, 2016 2017 $ 2018 (885,025) (978,871) 2019 2020 Thereafter (885,025) (1,957,586) $ - (4,706,507) 87 Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial assumptions used in the June 30, 2013, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Arithmetic Target Real Rates Asset Class Equity Allocation 63% of Return 7.03% Real etate Commodities 8% 4% 4.75% 4.50% Fixed income Total 25% 100% 3.20% Discount Rate The discount rate used to measure the ASRS pension liability was 8 percent, which is less than the long-term expected rate of return of 8.79 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates as determined by the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payment to determine the total pension liability. Sensitivity of the City’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate The following table presents the City’s proportionate shares of the net pension liability calculated using the discount rate of 8 percent, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower current rate: 88 or 1 percentage point higher than the Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. PSPRS Benefits provided – The PSPRS provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute established benefits terms. Retirement disability and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earnings. PSPRS also provides temporary disability benefits of 50 percent of the members’ compensation for up to 12 months. 89 Employees covered by Benefit Terms At June 30, 2015, the following employees were covered by the agent pension plans’ benefit terms: Contributions and Annual OPEB Cost State statutes establish the pension contrition requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. 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). 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. In addition, the City was required by statute to contribute at the actuarially determined rate of 19.65 percent for the PSPRS of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the PSPRS. During fiscal year 2015, the City paid for PSPRS pension and OPEB contributions for police with 100% general fund dollars and 96.4% from the general fund plus 3.6% from the airport fund as related to fire contributions. Pension Liability At June 30, 2015, the City reported net pension liability of $37,704,111 and $41,767,780 for police and fire respectively. The net pension liabilities were measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 90 Pension Actuarial Assumptions Actuarial assumptions used in the June 30, 2014, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.85 percent using a building-block method in which best-estimated ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: The projection of cash flows used to determine the discount rates assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the actuarially determined contribution rate and the member rate. Based on those assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 91 Changes in the Net Pension Liability 92 Sensitivity of the City’s Net Pension Liability to Changes in the Discount Rate The following table presents the City’s net pension liabilities calculated using the discount rates noted above as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: Pension Plan Fiduciary Net Position Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS financial reports. Pension Expense For the year ended June 30, 2015, the City recognized $5,281,633 and $5,332,229 pension expense related to police and fire, respectively. 93 Pension Deferred Outflows/Inflows of Resources At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: The amounts reported as deferred outflows of resources related to pensions resulting from city contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows or resources related to pensions will be recognized in pension expense as follows: Agent Plan OPEB Trend Information The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and 2 preceding years: 94 Agent Plan OPEB Actuarial Assumptions Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plans as understood by the City and plans’ members and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between the City and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for all PSPRS plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2015 contribution requirements are as follow: PSPRS OPEB Contribution Requirements 95 Agent Plan OPEB Funded Status The following table presents the funded status of the health insurance premium benefit plans as of the most recent valuation date, June 30, 2015. EORP Benefits Provided The EORP provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average yearly compensation, and service credit as follows: Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. 96 Contributions State statutes establish active member and employer contribution requirements. Statute also appropriates $5 million annually through fiscal year 2043 for the EORP from the State of Arizona to supplement the normal cost plus an amount to amortize the unfunded accrued liability. For the year ended June 30, 2015, active EORP members were required by statute to contribute 13.00% of the members’ annual covered payroll. And the City was required contribute a designated portion of certain court fees and 25.06 percent (23.50% for retirement and 1.56% for health insurance premium benefit) of active EORP members’ annual covered payroll. In addition, the City was required to contribute the actuarially determined rate of 12.02% for members who meet certain criteria. The City’s contribution to the pension plan for the year ended June 30, 2015, and 2 preceding years for OPEB, all of which were equal to the required contributions, were as follows. Pension Liability At June 30, 2015, the City reported a liability for its proportionate share of the EORP’s net pension liability that reflected a reduction for the City’s proportionate share of the State’s appropriation for EORP. The amount the city recognized as its proportionate liability that was associated with the City was as follows: The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City reported a liability at June 30, 2015, which increased by $926,273 from the City’s prior year liability of $750,330 due to changes in the EORP’s net pension liability and the City’s proportionate share of the liability. The EORP’s publicly available financial report provides details on the change in the net pension liability. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2015, the City recognized pension expense for the EORP of $649,339 and revenue of $152,374 for the City’s proportionate share of the State’s appropriation to EORP. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions form the following sources: 97 The $40,950 reported as deferred outflows of resources related to EORP pensions resulting from city contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to EORP pensions will be recognized in pension expense as follows: 98 Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: The long-term expected rate of return on EORP pension plan investments was determined to be 7.85 percent using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimated of geometric real rates of return for each major asset call are summarized in the following table: 99 Discount Rate The discount rate used to measure the EORP total pension liability was 5.67 percent. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate, employer contributions will be made at the statutorily set rates, and state contributions will be made as currently required by statute. Based on those assumptions, the pension plans’ fiduciary net position was projected to be insufficient to make all project future benefit payments of current plan member. Therefore, to determine the total pension liability for the plan, the long-term expected rate of return on pension plan investments of 7.85 percent was applied to period of projected benefit payments through the year ended June 30, 2030. A municipal bond rate of 4.29 percent obtained from the 20-year Bond Buyer Index, as published by the Federal Reserve as of June 26, 2014, was applied to period of projected benefit payments after June 30, 2030. Sensitivity of the City’s Proportionate Share of the EORP Net Pension Liability to Changes in the Discount Rate The following table presents the city’s proportionate share of the net pension liability calculated using the discount rate of 5.67 percent, as well as what the city’s proportionate share to the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate. Pension Plan Fiduciary Net Position Detailed information about the pension plans’ fiduciary net position is available in the separately issued EORP financial report. 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, 2015, there were 85 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. 100 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 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 contributed $182,941 during fiscal year 2015. Annual OPEB Cost and Net OPEB Obligation. For 2015, the City’s annual OPEB cost (expense) of $972,644 was equal to the ARC, as adjusted by any ARC adjustments, and interest on the net OPEB obligation of $204,008. On June 30, 2015, the net increase in NOO for governmental activities was $639,962 and for business-type activities was $149,741. 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 2015 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 $33,304,177, and the ratio of the unfunded actuarial accrued liability to the covered payroll is 29.7 percent. Following is a table of the last three years funding progress as available, inclusive of Housing Authority unless noted. 101 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 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 $7,895,618 as of June 30, 2015, which is based on 75.90 percent usage of the landfill. The remaining $2,506,150 will be accrued over the remaining life of the landfill, which is currently estimated to be 11 years. The accrual for the closure and postclosure care costs for fiscal year 2015 is $246,316. 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, 2015 the balance of the investments held for those purposes is $10,099,227. 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, $10,401,769, 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, 2015. 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. 102 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. 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 August 28, 2015 the City redeemed $4,400,000 of its’ Aspen Place at the Sawmill Improvement District Bonds as part of a refunding defeasance related to the early pay off of debt by the developer. 103 CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the City's Proportionate Share of the Net Pension Liability Cost-Sharing Pension Plans June 30, 2015 Measurement Date 2014 * 2013 through 2005 Arizona State Retirement System Proportion of the net pension liability 0.302625% Proportionate share of the net pension liability $ Covered employee payroll Proportionate share of the net pension liability as a percentage of its coveredemployee payroll Information 44,778,290 not 26,638,622 available 168.09% Plan fiduciary net position as a percentage of the total pension liability - 69.49% EORP Proportion of the net pension liability 0.2500258% Proportionate share of the net pension liability $ Covered employee payroll 1,676,603 204,400 Proportionate share of the net pension liability as a percentage of its coveredemployee payroll Plan fiduciary net position as a percentage of the total pension liability 1064.00% 31.91% * Measurment date is one year prior to reporting date and is the latest information available at the time of report issuance 104 Information not available CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the Changes in Net Pension Liability and Related Ratios Agent Pension Plans - PSPRS Police June 30, 2015 Reporting Fiscal Year (Measurement Date) 2014 * PSPRS Police Total pension liability Service cost Interest on the total pension liability Changes of benefit terms differences between expected and actual experience in the measurement of the pension liability changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Other changes $ $ $ 1,312,430 3,904,338 1,353,950 Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) $ Net pension liability - ending (a) - (b) $ 37,704,111 Net pension liability as a percentage of covered employee payroll Information not available (671,478) 6,987,647 (3,311,491) 9,575,396 50,736,319 60,311,715 2,311,119 768,029 2,757,888 (3,311,491) (1,371,053) 1,154,492 21,453,112 22,607,604 Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll $ 2013 through 2005 37.48% 6,409,245 588.28% * Measurment date is one year prior to reporting date and is the latest information available at the time of report issuance 105 CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the Changes in Net Pension Liability and Related Ratios Agent Pension Plans - PSPRS Fire June 30, 2015 Reporting Fiscal Year (Measurement Date) 2014 * PSPRS Fire Total pension liability Service cost Interest on the total pension liability Changes of benefit terms differences between expected and actual experience in the measurement of the pension liability changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Other changes $ $ Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) $ Net pension liability - ending (a) - (b) $ 41,767,780 $ Information not available 1,431,974 7,269,797 (3,994,598) 11,602,288 57,455,404 69,057,692 2,030,211 525,878 3,407,667 (3,994,598) (1,831,071) 138,087 27,151,825 27,289,912 Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll Net pension liability as a percentage of covered employee payroll $ 950,445 4,390,766 1,553,904 2014 through 2006 39.52% 3,965,628 1053.25% * Measurment date is one year prior to reporting date and is the latest information available at the time of report issuance 106 CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the City's Pension Contributions June 30, 2015 Reporting Fiscal Year 2015 2014 2013 through 2006 Arizona State Retirement System Statutorily required contributions $ Contributions in relation to the statutorily required contribution Contribution deficiency (excess) 3,002,707 $ 3,002,707 $ Covered-employee payroll - $ 27,573,067 Contributions as a percentage of covered-employee payroll 2,837,013 2,837,013 - Information not available 26,638,622 10.89% 10.65% Elected Officials Retirement Plan Statutorily required contributions $ Contributions in relation to the statutorily required contribution Contribution deficiency (excess) 37,483 $ 37,483 $ Covered-employee payroll - $ 157,579 Contributions as a percentage of covered-employee payroll 50,732 Information 50,732 not - available 204,400 23.79% 24.82% PSPRS - Police Statutorily required contributions $ Contributions in relation to the statutorily required contribution Contribution deficiency (excess) 2,625,199 $ 2,625,199 $ Covered-employee payroll - $ 7,485,806 Contributions as a percentage of covered-employee payroll 2,106,719 2,106,719 - Information not available 6,409,245 35.07% 32.87% PSPRS - Fire Statutorily required contributions $ Contributions in relation to the statutorily required contribution Contribution deficiency (excess) 2,268,517 $ 2,268,517 $ Covered-employee payroll 4,825,600 Contributions as a percentage of covered-employee payroll 47.01% 107 1,784,136 1,784,136 $ 3,965,628 44.99% Information not available 108 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. Capital Projects Funds 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. 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. 109 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2015 Special Revenue Funds Library Fund Community Redevelopment Fund BBB Fund Metropolitan Planning Organization Fund ASSETS Cash and investments $ 1,983,125 Accounts receivable, net $ 8,580,144 $ 957,285 $ 780 - 945,863 450 - 7,219 17,934 1,549 - Intergovernmental receivable - 10,000 137,835 327,943 Inventory - 55,735 - - Interest receivable Restricted cash and investments Total assets 2,230,795 974,714 $ 4,221,139 $ 10,584,390 $ 1,097,119 $ 328,723 - $ $ $ 46,322 $ 37,588 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 682,495 469,981 66,910 28,772 1,851 5,931 - - - 210,000 60,131 16,234 30 25,000 809,536 514,987 48,203 278,519 Perpetual care - - - - Inventory - 55,735 - - 1,180,808 - - - Interfund payable Advanced revenue Total liabilities Fund balances: Nonspendable: Restricted for: Library services Library branch services 1,067,573 - - - Library programs board directed 1,163,222 - - - Debt service - - - - Public art - 511,124 - - Park renovations - 2,430,030 - - Park maintenance and operations - 1,539,989 - - Other capital projects - 5,532,525 1,048,916 - Regional planning - - - 50,204 Perpetual care - - - - - - - - 3,411,603 10,069,403 1,048,916 50,204 $ 4,221,139 $ 10,584,390 Unassigned (deficit): Total fund balances Total liabilities and fund balances 110 $ 1,097,119 $ 328,723 Capital Projects Debt Service Funds - $ Permanent Fund Capital Projects Bond Construction Secondary Property Tax Revenue Fund General Obligation Bond Fund $ Funds 14,069,071 $ 39,851 Total Other Governmental Funds Perpetual Care $ 16,874 $ 25,647,130 - - - 132 946,445 - 21,689 198 476 49,065 - - 1,746,391 - 2,222,169 - - - - 55,735 - - 1,951,152 240,938 5,397,599 $ - $ 14,090,760 $ 3,737,592 $ 258,420 $ 34,318,143 $ - $ - $ 1,104,437 $ - $ 2,340,823 - - 5,333 - 108,797 - - 2,910,000 - 3,120,000 - - - - 101,395 - - 4,019,770 - 5,671,015 - - - 237,503 237,503 - - - - 55,735 - - - - 1,180,808 - - - - 1,067,573 - - - - 1,163,222 - 14,090,760 - - 14,090,760 - - - - 511,124 - - - - 2,430,030 - - - - - - - - - - - $ - 14,090,760 1,539,989 6,581,441 - - 50,204 - 20,917 (282,178) 14,090,760 $ - (282,178) $ 3,737,592 111 20,917 - (282,178) 258,420 $ 258,420 28,647,128 $ 34,318,143 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2015 Special Revenue Funds Library Fund Metropolitan Planning Organization Fund Community Redevelopment Fund BBB Fund REVENUES: Taxes $ Intergovernmental - $ 7,022,545 $ - $ - 2,969,669 - - 5,000 44,818 48,270 593,462 488,027 - Grants and entitlements Rents - 49,393 7,920 Investment earnings 34,925 77,386 8,047 - Contributions 49,099 812 33,000 100 Miscellaneous 51,149 156,621 131,869 - 3,149,660 7,355,027 774,298 493,127 General government - - - - Public works - - - - Economic and physical development - 2,526,617 786,670 510,800 4,568,699 710,499 - - - 97,370 - - - 125,000 - - Total revenues EXPENDITURES: Current: Culture and recreation Highways and streets Debt service: Principal retirement Interest and other charges - 127,303 - - 338,685 652,035 - - 4,907,384 4,238,824 786,670 510,800 (1,757,724) 3,116,203 Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures (12,372) (17,673) OTHER FINANCING SOURCES (USES): Transfers in 1,663,951 Transfers out Total other financing sources (uses) 1,624,755 Net change in fund balances (132,969) Fund balances, beginning of year Fund balances, end of year 624,030 (39,196) 3,544,572 $ 3,411,603 112 102,000 (130,000) - (1,902,077) (28,000) 22,500 1,214,126 (40,372) 4,827 8,855,277 $ 22,500 (2,526,107) 10,069,403 1,089,288 $ 1,048,916 45,377 $ 50,204 Capital Projects Funds Debt Service Funds General Obligation Bond Fund $ Secondary Property Tax Revenue Fund - 5,585,943 Capital Projects Bond Construction $ - Total Other Governmental Funds Perpetual Care $ - $ 12,608,488 - - - - 2,974,669 - - 4,035,158 - 5,209,735 - - - - 57,313 - 98,275 6,828 2,233 227,694 - - - 16,821 99,832 - - - - 339,639 - 5,684,218 4,041,986 19,054 21,517,370 - - 351,144 - 351,144 - - 134,926 - 134,926 - - - - 3,824,087 - - - - 5,279,198 - - 247 - 97,617 4,420,973 - - - 4,545,973 1,430,703 - 161,997 - 1,720,003 - - 8,897,156 - 9,887,876 5,851,676 - 9,545,470 - 25,840,824 (5,851,676) 5,851,676 $ $ Permanent Fund 5,684,218 (5,503,484) 427,224 19,054 - 9,967,277 - (5,842,916) (575,634) - (9,113,853) 5,851,676 (5,415,692) 700,262 - - 268,526 - 13,822,234 - $ 14,090,760 1,275,896 (4,323,454) (4,803,222) 19,054 4,521,044 $ (282,178) 113 853,424 (3,470,030) 239,366 $ 258,420 32,117,158 $ 28,647,128 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. 114 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Net Position Non-Major Proprietary Fund June 30, 2015 Business-type Activities - Enterprise Fund ASSETS Current assets: Cash and investments Receivable, net Intergovernmental receivables Prepaid items Total current assets Noncurrent assets: Capital assets, non-depreciable Capital assets, depreciable, net Total non-current assets Total assets Housing Authority $ Deferred outflows - pension Total assets and deferred outflows 697,942 358,002 89,852 59,636 1,205,432 Total Other Proprietary Fund $ 697,942 358,002 89,852 59,636 1,205,432 1,661,278 3,181,439 4,842,717 6,048,149 1,661,278 3,181,439 4,842,717 6,048,149 235,751 6,283,900 235,751 6,283,900 LIABILITIES Current liabilities: Accounts payable Accrued payroll Accrued compensated absences Advanced revenue Deposits payable Total current liabilities Noncurrent liabilities: Compensated absences Net OPEB obligation Net pension liability Total noncurrent liabilities Total liabilities 110,291 38,348 66,411 12,301 73,400 300,751 110,291 38,348 66,411 12,301 73,400 300,751 167,197 104,773 1,946,956 2,218,926 2,519,677 167,197 104,773 1,946,956 2,218,926 2,519,677 Deferred inflows - pension Total liabilities and deferred inflows 453,382 2,973,059 453,382 2,973,059 4,842,717 (1,531,876) 3,310,841 4,842,717 (1,531,876) 3,310,841 NET POSITION Net investment in capital assets Unrestricted (deficit) Total net position $ 115 $ CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Non-Major Proprietary Fund Year Ended June 30, 2015 Business-type Activities - Enterprise Fund Housing Authority OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ Personnel services Contractual services, materials and supplies Depreciation and amortization Total operating expenses 1,027,945 430,551 1,458,496 Total Other Proprietary Fund $ 1,027,945 430,551 1,458,496 1,285,543 4,391,064 407,412 6,084,019 1,285,543 4,391,064 407,412 6,084,019 (4,625,523) (4,625,523) 4,259,652 504,249 4,763,901 4,259,652 504,249 4,763,901 Income (loss) before capital contributions and transfers 138,378 138,378 Capital contributions related to grants Transfers in Change in net position 35,946 33,200 207,524 35,946 33,200 207,524 3,103,317 3,103,317 Operating income (loss) NON-OPERATING REVENUES (EXPENSES): Grants and entitlements Gain (loss) on disposal of capital asset Total non-operating revenues (expenses) Total net position, beginning of year Total net position, end of year $ 3,310,841 116 $ 3,310,841 City of Flagstaff, Arizona Combining Statement of Cash Flows Non-Major Proprietary Fund Year Ended June 30, 2015 Business-type Activities - Enterprise Fund Total Other Housing Authority Proprietary Fund Cash flows from operating activities: Receipts from customers Other receipts Payments to suppliers Interfund services used Payments to employees Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Transfer from other funds Net cash provided (used) by noncapital financing activities 946,795 398,780 (4,171,238) (250,846) (1,299,077) (4,375,586) $ 33,200 33,200 Cash flows from capital and related financing activities: Receipts from grantors Acquisition and construction of capital assets Proceeds from insurance reimbursement Net cash provided (used) by capital and related financing 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 $ 33,200 33,200 4,205,746 (238,768) 254,705 4,205,746 (238,768) 254,705 4,221,683 4,221,683 (120,703) 818,645 697,942 $ 697,942 697,942 $ $ (continued) 117 946,795 398,780 (4,171,238) (250,846) (1,299,077) (4,375,586) (120,703) 818,645 697,942 697,942 697,942 Combining Statement of Cash Flows Non-Major Proprietary Fund Year Ended June 30, 2015 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) $ (4,625,523) $ (4,625,523) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 407,412 407,412 (Increase) decrease in assets: - Accounts receivable (61,341) (61,341) Prepaid items (25,885) (25,885) (5,135) (5,135) Increase (decrease) in liabilities: - Accounts payable Accrued payroll, compensated absences 12,509 OPEB 31,733 31,733 (57,776) (57,776) Pension expense (contribution) Deposits payable 68,229 Advanced revenue Total adjustments Net cash provided (used) by operating activities 12,509 $ 68,229 (119,809) (119,809) 249,937 249,937 (4,375,586) $ (4,375,586) 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) 118 - 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 120 122 Budgetary Comparison Schedules - Other Major Governmental Funds Special Assessment Bond Fund 123 Budgetary Comparison Schedules - Non-Major Governmental Funds Library Fund BBB Fund Community Redevelopment Fund EDA Revolving Loan Fund 124 General Obligation Bond Fund Secondary Property Tax Revenue Fund 129 130 125 126 127 128 Metropolitan Planning Organization Fund Capital Projects Bond Construction 131 Financial Data Submission Schedules Net Position Accounts 132 Revenue, Expenses, and Changes in Fund Net Position Accounts 134 Revenue, Expenses, and Changes in Fund Net Position AccountsPublic Housing-Consolidated 137 119 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2015 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 3,811,946 3,936,510 90,547 81,783 24,382,673 32,541,753 $ 64,845,212 $ 64,845,212 120 $ 13,514,271 27,044,960 5,343,042 7,541,573 22,281,151 102,309 Improvements $ 2,975,159 113,946 221,973 95,128 15,673,512 2,279,434 75,827,306 21,359,152 (21,411,268) (14,736,642) 54,416,038 $ 6,622,510 Machinery and Equipment $ 1,185,450 15,809,769 1,358,935 778,090 3,699,343 8,913,893 Construction In Progress $ 31,745,480 9,346,917 251,570 498,438 6,828,149 1,048,548 5,183,382 $ 13,810,087 (22,398,563) $ Infrastructure $ 13,810,087 121 $ 1,117,226 652,947 9,698,938 290,197,103 Total $ 21,738,396 47,403,623 8,131,723 15,977,670 76,784,165 339,217,875 301,666,214 509,253,452 (145,604,187) (204,150,660) 156,062,028 $ 305,102,792 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2015 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total Balance July 1, 2014 Additions Retirements Transfers In (out) Balance June 30, 2015 21,143,949 47,885,281 8,035,444 9,670,910 74,224,450 340,556,955 1,230,316 639,359 6,409,364 2,668,380 7,821,139 (630,470) (979,869) (51,731) (125,868) (65,777) (6,798,543) (5,400) (141,148) 148,010 23,264 (42,886) (2,361,677) 21,738,396 47,403,623 8,131,723 15,977,670 76,784,165 339,217,875 501,516,989 18,768,557 (8,652,257) (2,379,837) 509,253,452 122 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis Variance with Final Budget REVENUES: Special assessments $ Investment earnings 735,250 $ 735,250 $ 2,222,075 $ 1,486,825 1,830 1,830 2,025 195 737,080 737,080 2,224,100 1,487,020 Principal retirement 305,000 305,000 1,900,000 (1,595,000) Interest and other charges 435,850 435,850 416,978 Total expenditures 740,850 740,850 2,316,978 Total revenues EXPENDITURES: Debt service: 18,872 (1,576,128) Excess (deficiency) of revenues over (under) expenditures (3,770) (3,770) (92,878) (89,108) Net change in fund balances (3,770) (3,770) (92,878) (89,108) Budgetary fund balances, beginning of year Budgetary fund balances, end of year 236,375 $ 236,375 232,605 $ 123 232,605 236,375 $ 143,497 $ (89,108) CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis 3,595,743 $ Variance with Final Budget REVENUES: Intergovernmental $ 3,595,743 $ 2,969,669 $ (626,074) Grants and entitlements 79,000 79,000 44,819 (34,181) Investment earnings 37,624 37,624 34,925 (2,699) Contributions 33,000 33,000 49,099 Miscellaneous 1,926,291 1,926,291 51,148 (1,875,143) 5,671,658 5,671,658 3,149,660 (2,521,998) 7,520,320 7,520,320 4,907,384 2,612,936 Total revenues 16,099 EXPENDITURES: Current: Culture and recreation Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 100,000 100,000 - 100,000 7,620,320 7,620,320 4,907,384 2,712,936 (1,948,662) (1,948,662) (1,757,724) 1,663,951 1,663,951 1,663,951 190,938 OTHER FINANCING SOURCES (USES): Transfers in Transfers out (289,196) Total other financing sources (uses) 1,374,755 Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year (289,196) $ 1,374,755 (573,907) (132,969) 873,900 873,900 873,900 $ 124 299,993 250,000 1,624,755 (573,907) 299,993 - (39,196) $ 740,931 250,000 440,938 $ 440,938 CITY OF FLAGSTAFF, ARIZONA BBB Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis 6,167,976 $ Variance with Final Budget REVENUES: Taxes $ Grants and entitlements Rents Investment earnings Miscellaneous Total revenues 6,167,976 $ 6,982,052 $ 814,076 35,000 35,000 48,270 13,270 110,058 110,058 49,393 (60,665) 42,395 42,395 77,386 34,991 139,130 139,130 156,622 17,492 6,494,559 6,494,559 7,313,723 819,164 2,591,088 2,591,088 2,526,618 64,470 561,946 561,946 582,282 (20,336) - - 24,959 (24,959) 125,000 125,000 125,000 EXPENDITURES: Current: Economic and physical development Culture and recreation Highways and streets Debt service: Principal retirement Interest and other charges Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures - 211,918 211,918 127,303 84,615 5,891,573 5,891,573 852,662 5,038,911 240,070 240,070 - 240,070 9,621,595 9,621,595 4,238,824 5,382,771 (3,127,036) (3,127,036) 3,074,899 6,201,935 OTHER FINANCING SOURCES (USES): Transfers in 251,000 Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 251,000 251,000 - (2,591,493) (2,591,493) (2,153,078) 438,415 (2,340,493) (2,340,493) (1,902,078) 438,415 (5,467,529) (5,467,529) 1,172,821 6,640,350 7,527,691 7,527,691 7,527,691 - 2,060,162 $ Adjustment from budgetary basis to GAAP basis net change in fund balances 2,060,162 $ 8,700,512 $ 1,172,821 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 41,305 Adjusted net change in fund balance - GAAP basis $ 125 1,214,126 $ 6,640,350 CITY OF FLAGSTAFF, ARIZONA Community Redevelopment Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis 1,995,202 $ Variance with Final Budget REVENUES: Grants and entitlements $ Investment earnings 1,995,202 $ - 593,462 $ (1,401,740) - 8,047 650,000 650,000 139,789 (510,211) 2,645,202 2,645,202 741,298 (1,903,904) Economic and physical development 2,823,031 2,823,031 786,670 2,036,361 Total expenditures 2,823,031 2,823,031 786,670 2,036,361 Miscellaneous Total revenues 8,047 EXPENDITURES: Current: Excess (deficiency) of revenues over (under) expenditures (177,829) (177,829) (45,372) 132,457 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 - (102,000) (152,500) (152,500) (130,000) (152,500) (152,500) (28,000) (79,500) (330,329) (330,329) (73,372) 52,957 1,088,854 $ 102,000 1,088,854 758,525 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 758,525 1,088,854 $ $ 1,015,482 (73,372) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 33,000 Adjusted net change in fund balance - GAAP basis $ 126 22,500 (40,372) $ 52,957 CITY OF FLAGSTAFF, ARIZONA EDA Revolving Loan Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis Variance with Final Budget REVENUES: Investment earnings $ Total revenues 2,201 $ 2,201 $ - $ (2,201) 2,201 2,201 - (2,201) Economic and physical development 220,000 220,000 - 220,000 Total expenditures 220,000 220,000 - 220,000 Excess (deficiency) of revenues over (under) expenditures (217,799) (217,799) - 217,799 Net change in fund balances (217,799) (217,799) - 217,799 220,071 220,071 220,071 - EXPENDITURES: Current: Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 2,272 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 2,272 $ $ 220,071 - The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. - Adjusted net change in fund balance - GAAP basis $ 127 - $ 217,799 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis 1,147,579 $ Variance with Final Budget REVENUES: Grants and entitlements $ Intergovernmental Total revenues 1,147,579 $ 488,027 $ (659,552) 5,000 5,000 5,000 1,152,579 1,152,579 493,027 (659,552) - 925,079 925,079 510,800 414,279 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 250,000 250,000 - 250,000 1,175,079 1,175,079 510,800 664,279 (22,500) (22,500) (17,773) 4,727 22,500 22,500 22,500 - 22,500 22,500 22,500 - Net change in fund balances - - 4,727 4,727 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 - $ 4,727 $ 4,727 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 100 Adjusted net change in fund balance - GAAP basis $ 128 4,827 $ 4,727 CITY OF FLAGSTAFF, ARIZONA General Obligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original Final Actual Amounts Budgetary Basis 4,838,474 $ Variance with Final Budget EXPENDITURES: Debt service: Principal retirement $ 4,838,474 $ 4,420,973 $ 417,501 Interest and other charges 2,657,720 2,657,720 1,430,703 1,227,017 Total expenditures 7,496,194 7,496,194 5,851,676 1,644,518 (7,496,194) (7,496,194) (5,851,676) 1,644,518 7,496,194 7,496,194 5,851,676 (1,644,518) 7,496,194 7,496,194 5,851,676 (1,644,518) Net change in fund balances - - - - Budgetary fund balances, beginning of year - - - - Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Budgetary fund balances, end of year $ - $ 129 - $ - $ - 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, 2015 Budget Original Final Actual Amounts Budgetary Basis 5,611,045 $ Variance with Final Budget REVENUES: Taxes $ Investment earnings Total revenues 5,611,045 $ 5,585,943 $ (25,102) 61,800 61,800 98,275 36,475 5,672,845 5,672,845 5,684,218 11,373 - - 427,224 427,224 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 $ (7,496,194) (7,496,194) (5,842,916) 1,653,278 (7,496,194) (7,496,194) (5,415,692) 2,080,502 (1,823,349) (1,823,349) 7,384,991 7,384,991 5,561,642 $ 130 5,561,642 $ 268,526 2,091,875 7,384,991 - 7,653,517 $ 2,091,875 CITY OF FLAGSTAFF, ARIZONA Capital Projects Bond Construction Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2015 Budget Original REVENUES: Grants and entitlements $ Miscellaneous 4,394,303 $ 10,255,866 Investment earnings Total revenues Actual Amounts Budgetary Basis Final 4,394,303 $ 10,255,866 4,035,158 Variance with Final Budget $ - (359,145) (10,255,866) 1,880 1,880 6,828 4,948 14,652,049 14,652,049 4,041,986 (10,610,063) EXPENDITURES: Current: Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 47,203,426 47,203,426 9,545,470 37,657,956 47,203,426 47,203,426 9,545,470 37,657,956 (32,551,377) (32,551,377) (5,503,484) 27,047,893 23,662,500 23,662,500 - (23,662,500) 7,370,896 7,370,896 1,275,896 (6,095,000) - - 31,033,396 31,033,396 OTHER FINANCING SOURCES (USES): Bonds issued 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 $ (575,634) (1,517,981) (1,517,981) (4,803,222) 2,888,630 2,888,630 2,888,630 1,370,649 $ 131 1,370,649 (575,634) 700,262 $ (1,914,592) (30,333,134) (3,285,241) $ (3,285,241) CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2015 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Moderate Rehabilitation 14.856 Business Activities 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 $ 548,762 $ 82,087 $ - $ 12,560 $ - $ 643,409 - - - - - - 73,400 - - - - 73,400 622,162 34,127 4,098 249,544 27,980 $ 82,087 17,537 1,779 $ - 12,560 4,988 $ - - $ 716,809 56,652 33,200 - - 37,298 102,577 - - 353,900 28,188 208 - - - (672) (208) - - - (880) - - - - (27,304) - - - - - - - - - - - - - - - - - 315,077 19,316 (27,304) 108,473 4,988 - - - - - - - - - - - - - 54,901 1,587 3,148 447,854 59,636 - - - - - - - - - - - - - - - - 992,140 102,990 50,278 161,899 620 18,168 (50,898) (50,898) 1,224,299 Noncurrent Assets: Capital Assets: Land Buildings 1,446,035 - - - - 1,446,035 8,459,745 - - - - 8,459,745 - - - 930,725 - - - - 537,556 - - - - - - - Furniture, Equipment & Machinery - Dwellings 887,236 Furniture, Equipment & Machinery - Administration 537,556 Leasehold Improvements Accumulated Depreciation Construction in Progress Total Capital Assets, Net Notes receivable - Noncurrent Other Assets Total Non-Current Assets Deferred Outflow of Resources Total Assets and Deferred Outflow of Resources (6,703,096) 43,489 (43,489) (6,746,585) 215,243 - - - - 215,243 4,842,719 - - - - 4,842,719 - - - - - - - - - - - - - - 4,842,719 - - 235,750 4,842,719 159,991 28,656 47,103 5,994,850 131,646 209,002 (continued) 132 18,168 (50,898) - 6,302,768 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2015 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Moderate Rehabilitation 14.856 Elimination - - 18,866 - 75,007 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 Unearned Revenues 33,105 59,727 1,529 2,699 - - - - - - - - - - - - 3,984 - - - - - - - - 69,647 73,400 - - - - 73,400 12,301 - - - - 12,301 - - - - - - - - - - - - - - - - - - - - 40,535 9,718 620 25 (50,898) 288,715 14,621 61,640 5,538 (50,898) Accrued Pension and OPEB Liabilities Total Liabilities Deferred Inflow of Resources Net Position: Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Equity/Net Position Total Liabilities, Deferred Inflows of Resources and Equity/Net Position 319,616 - Long-term Debt, Net of Current - Operating Total Non-Current Liabilities - - Long-term Debt, Net of Current - Capital Accrued Compensated Absences 3,984 - Noncurrent Liabilities Non-current Liabilities - Other 66,411 69,647 Other Current Liabilities Total Current Liabilities 39,455 3,985 Current Portion of L-T Debt - Operating Inter Program - Due To 18,866 - Current Portion of L-T Debt - Capital Accrued Liabilities - Other 918 128,563 35,867 2,767 1,403,984 245,348 402,398 1,532,547 281,215 405,165 1,821,262 295,836 466,805 309,489 54,613 89,280 167,197 2,051,730 - - 5,538 (50,898) - - 2,218,927 2,538,543 453,382 - 4,842,719 - - 13,253 (978,620) 3,864,099 $ 5,994,850 $ - - - - - - 4,842,719 13,253 (232,056) (347,083) 12,630 - (1,545,129) (218,803) (347,083) 12,630 - 3,310,843 77,033 $ 119,722 (concluded) 133 $ 18,168 $ (50,898) $ 5,849,386 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2015 Housing Choice Vouchers 14.871 Public Housing 14.850 & 14.872 Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue $ 991,541 $ - Moderate Rehabilitation 14.856 Business Activities $ - $ - Elimination $ - Total $ 991,541 25,988 - - - - 25,988 1,017,529 - - - - 1,017,529 - 4,259,652 - - - - 35,946 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Mortgage Interest Income - - - - - - Proceeds -Disposition of Assets Held for Sale - - - - - - - - - - - - - - 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 Cost of Sale of Assets Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue 848,065 35,946 3,325,787 36,405 3,892 5,756 46,671 504,249 - - - 356,594 - 2,447,950 3,376,350 356,594 480,764 164,685 107,630 5,600 1,960 85,800 357 86,157 (10,362) (10,362) 40,297 399,016 504,249 6,256,689 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 Asset Management Fee Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Fuel Labor Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities - - 753,079 840 - - 8,400 - - - - - - - - - - - 538 325 - - 863 229,178 38,965 64,646 - - 332,789 75,522 22,972 14,925 51 - 113,470 1,294 1,580 2,978 9,766 - - - - - 2,978 - - 12,640 - - - 3,566 1,518 1,724 10,362 (10,362) 6,808 807,912 231,719 191,345 10,413 (10,362) 1,231,027 - - - - - - - - - - - - - - - - - - - - - - - - 570 - - - - 570 570 - - - - 570 113,604 - - - - 19,531 - - - - 19,531 144,195 - - - - 144,195 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 55,477 332,807 134 113,604 55,477 332,807 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2015 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Moderate Rehabilitation 14.856 Elimination Total (continued) Ordinary Maintenance and Operations Labor Materials and Other Ordinary Maintenance and Operations Contracts Employee Benefit Contributions - Ordinary Maintenance Total Maintenance Protective Services Protective Services - Labor Protective Services - Other Contract Costs Protective Services - Other Employee Benefit - Protective Services 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 - Mortgages Bad debt - Other Severance Expense Total General Expenses Financial Expenses 343,807 - - - 488,341 39,443 - - - - 39,443 134,085 - - - - 134,085 - - - - - 517,335 - 144,534 144,534 661,869 . 18,852 - - - - - - - - - - - - - - - - - - - - - - - 18,852 - - - - 40,012 - - - 24,305 26,696 18,852 40,012 18,852 - 20,631 3,674 16,638 2,864 7,194 - - 300 - - 14,864 91,288 557 7,095 7,494 - - 105,877 13,518 7,154 16,174 - - 36,846 14,007 (6,348) 69,647 19,119 9,952 - - - - 3,604 - - - 69,647 19,119 - - - - - - - - - - - - - - - - - - - - - - - 95,936 17,106 16,174 129,216 Interest Expense - Mortgage Payable - - - - - - Interest on Notes Payable (Short & Long Term) - - - - - - - - - - - - - - - - - - Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses 1,864,700 255,920 359,547 10,413 583,250 3,120,430 (2,953) 75,744 (10,362) 2,480,218 - 3,776,471 15,386 (continued) Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense Fraud Losses Capital Outlays - Governmental Funds Debt Principal Payment - Governmental Funds Dwelling Units Rent Expense Total Other Expense Total Expenses 15,386 - - - - - - - - - - 3,072,190 - 31,720 - 75,438 - 3,147,628 - - - 31,720 - - - - 407,412 - - - - - - - - - - - - - - - - - - - - - - - 407,412 422,798 3,103,910 2,287,498 3,359,830 359,547 135 75,438 85,851 (10,362) 3,602,146 6,082,364 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2015 Housing Choice Vouchers 14.871 Public Housing 14.850 & 14.872 Other Financing Sources (Uses) 72,487 Operating Transfer In 22,500 (72,487) Operating transfer Out Business Activities Moderate Rehabilitation 14.856 Elimination - Total - - 94,987 - (22,500) - - (94,987) 33,200 - - 33,200 Operating Transfers from/to Primary Government - - Operating Transfers from/to Component Unit - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 33,200 306 - 207,525 - 5,325,682 Proceeds from Notes, Loans and Bonds Proceeds from Property Sales Extraordinary Items, Net Gain/Loss Special Items (Net Gain/Loss) Inter Project Excess Cash Transfer In Inter Project Excess Cash Transfer Out Transfers between Program and Project - In Transfers between Project and Program Out Transfer of Funds Transfer of Equity Prior Period Adjustments - Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Beginning Net Position Required Annual Debt Principal Payments 22,500 10,700 160,452 39,020 7,747 5,220,683 9,879 82,796 - Prior Period Adjustments, Equity Transfers and Correction of Errors - (1,517,036) Changes in Compensated Absence Balance Changes in Contingent Liability Balance 12,324 - (267,702) (437,626) - - - - - (2,222,364) - - - - - - - - - - - - Changes in Unrecognized Pension Transition Liability - - - - - - Changes in Special Term/Severance Benefits Liability - - - - - - Changes in Allowance for Doubtful Accounts - Dwelling Rents - - - - - - Changes in Allowance for Doubtful Accounts - Other - - - - - - Ending Net Position Administrative Fee Equity $ $ Unit Months Available Excess Cash Land Purchases Building Purchases - $ (218,803) $ $ (232,056) $ $ Housing Assistance Payments Equity Number of Unit Months Leased 3,864,099 (347,083) - $ $ 12,630 - 13,253 4,457 144 3,092 4,181 140 503,208 $ 35,946 - $ 3,310,843 $ - $ $ 3,150 $ $ (232,056) 13,253 7,751 7,413 $ $ $ 503,208 35,946 Furniture & Equipment - Dwelling Purchases $ - Furniture & Equipment - Administrative Purchases $ - $ - $ - $ - $ - Leasehold Improvements Purchases Infrastructure Purchases CFFP Debt Service Payments Replacement Housing Factor Funds (concluded) 136 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2015 Operating Fund Program Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants $ Capital Fund Grants 991,541 $ 25,988 $ 1,017,529 667,092 Capital Grants - 848,065 35,946 - Bookkeeping Fee - Front Line Service Fee - Other Fees - Other Government Grants - Investment Income - Unrestricted Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue 25,988 1,017,529 35,946 Asset Management Fee Fraud Recovery 991,541 180,973 Management Fee Mortgage Interest Income Other Project Total 36,405 36,405 5,756 5,756 504,249 504,249 - 2,231,031 216,919 2,447,950 42,588 480,764 Expenses: Administrative Administrative Salaries Auditing Fees $438,176 $5,600 5,600 Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Allocated Overhead Other Total Administrative $538 538 $215,871 13,307 229,178 $50,753 24,769 75,522 $2,978 2,978 $9,766 9,766 $3,566 727,248 3,566 80,664 Tenant Services - Tenant Services - Salaries - Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Sewer 570 570 570 - $113,604 Total Utilities 570 113,604 $19,531 19,531 $144,195 144,195 $55,477 55,477 - Employee Benefit - Utilities Other Utilities Expense 807,912 332,807 (continued) 137 332,807 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2015 Operating Fund Program Ordinary Maintenance and Operations Labor Materials and Other Contracts Employee Benefit Contributions Total Maintenance Protective Services Protective Services - Labor Protective Services - Other Contract Costs Protective Services - Other Employee Benefit - Protective Services 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 343,807 Financial Expenses Interest Expense - Mortgage Payable Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses 343,807 12,115 39,443 106,967 27,118 134,085 478,102 39,233 517,335 - - - 18,852 - - - - - 18,852 - $40,012 $15,628 18,852 20,631 1,010 16,638 1,010 91,288 $14,007 90,278 18,852 40,012 $20,631 14,007 13,518 13,518 (6,348) (6,348) 69,647 69,647 19,119 19,119 - - - Bad debt - Other Total General Expenses Other Project Total 27,328 Bad debt - Mortgages Severance Expense Capital Fund Grants - 186,214 1,010 187,224 - - - - - - - - - 1,743,793 120,907 1,864,700 487,238 96,012 583,250 (continued) 138 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2015 Operating Fund Program Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense Total Other Expense Total Expenses Other Financing Sources (Uses) Operating Transfer In Operating transfer Out Operating Transfers from/to Primary Government Operating Transfers from/to Component Unit Proceeds from Notes, Loans and Bonds Proceeds from Property Sales Extraordinary Items, Net Gain/Loss Special Items (Net Gain/Loss) Inter Project Excess Cash Transfer In Inter Project Excess Cash Transfer Out Transfers between Program and Project - In Transfers between Project and Program - Out Capital Fund Grants 15,386 - Prior Period Adjustments Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Beginning Net Position Required Annual Debt Principal Payments Prior Period Adjustments, Equity Transfers and Correction of Errors Changes in Compensated Absence Balance Changes in Contingent Liability Balance Changes in Unrecognized Pension Transition Liability Changes in Special Term/Severance Benefits Liability Changes in Allowance for Doubtful Accounts - Dwelling Rents Changes in Allowance for Doubtful Accounts - Other Ending Net Position Administrative Fee Equity Housing Assistance Payments Equity Unit Months Available Number of Unit Months Leased Excess Cash Land Purchases Building Purchases Furniture & Equipment - Dwelling Purchases Furniture & Equipment - Administrative Purchases Leasehold Improvements Purchases Infrastructure Purchases CFFP Debt Service Payments Replacement Housing Factor Funds 15,386 - - - - - - - - - 407,412 - 407,412 422,798 - 422,798 2,166,591 120,907 72,487 - (72,487) 2,287,498 72,487 (72,487) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Transfer of Funds Transfer of Equity Other Project Total 72,487 136,927 (72,487) 23,525 5,220,683 - (1,481,090) (35,946) - 160,452 5,220,683 (1,517,036) - - - - - - - - - - - - - - - - - - 5,357,610 23,525 - - 5,381,135 - 3,150 - 3,092 - 3,092 503,208 - 503,208 - 35,946 3,150 35,946 - - - - - - - - - - - - - - - - - - (concluded) 139 140 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 142 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 151 These schedules contain information to help the reader assess the city's most significant local revenue source, sales tax. Debt Capacity 156 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. 167 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. 169 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. 141 142 $ 493,334,773 $ $ $ $ $ $ 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 (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 (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 30,751,613 Unrestricted 414,629,912 252,731,451 20,303,463 2,392,858 230,035,130 240,603,322 47,953,248 $ $ $ $ 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 10,448,150 Unrestricted 184,594,782 45,560,390 $ 2006 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 $ 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 $ 597,329,620 60,359,442 20,423,156 $ 516,547,022 $ 315,889,334 10,895,855 2,209,327 $ 302,784,152 (4) $ 281,440,286 49,463,587 18,213,829 $ $ $ $ $ $ Fiscal Year $ 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 $ $ $ $ $ $ 635,286,273 61,483,885 46,550,506 527,251,882 336,451,012 29,195,853 2,694,262 304,560,897 298,835,261 32,288,032 43,856,244 222,690,985 2013 $ $ $ $ $ $ 652,458,620 68,304,802 46,253,718 537,900,100 344,173,830 31,128,319 2,492,562 310,552,949 308,284,790 37,176,483 43,761,156 227,347,151 2014 $ 551,338,992 5,794,367 2,922,683 $ 542,621,942 $ 333,018,211 18,390,515 2,664,263 $ 311,963,433 $ 218,320,781 (12,596,148) 258,420 $ 230,658,509 2015 143 144 1,894,089 10,913,187 8,238,178 $ 7,850,954 Culture and recreation Highways and streets 21,566,549 33,255,955 Total governmental activities program revenues 29,054,937 19,356,271 2,062,329 - 742,088 - 683,906 3,791,526 Capital grants and contributions Operating grants and contributions 1,455,461 704,800 4,171,853 562,135 $ $ 106,358,761 34,200,858 1,019,248 $ 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 39,612,372 1,160,604 - 3,608,322 - 3,162,391 332,356 1,180,097 Public works Economic and physical development 815,167 4,886,354 Public safety General government Charges for services: Governmental activities: $ 93,681,732 Total primary government expense Program Revenues 31,860,328 791,791 Total business-type activities expense Stormwater - $ 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 39,985,739 1,203,436 - 4,197,447 $ 2,646,424 51,356,453 36,949,681 24,126,116 9,226,778 7,965,474 - 1,442,901 6,654,978 - 1,420,094 1,537,188 1,144,636 162,715 $ $ 124,187,898 44,619,819 1,121,555 5,811,922 4,584,733 291,211 1,471,550 1,283,697 3,285,242 $ 117,797,305 38,354,045 1,258,072 - 4,273,609 11,610,370 21,491,239 79,568,079 3,370,918 19,275,381 12,854,824 8,474,776 1,754,033 25,987,193 $ 9,406,406 $ 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 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 27,175,720 $ $ 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 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 27,269,325 10,442,808 2013 $ $ 29,432,776 14,603,667 7,071,557 - 1,656,628 903,233 1,215 628,038 4,568,438 $ 131,408,793 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 28,730,111 10,732,510 2014 $ 14,307,902 97,519,389 2,944,000 18,174,944 12,511,424 9,343,417 1,664,308 35,255,450 17,625,846 2015 $ 27,585,302 13,008,629 6,670,678 - 1,605,120 2,329,258 520 879,755 3,091,342 $ 146,587,085 49,067,696 1,184,464 6,084,019 4,540,208 3,519,749 Housing Authority 11,091,078 21,731,286 79,443,260 3,918,110 17,856,121 12,507,679 8,827,578 1,502,626 26,592,968 2012 Airport $ 2011 10,879,594 11,423,164 10,073,853 11,782,540 22,802,316 88,726,876 3,651,521 19,297,615 13,120,917 10,346,982 2,109,221 29,287,433 Fiscal Year 12,071,509 23,420,282 80,790,765 2,916,380 15,515,643 11,607,116 10,556,175 $ 2010 9,096,420 19,945,366 11,271,031 27,030,331 2009 Environmental 18,452,368 72,157,903 10,089,469 9,508,406 $ 2008 Wastewater Water Business-type activities: $ 3,090,140 2,167,626 Total governmental activities expense 61,821,404 8,328,945 12,043,242 Culture and recreation Highways and streets Interest on long-term debt 14,557,140 7,842,985 1,882,489 1,454,731 9,035,268 23,994,991 Economic and physical development $ Public works 7,458,583 2007 22,525,292 $ 2006 Public safety General government Governmental activities: Expenses (accrual basis of accounting) Last Ten Fiscal Years Changes in Net Position City of Flagstaff Schedule 2 145 Stormwater (8,311,400) Business-type activities Total primary government net expense Investment earnings 49,673,379 $ Total primary government 25,642,514 24,030,865 $ Business-type activities Governmental activities Change in Net Position 57,984,779 3,776,816 Total business-type activities Total primary government 2,267,551 326,540 - Transers in (out) Gain on sale of capital assets Miscellaneous 1,181,836 $ $ $ (9,123,196) (2,267,551) 54,207,963 Transers in (out) Total governmental activities Business-type activties: 19,460 24,630 Contributions to permanent fund 47,644,619 33,342,355 14,302,264 68,217,508 10,812,278 9,123,196 31,354 110,835 1,546,893 57,405,230 242,167 1,377,552 4,108,861 16,276,354 32,334,785 12,169,247 33,417 $ $ (20,572,889) 22,530,077 (43,102,966) $ $ 85,785,872 $ 56,730,935 27,369,058 19,500 1,042,701 - 1,122,274 9,839,486 - 17,337,916 Gain on sale of capital assets 204,678 2,385,099 14,384,055 Miscellaneous Investment earnings State shared sales taxes - unrestricted 9,051,158 30,014,975 Sales taxes Property taxes Taxes Governmental activities: General Revenues and Other Changes in Net Position $ 20,254,049 $ $ Governmental activities (28,565,449) 85,370,332 $ Total primary government program revenues Net (Expense)/Revenue 52,114,377 23,449,969 369 630,962 Total business-type activities program revenues Capital grants and contributions Operating grants and contributions - 1,261,594 Airport Housing Authority 9,723,652 - 17,047,831 Environmental Wastewater Water Charges for services: Business-type activities: (accrual basis of accounting) Last Ten Fiscal Years Changes in Net Position City of Flagstaff Schedule 2 (continued) $ $ $ $ $ $ $ 22,050,787 8,563,922 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 33,129,731 13,664,791 (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 (12,503,209) 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 31,420,047 12,262,185 (64,944,808) 78,825 (65,023,633) 63,767,807 40,064,564 8,744,216 10,966 1,247,878 - 1,187,105 11,545,472 - 17,328,927 $ $ $ $ $ $ $ 34,079,067 11,053,585 23,025,482 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 30,429,840 12,798,495 (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 1,261,934 3,275,262 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 31,355,882 12,645,717 (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 $ $ $ $ $ $ $ 14,271,637 7,885,576 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 33,401,021 11,974,341 (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 $ $ $ $ $ $ $ 12,992,366 5,258,714 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 35,188,913 11,821,650 (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 $ $ $ $ $ $ $ 17,841,433 7,726,965 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 37,675,638 11,044,817 (50,222,453) 3,963,935 (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 $ $ $ $ $ $ $ 4,367,631 3,368,630 999,001 74,257,521 3,324,433 1,407,710 493,358 1,119,502 303,863 70,933,088 (1,407,710) 16,821 65,201 645,571 1,179,131 16,683,665 42,539,371 11,211,038 (69,889,890) 44,197 (69,934,087) 76,697,195 49,111,893 4,749,158 4,742,685 1,466,347 1,027,945 1,528,202 12,646,619 8,907,760 14,043,177 232,190 1,260,236 - Assigned Unassigned $ $ 63,689,857 - - - - - 6,567 - 16,332,830 47,350,460 31,220,471 - $ $ $ $ * FY2010 : Implementation of GASB-54 Fund Balance Classification 308,979 2008 36,355,874 - - - - - 9,916 (763,744) 16,498,123 20,611,579 - 27,801,832 - - - - 27,492,853 (1) FY2007 : As restated for accounting error related to the accural of state shared revenues 53,004,789 - Committed $ - Restricted Total all other governmental funds - 3,271 - 22,893,640 30,107,878 Nonspendable Permanent fund Capital project funds Special revenue funds Unreserved, reported in: Reserved All Other Governmental Funds $ - - Total general fund 28,807,045 (1) $ - Assigned Unassigned - - - - - 29,960,235 Committed $ Restricted 28,574,855 2007 - $ $ 2006 Nonspendable Unreserved Reserved General Fund (modified accrual basis of accounting) Last Ten Fiscal Years Fund Balances, Governmental Funds City of Flagstaff Schedule 3 146 $ $ $ $ - - 13,471,434 - 8,955,106 - 4,299,450 216,878 - - - - 22,590,284 22,203,764 - - 106,144 280,376 2009 $ $ $ $ 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 - - $ $ $ $ Fiscal Year 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 $ $ $ $ - - 51,014,684 (282,178) - - 51,003,624 293,238 - - - - 33,621,090 23,153,900 8,192,178 - 1,951,220 323,792 2015 147 2,238,285 129,930 204,678 Investment earnings Contributions Miscellaneous $ 1,195,464 Rents 7,178,029 10,700,196 Culture and recreation Highways and streets non capital expenditures Debt service as a percentage of Net change in fund balances 14.15% 17,829,287 29,490,427 (19,584,684) Total other financing sources (uses) Transfers out 37,892 17,317,133 Sale of capital assets Transfers in - 12.69% 13,098,494 17,642,417 (19,488,466) 17,756,847 252,329 - 46,707 220,086 Insurance recoveries Bond premium - - Lease issued - 19,075,000 - (4,543,923) 93,583,397 - 31,500,000 - (11,661,140) 89,047,123 26,403,203 3,210,879 5,313,222 7,859,004 8,648,628 9,344,676 Payment to bond refunding escrow agent Issuance of capital debt Proceeds of refunding bonds OTHER FINANCING SOURCES (USES): Excess of revenues over (under) expenditures Total expenditures 25,054,173 2,552,016 Interest and other charges Capital outlay 6,505,449 Principal retirement Debt service: 1,168,424 7,640,313 Public works 1,615,049 8,194,214 89,039,474 1,377,552 1,480,686 22,994,522 6,621,976 2,438,599 1,290,667 21,626,547 Economic and physical development Public safety General governmental EXPENDITURES: 77,385,983 2,981,982 1,394,174 Fines and forfeitures Total revenues 3,920,473 2,834,506 Licenses and permits 2,927 30,016 Special assessments 2,605,880 12,185,406 18,779,168 41,976,134 2,199,819 $ $ 2007 Charges for services 10,880,792 Grants and entitlements 39,104,903 17,173,416 $ 2006 Intergovernmental Taxes REVENUES: (modified accrual basis of accounting) Last Ten Fiscal Years Changes in Fund Balances, Governmental Funds City of Flagstaff Schedule 4 $ $ 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 3,020,927 5,046,398 8,505,722 10,267,649 10,335,964 1,617,311 25,696,174 10,229,814 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 3,750,657 5,034,991 11,187,402 12,158,087 9,991,927 1,645,703 27,374,083 9,848,252 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 $ $ 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 25,159,777 7,926,726 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 $ $ Fiscal Year 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 24,476,615 7,113,922 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) 16,797,287 13,924,136 (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 25,301,495 7,453,963 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 25,099,149 8,480,086 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 $ $ 14.57% 3,021,505 $ 7,976,367 (11,659,441) 12,102,855 727,996 - 1,317,667 - (9,382,710) 6,600,000 8,270,000 (4,954,862) 102,398,300 24,062,755 3,126,469 8,287,457 10,621,311 11,446,096 8,212,772 1,031,983 26,567,511 9,041,946 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 19,584,399 48,806,758 $ 2014 13.48% 4,281,184 4,005,581 (16,384,283) 17,376,813 3,013,051 - - - - - - 275,603 99,402,636 16,944,654 2,798,182 8,313,298 8,035,221 11,029,832 8,506,794 1,216,083 27,583,880 14,974,692 99,678,239 645,571 368,057 1,145,686 1,660,635 1,389,663 1,866,792 2,986,151 1,857,884 13,483,604 20,549,000 53,725,196 2015 148 4,616 4,882 5,150 5,259 5,473 5,472 5,571 5,597 2008 2009 2010 2011 2012 2013 2014 2015 2006-2015 32.98% 4,453 2007 Change 4,209 Property Tax Year 2006 General Fiscal (modified accrual basis of accounting) (dollars in thousands) Last Ten Fiscal Years 14.44% 5,586 5,560 6,423 6,703 7,184 7,620 7,254 6,219 5,188 4,881 Property Tax Secondary Tax Revenue by Source, Governmental Funds City of Flagstaff Schedule 5 18.43% 2,467 2,487 2,303 2,348 2,339 2,133 2,246 2,189 1,838 2,083 Other Taxes Franchise and 21.34% 17,845 17,042 15,760 14,900 13,893 13,595 14,384 16,150 16,071 14,707 Sales Tax City 51.89% 7,022 6,310 5,911 5,626 5,259 5,074 5,052 5,187 4,992 4,623 Tax and Booze Bed, Board 9,605 9,434 8,602 76.80% 15,208 11,837 11,215 10,527 9,865 9,628 10,035 Tax Transportation 37.39% 53,725 48,807 47,084 45,577 43,799 43,200 43,853 43,966 41,976 39,105 Total 149 5,815,473 5,623,144 4,868,072 4,490,087 4,711,821 5,147,101 5,391,580 5,733,507 6,019,776 2007 2008 2009 2010 2011 2012 2013 2014 2015 7,973,971 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 Income Tax State 2,689,916 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 In-Lieu Tax County Auto * - As restated due to change in accounting error identified in FY2010 5,652,335 Sales Tax Year 2006 State Fiscal (modified accrual basis of accounting) Last Ten Fiscal Years Intergovernmental Revenue by Source, Governmental Funds City of Flagstaff Schedule 6 6,884,173 6,168,102 6,007,741 5,576,167 6,300,885 6,429,355 6,412,329 7,422,359 7,855,427 7,942,771 User Tax Highway Local - - - - - 156,218 251,536 225,965 293,502 304,341 Assistance Transportation State - - - - - - - 58,782 - 55,665 HB 2565 4,993,449 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 Grants Federal State Grants 1,605,982 6,864,429 3,255,824 601,149 1,101,522 701,592 1,234,065 981,142 1,214,162 940,441 & Other State County 800,478 793,898 791,906 759,606 744,070 757,241 897,337 668,153 721,797 420,426 LEAF IGA County Library 2,969,669 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 District Funding * - - - 95,190 60,190 76,716 118,216 64,092 50,068 32,795 Other 34,032,604 34,898,141 30,083,038 26,952,265 28,071,504 30,623,075 31,293,545 34,776,212 31,021,135 28,255,095 Total 150 27,532,435 28,051,846 28,940,765 27,478,520 25,750,042 26,651,155 28,837,059 28,918,422 30,046,573 2007 2008 2009 2010 2011 2012 2013 2014 2015 217,466,880 215,081,441 255,823,684 265,230,915 274,992,074 286,101,952 281,348,845 261,009,908 237,795,313 221,179,062 Property Commercial Vacant, 123,834,908 123,988,197 124,373,673 133,909,755 146,079,309 151,630,088 140,117,313 125,377,258 100,985,606 82,683,618 Property and Government Agricultural, 429,223,625 389,760,175 436,787,954 447,421,001 502,351,037 529,950,871 500,150,890 398,783,838 315,182,546 276,187,028 Property Residential Less: 88,064,490 87,055,619 80,555,433 81,844,375 85,132,993 78,819,714 71,775,990 62,684,483 57,296,001 50,697,830 Property Tax-exempt 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 Source: State of Arizona Department of Revenue, State and County Abstract of the Assessment Roll 27,328,709 Property Year 2006 Valued Fiscal Centrally (modified accrual basis of accounting) Last Ten Fiscal Years Full Cash Value of Taxable Property City of Flagstaff Schedule 7 712,507,496 670,692,616 765,266,937 791,368,451 864,039,469 916,341,717 878,781,823 750,538,367 624,199,899 556,680,587 Value Assessed Total Taxable Total - 1.6795 1.5497 1.5283 1.4845 1.4913 1.5519 1.5519 1.5929 1.6627 Tax Rate Direct 151 144,635 Other $ $ 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 66,641 181,245 2009 $ $ 1,312,658 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 66,392 152,042 546,765 - 251,271 85,806 60,143 150,239 2010 *NOTES: FY13 reflects a change in tax categories reported to proactively reflect possible New State Sales Tax Codes TOTAL 1,414,626 586,841 Retail 4,892 - Hotel/Motel Utilities 232,359 Restaurants and Bars 82,481 233,747 129,671 $ $ 2006 Auto Sales Building Materials Construction (dollars in thousands) Last Ten Fiscal Years City Taxable Revenue for Major Categories City of Flagstaff Schedule 8 $ $ 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 $ $ 1,719,292 109,578 213,248 679,325 108,913 243,560 173,371 - 191,297 2015 152 Note: Tax rates are per $100 assessed valuation. 8.7728 7.5685 7.6099 6.5284 7.3170 7.7131 7.6983 9.4948 0.7847 Total 0.7656 0.1000 0.7245 Fire District Assistance 0.7244 0.2367 0.7603 Library District 0.7588 0.4480 0.7521 0.4734 General Fund County 1.2010 0.4308 0.1052 0.4267 Bond 0.4643 0.3875 0.4865 0.4927 0.5269 Community College 0.5525 0.4112 Class B Bond Maintenance 0.1833 4.8712 Capital Override 4.9458 0.6126 4.6772 15% M&O Override 3.8860 1.5497 2013 0.0459 4.8334 1.5283 2012 Adjacent Ways 4.7713 1.4845 2011 3.6182 5.9009 1.4913 2010 Fiscal Year Maintenance School District 6.0786 1.5519 2009 0.8366 1.5519 2008 Secondary 1.5929 2007 0.7131 1.6627 2006 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 0.5466 0.9022 0.1243 0.4636 0.5879 0.4979 0.0000 0.7061 0.0096 3.9803 5.1939 0.8366 0.8429 1.6795 2014 8.3909 0.1000 0.2556 0.5646 0.9202 0.1268 0.4788 0.6056 0.6227 0.0357 0.7138 0.0259 3.7886 5.1867 0.8366 0.8418 1.6784 2015 153 2,394,644 2,369,114 2,326,331 2,208,475 2,013,878 1,978,429 1,854,874 1,846,240 68,693,212 BNSF Railway Company Walgreens Arizona Drug Co Ridge at Clear Creek LLC Elevation Flagstaff AZ LLC Northern Arizona Healthcare Corp First American Title Hope Tribe Economic Development Corp Flagstaff Medical Center Inc Total Principal Taxpayers Source: Coconino County Assessor Office 2,583,775 Unisource Energy Corporation 3,338,504 Little America Hotels & Resorts Inc 2,986,867 3,409,362 Qwest Corporation Flagstaff Mall SPE LLC 3,467,133 Wal-Mart Stores 13,856,962 18,056,955 4,001,669 $ $ 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 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Rank 2015 9.64% 0.26% 0.26% 0.28% 0.28% 0.31% 0.33% 0.33% 0.34% 0.36% 0.42% 0.47% 0.48% 0.49% 0.56% 1.94% 2.53% Assessed Valuation Secondary As a Percentage of the City Total $ $ 48,550,633 3,867,713 2,538,753 3,250,000 3,830,418 9,580,227 4,171,498 10,109,600 11,202,424 Value Total Assessed 5 9 8 6 3 4 2 1 Rank 2005 8.72% 0.69% 0.46% 0.58% 0.69% 1.72% 0.75% 1.82% 2.01% Assessed Valuation Secondary As a Percentage of the City Total 154 12,497,535 12,015,988 11,828,399 11,050,626 11,172,785 2012 2013 2014 2015 12,253,760 2009 2011 10,935,835 2008 12,750,836 9,615,015 2007 2010 9,075,322 June 30, 2006 Fiscal Year Ended 11,002,896 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 Amount for the Year 98.5% 97.5% 97.7% 96.8% 96.9% 97.9% 97.4% 98.1% 98.8% 98.7% of Levy Percentage Collected within the Fiscal Year of the Levy Taxes Levied Fiscal Last Ten Fiscal Years Property Tax Levies and Collections City of Flagstaff Schedule 11 Collections - 145,544 315,044 300,188 473,677 288,851 309,164 222,871 141,012 131,194 Years in Subsequent 11,002,896 10,924,239 11,868,515 11,935,400 12,586,805 12,766,264 12,244,162 10,951,336 9,636,947 9,089,927 Amount 98.5% 98.9% 100.3% 99.3% 100.7% 100.1% 99.9% 100.1% 100.2% 100.2% of Levy Percentage Total Collections to Date 155 1.0000% 2015 City 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% & Beverage Bed, Board http://www.flagstaff.az.gov/index.aspx?nid=53 1.0510% 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.6010% 0.6010% 0.6010% Transportation City of Flagstaff - Sales Tax / Business Licenses 1.0000% 2014 Source: 1.0000% 2013 1.0000% 2010 1.0000% 1.0000% 2009 2012 1.0000% 2008 1.0000% 1.0000% 2007 2011 1.0000% Sales Tax Year 2006 General Fiscal Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates City of Flagstaff Schedule 12 State of 5.6000% 5.6000% 6.6000% 6.6000% 6.6000% 6.6000% 5.6000% 5.6000% 5.6000% 5.6000% Arizona 1.3000% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 0.9250% County Coconino 10.9510% 10.4460% 11.4460% 11.4460% 11.4460% 11.4460% 10.4460% 10.3260% 10.3260% 10.1260% Total 156 38,449 2012 * Special 340 6,737 8,639 11,055 11,365 18,130 18,615 19,169 19,257 19,339 Bonds Assessment 15,781 16,603 16,328 15,615 4,930 6,665 4,865 6,325 7,725 9,665 Bonds Revenue Governmental Activities 860 1,260 1,260 3,205 18,095 19,890 21,625 23,000 24,315 25,610 Bonds Corporation Facility Municipal COP 3,625 4,400 5,335 5,200 1,542 6,964 2,430 2,728 3,097 3,455 Leases 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. * - As restated due to refunding loss 50,857 24,015 2011 2015 25,865 2010 55,571 27,645 2009 2014 29,350 2008 48,134 31,230 2007 2013 32,875 Bonds Year 2006 Obligation Fiscal General (dollars in thousands, except per capita) Last Ten Fiscal Years Ratios of Outstanding Debt by Type City of Flagstaff Schedule 13 General 1,441 1,752 1,748 3,125 3,830 5,690 7,460 10,515 13,310 16,294 Bonds Obligation 3,285 3,635 3,634 3,972 4,299 4,614 4,918 5,212 5,496 5,770 Bonds Revenue 31,909 33,873 33,873 35,689 37,491 36,257 37,006 32,275 32,957 2,671 Payable Loan Term Business-Type Activities 3,972 4,431 4,686 3,075 3,384 3,679 3,960 4,227 4,482 2,652 Leases Capital Total 118,467 130,164 126,053 119,695 115,716 128,239 129,078 132,889 141,951 99,332 Government Primary Percentage Income 2.2% 2.7% 2.7% 2.7% 3.1% 3.4% 3.4% 3.5% 3.8% 2.6% of Personal Per 1,707.24 1,928.30 1,867.40 1,817.14 1,756.73 1,946.85 1,969.99 2,054.15 2,194.23 1,547.23 Capita 157 31,230 29,350 27,645 25,865 24,015 38,449 38,214 47,781 43,334 2007 2008 2009 2010 2011 2012 2013 2014 2015 1,441 1,752 1,752 3,125 3,830 5,690 7,460 10,515 13,310 16,294 Bonds 44,775 49,533 39,966 41,574 27,845 31,555 35,105 39,865 44,540 49,169 Total 6.3% 7.4% 5.2% 5.3% 3.2% 3.4% 4.0% 5.3% 7.1% 8.8% Property Value of Taxable of Actual Percentage (a) Per 663.31 751.98 606.74 631.15 422.73 481.59 542.64 620.95 718.04 792.66 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. 32,875 2006 Bonds Year Obligation General General Obligation Activities Activities Fiscal Business-Type 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) 158 * 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. 99,953 $ Total direct and overlapping debt - 22,093 Debt 77,860 0.00% 65.17% Share of Overlapping City direct debt 345 33,900 Applicable* Percentage Estimated 22,093 $ Outstanding Debt 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 15 159 160 as a percentage of debt limit Total net debt applicable to the 6% limit 61.08% 23,250 $ $ Legal debt margin (Available borrowing capacity) 37,452 14,202 $ $ 2006 39.31% 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 89,613 $ $ $ Legal debt margin (Available borrowing capacity) 124,840 35,227 $ 2006 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 $ $ 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 23.69% 148,163 $ 35,105 183,268 2009 $ 0.00% 51,842 $ - 51,842 2010 25.49% 137,703 $ 35,105 172,808 $ Fiscal Year 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 0.00% 42,750 - 42,750 2015 54.66% 92,141 50,361 142,501 2015 161 $ 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, 2015 Legal Debt Margin Calculation for Fiscal Year 2015 Legal Debt Margin Information City of Flagstaff Schedule 16 (continued) 42,750,450 - 42,750,450 92,140,842 50,360,657 142,501,499 712,507,496 162 19,996,116 22,846,487 23,642,792 23,453,378 2012 2013 2014 2015 15,345,504 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 Expenses (2) 8,107,874 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 Service for Debt Available Revenue Net 2,328,839 2,252,132 2,252,132 2,540,658 2,443,196 2,356,705 2,130,093 283,832 274,108 264,717 Principal (3) 3,069,925 3,037,699 3,059,388 3,990,500 3,918,523 3,839,777 3,417,662 478,801 478,801 478,801 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. 741,086 785,567 807,256 1,449,842 1,475,327 1,483,072 1,287,569 194,969 204,693 214,084 Interest (4) Debt Service Requirements Water and Sewer Revenue Bonds (1) Includes total operating revenues and investment income of the water and wastewaste fund. 18,824,260 17,459,105 2009 2011 18,380,351 2008 17,585,198 18,235,171 2007 2010 17,755,038 Revenues (1) Year 2006 Gross Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 2.64 2.93 3.28 1.84 1.83 1.52 0.83 4.49 11.16 12.45 Coverage 163 6,168,102 6,884,173 2014 2015 - - - 1,725,000 1,620,000 1,520,000 1,460,000 1,400,000 1,940,000 - - - 1,819,875 1,810,455 1,800,135 1,804,010 1,811,385 2,409,585 2,416,285 - - - 3.06 3.48 3.57 3.55 4.10 3.26 3.12 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, - - - 94,875 190,455 280,135 344,010 411,385 469,585 526,285 Interest (2) Total Highway User Revenue Bonds Debt Service Requirements 1,890,000 Principal (1) (1) Includes 1992 Jr. Lien and Series 2003 Refunding. 6,007,741 2013 6,429,355 2010 5,576,167 6,412,329 2009 2012 7,422,359 2008 6,300,885 7,855,427 2007 2011 7,540,081 Revenue Year 2006 User Tax Fiscal Highway Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 164 10,247,131 11,657,403 12,621,802 13,543,397 2012 2013 2014 2015 400,000 385,000 385,000 365,000 350,000 335,000 320,000 310,000 295,000 285,000 Principal (2) 50,350 68,753 77,656 94,446 110,371 125,614 139,534 152,398 164,198 175,598 Interest (3) Debt Service Requirements 450,350 453,753 462,656 459,446 460,371 460,614 459,534 462,398 459,198 460,598 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. 30.07 27.82 25.20 22.30 22.17 25.90 29.50 29.78 26.79 23.55 Coverage (1) State sales tax, state income tax less debt service requirements for MFC debt other than transportation. 10,206,755 13,557,828 2009 2011 13,771,313 2008 11,929,099 12,302,955 2007 2010 10,847,378 Revenue (1) 2006 Year Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 165 39,681,382 41,483,415 38,586,144 35,708,503 33,777,368 25,841,021 25,842,019 28,973,317 30,348,121 2007 2008 2009 2010 2011 2012 2013 2014 2015 695,000 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 Principal (2) 469,750 511,375 542,575 574,838 814,700 860,200 891,850 942,100 964,600 987,100 Interest Debt Service Requirements 1,164,750 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 Total Transportation MFC Debt 26.06 13.99 12.29 12.45 14.95 15.80 19.82 21.31 20.20 17.98 Coverage Municipal Facility Corporation Bonds As Parital Refunded with Pledged Revenue Bonds (2) MFC revenue bond series 2004 Fourth Street, partial advance refunding pledged revenue series 2012 requirements for transportation MFC bonds. Refunding Series 2012 excludes state revenue sharing income and sales tax licenses and permits, charges for services, fine and forfeits, other revenue, state sales tax, and state revenue sharing. Less the debt service (1) Pledged revenues on the Municipal Facility Corporation Bonds include the city base rate sales tax, transportation sales tax, francise sales tax, 35,725,917 Revenue (1) 2006 Year Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 166 7,657,621 9,340,790 10,302,188 12,129,085 2012 2013 2014 2015 125,000 120,000 120,000 120,000 115,000 Principal (3) 124,562 128,237 130,037 133,638 135,938 Interest Debt Service Requirements (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 249,562 248,237 250,037 253,638 250,938 Total Revenue Bonds Greater Arizona Development Authority (1) New Issue no trend information available, prior to fiscal year 2010 7,169,310 Revenue (2) 2011 Year (1) Fiscal Last Five Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 48.60 41.50 37.36 30.19 28.57 Coverage 167 65,522 65,870 65,870 65,870 67,502 69,391 2010 2011 2012 2013 2014 2015 (thousands 5,399,899 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 39,220 35,933 34,353 34,999 34,510 29,879 29,879 29,879 28,045 28,045 Income Personal Income of dollars) Per Capita Personal 26.6 26.6 26.6 26.6 26.6 26.8 26.8 26.8 26.8 26.8 Age Median Education Education 41.8% 41.8% 41.8% 41.8% 41.8% 39.4% 39.4% 39.4% 39.4% 39.4% or Higher Bachelor's Degree Level - Percent Unemployment - Arizona Department of Administration - Office of Employment and Population Statistics School Enrollment - 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 School 11,766 10,623 10,623 10,623 11,839 12,600 12,910 13,040 13,453 13,171 Enrollment Per Capita Income - 2006 - 2009 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 Personal Income - 2008 - 2015 Arizona Department of Administration--Employment and Population Statistics Personal Income - 2006 - 2007 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 90.6% 90.6% 90.6% 90.6% 90.6% 89.8% 89.8% 89.8% 89.8% 89.8% Grad or Higher High School Level - Percent Population - Arizona Department of Administration--Employment and Population Statistics Sources: 64,200 64,693 62,030 2007 2008 62,030 2006 2009 Population Year Last Ten Fiscal Years Demographic and Economic Statistics City of Flagstaff Schedule 18 Rate 6.48% 6.90% 8.10% 9.20% 8.90% 7.70% 7.50% 4.60% 3.40% 5.00% Unemployment 168 55,170 2010 U.S. Census Labor Force Source: (1) Arizona Department of Economic Security (2) Economic Collaborative of Northern Arizona (3) Includes part-time employees excluded from Sched. 20 12,957 2,815 2,300 2,200 1,436 1,294 872 630 421 279 250 240 220 Employees Total Northern Arizona University Flagstaff Medical Center W.L. Gore & Associates Flagstaff United School District Coconino County City of Flagstaff (3) Walmart Grand Canyon Railway SCA Tissue Dell Systems Nestle Purina PetCare Little America Hotel Employer Current Year and Six Years Ago Principal Employers City of Flagstaff Schedule 19 1 2 3 4 5 6 7 8 9 10 11 12 Rank 2014 (2) 23.49% 5.10% 4.17% 3.99% 2.60% 2.35% 1.58% 1.14% 0.76% 0.51% 0.45% 0.44% 0.40% Percentage of Total City Employment 55,170 10,795 2,497 2,104 1,800 1,436 1,294 876 338 450 Employees 1 2 3 4 5 6 10 8 Rank 2008 (1) 19.57% 4.53% 3.81% 3.26% 2.60% 2.35% 1.59% 0.61% 0.82% Percentage of Total City Employment 169 13.50 26.50 Capital management City Court 100.75 27.00 Fire Public Works 21.75 15.75 Planning Tourism 10.00 Airport 811.69 876.18 - 6.50 10.50 61.60 80.25 40.56 98.23 47.14 16.75 20.88 58.50 31.00 101.75 174.00 27.63 13.50 87.39 2008 906.52 - 6.50 10.50 68.10 81.75 41.06 99.69 53.77 16.75 24.88 57.50 31.00 101.75 181.00 29.63 13.50 89.14 2009 (1) 827.48 - 6.00 9.50 65.58 64.50 36.31 87.86 50.77 15.75 24.38 47.20 29.00 99.00 168.00 25.88 11.00 86.75 2010 (2) 825.33 23.50 6.00 9.50 63.58 62.50 36.31 86.86 50.77 13.25 22.88 41.00 26.50 92.00 168.00 25.18 11.00 86.50 2011 812.42 23.50 6.00 9.50 59.60 61.50 36.31 88.81 51.40 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 61.50 34.97 84.88 51.40 12.49 21.88 39.20 26.00 85.00 171.00 24.18 7.00 85.00 2013 (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 - 62.60 Environmental services 6.50 79.00 Water and wastewater Stormwater 37.25 Highways and Streets 43.13 68.82 Library Parks, recreation, and beautificatioin Culture and recreation 52.25 Building Economic and physical development 164.00 Police Public Safety 82.89 2007 Management services General Government Function/Program Last Ten Fiscal Years Full-time Equivalent City Government Employees by Function/Program City of Flagstaff Schedule 20 799.04 22.00 5.50 9.50 55.43 62.00 35.52 86.03 51.40 12.93 20.88 41.50 25.00 85.00 169.00 24.35 7.00 86.00 2014 814.47 4.50 22.00 9.50 56.25 66.00 33.02 90.13 53.43 13.93 16.88 42.98 25.50 88.00 167.00 26.35 8.00 91.00 2015 170 Plan Reviews Inspections assigned 694 Site Thinning (Acres) Calls dispatched to Police/Sheriff Calls dispatched to Medical Calls dispatched to Fire 9,175 77,239 11,741 9,136 3,313 Accident reports Non-crime reports 1,598 5,337 13,381 Domestive violence incidents Misdemeanor reports Felony reports Police Prescription Burn (Acres) 557 585 Site Marking (Acres) Plan Assessment (Acres) 662 1,280 1,966 1,323 Other calls 351 7,684 Fires response - 616 9,705 10,575 2006 Emergency responses Fuel Management Fire Credit card rebates received Purchasing 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 9,960 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 11,659 10,665 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 23,348 445 9,330 10,639 2009 - 61,175 11,011 2,776 9,480 1,953 3,073 12,293 551 376 - 294 401 572 1,906 247 6,668 21,677 468 9,326 Fiscal Year 13,471 2010 - 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 31,878 370 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 33,923 547 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 34,395 477 8,695 8,340 2013 - 56,373 11,464 2,180 7,174 1,688 2,564 778 541 511 10,383 N/A* 512 1,340 2,532 177 8,730 48,128 468 8,375 7,726 2014 184 70 8,980 - 58,590 11,777 2,590 6,036 1,550 2,511 333 820 2,300 659 2,341 2,654 9,432 72,037 554 7,273 8,428 2015 171 (1) (1) $ 61.47 758,468 625,103 $ 26,130,677 $ 97,895,269 9,866 154,321 39,646 705,638 1,962 2006 $ 66.86 789,621 643,174 $ 37,962,373 $ 38,895,496 10,356 153,121 44,598 642,643 2,443 2007 $ 60.52 782,908 680,253 $ 27,199,698 $ 25,278,055 10,472 157,792 44,088 651,814 4,032 2008 $ 43.21 887,887 738,603 $ 18,594,665 $ 31,498,803 9,842 142,409 65,418 627,202 4,373 2009 $ $ $ * Records no longer tracked 43.05 979,962 743,169 9,314,074 13,395,325 10,610 121,529 68,296 651,373 3,256 2010 (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 $ $ $ 50.94 739,706 1,182,956 20,338,552 65,299,515 8,101 137,815 62,872 526,406 1,877 2012 $ $ $ 54.61 715,033 1,164,789 14,479,348 43,609,942 8,388 145,793 60,190 490,401 2,054 2013 $ $ $ 59.99 687,735 1,117,652 19,978,010 75,489,761 8,343 144,411 61,691 544,028 3,605 2014 $ 67.62 673,246 1,002,125 (1) (1) 8,340 143,528 62,578 566,387 1,174 2015 172 (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. 48 Open hangars 48 61 11 18 61 Tiedowns Enclosed hangars 134 1 130 1 5,600 18,758 6,906 309 3,107 403 5 34 705 4 27 6 2,743 31 2007 Locally based aircraft 5,488 17,872 6,496 293 3,037 386 5 34 702 4 27 6 2,598 26 2006 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 48 61 11 134 1 5,456 18,849 7,107 265 3,201 690 6 48 712 4 26 6 3,148 34 2008 48 61 11 134 1 5,010 18,371 7,261 270 3,220 695 6 51 712 4 26 7 3,150 34 2009 35 48 61 14 120 1 5,123 19,042 7,261 270 3,350 813 6 51 712 4 26 7 3,143 48 61 11 122 1 5,107 22,092 7,308 271 3,466 814 4 53 735 5 24 7 3,176 37 2011 Fiscal Year 2010 48 61 11 125 1 5,339 19,020 7,308 271 3,466 814 4 53 680 4 23 7 3,179 37 2012 48 61 11 209 1 6,326 20,107 7,403 274 3,466 814 4 55 710 4 23 6 3,242 37 2013 48 61 11 134 1 5,022 19,961 7,403 274 3,466 844 4 55 710 4 23 6 3,242 37 2014 48 61 11 134 1 4,562 19,934 7,493 276 3,466 844 4 55 736 4 23 6 3,254 37 2015 173 5,000,000 / each wrongful act 1,000,000 / aggregate 1,000,000 / disease employee 1,000,000 / disease policy limit $ Statutory 1,000,000 / each accident $ 1,000,000 / aggregate $ $ 1,000,000 / each wrongful act $ 20,000,000 / each occurrence 20,000,000 / general aggregate $ $ 40,000,000 / each aircraft 40,000,000 / each occurrence $ 40,000,000 / aggregate 40,000,000 / aggregate 40,000,000 / each occurrence $ $ Personal Injury, Advertising & Malpractice Hangar Keepers Liability $ $ Products/Completed Operations General Liability Aviation: 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 1,000,000 / each offense $ $ Limited Abuse or Molestation Liability 3,000,000 / aggregate 1,000,000 / each employee 5,000,000 / aggregate $ $ $ $ 1,000,000 / aggregate 1,000,000 / each wrongful act / $5000/collision deductible 25,259,135 / $1000/comprehensive (Claims Made) Employee Benefits Liability* (Claims Made Retro Date 6-1-95) Employment Practices Liability* $ $ Public Entity Management Errors and Omissions* (Claims Made Retro Date 6-1-95) $ Auto Physical Damage 1,000,000 / each accident 1,000,000 / aggregate $ 1,000,000 / each wrongful act $ 2,000,000 / aggregate 1,000,000 / per occurrence $ $ $ Limit of Liability Auto Liability Law Enforcement Liability* freestyle park, EMT's) (Includes 2 skateboard parks, bike General Liability* Liability Insurance: Coverage Effective July 1, 2014 to June 30, 2015 Insurance Summary City of Flagstaff Schedule 23 as of 7/1/2015 $ $ $ $ $ $ $ $ $ $ $ Computer & Funds Transfer Fraud (some countries excluded) Kidnap and Extortion Worldwide International Travel - Executive Assistance $ $ $ $ $ Money Orders & Counterfeit, Credit, Debit or Charge Card forgery $ $ $ Depositors Forgery or Alteration (Inside and Outside) Theft, Disappearance, & Destruction $25,000 deductible / $25,000 deductible / $25,000 deductible / $25,000 deductible / $25,000 deductible 250,000 250,000 Each Loss Accidental death 1,500,000 / 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 500,000 / $25,000 deductible 250,000 / $25,000 deductible included included included 250,000 / $25,000 deductible $1,000,000 aggregate $250,000 per item / $25,000 deductible 5,000 / each building 122,700 / contents 242,000 / building 2,500,000 / 48 hours 15,000,000 / $50,000 deductible 10,000,000 / $50,000 deductible included 216,647,226 / $25,000 deductible Limit of Liability Dishonesty Bond Including Faithful Performance of Duty Blanket Public Employees and Treasurer Crime: City Hall, Visitor Center, Airport Terminal Fine Arts & exhibition floater Data and Media Computer Equipment and Peripherals Bookmobile book collection Employee Hand Tools Contractors Equipment (actual cash value) Inland Marine: Deductible Municipal Court Flood Zone A Properties Business Income/Extra Expense Earthquakes Flood Zones B and C Boiler and Machinery Blanket Buildings and Personal Property Property Insurance: Coverage 174 PAGES FROM THE 2002 ANNUAL BUDGET AND FINANCIAL PLAN More than Years 20GFOA of Recognition GOVERNMENT FINANCE O F F I C E R S A S S O C I AT I O N City of Flagstaff Comprehensive Annual Financial Report 35 Awards GOVERNMENT FINANCE O F F I C E R S A S S O C I AT I O N City of Flagstaff Budget and Financial Plan 21Awards Cit y of Flagstaf f 211 West Aspen Avenue Flagstaf f, Arizona 860 01 f lagstaf f. az .gov